UPDATE: HSBC, RBS Among UK Firms Exposed To Madoff Fraud
December 15 2008 - 8:44AM
Dow Jones News
U.K. banks and financial institutions, including HSBC Holdings
PLC (HBC) and Royal Bank of Scotland Group PLC (RBS), on Monday
said they were exposed to Bernard L. Madoff Investment Securities
LLC, which allegedly lost $50 billion in a giant pyramid
scheme.
Madoff, the head of the New York-based investment firm, was
arrested Thursday.
Monday afternoon, HSBC Holdings PLC (HBC) said it has provided
financing to a small number of institutional clients who invested
in funds with Madoff. On the basis of information currently
available, the "potential exposure" is in the region of $1 billion,
making it the largest exposure unveiled by U.K. firms so far.
Moreover, the bank said some clients in its global custody
business have invested with Madoff, but that it doesn't believe
these arrangements should be a source of exposure to the group.
Earlier Monday, Royal Bank of Scotland Group PLC (RBS) said that
it has exposure through trading and collateralized lending to funds
of hedge funds that were invested into the Madoff firm.
"If as a result of the alleged fraud the value of the assets of
these hedge funds is nil, RBS' potential loss could amount to
approximately GBP400 million."
A person familiar with Barclays PLC's (BCS) investment banking
operations, Barclays Capital, said its exposure to Madoff was
"minimal" and that, in any case, it is "fully collateralized."
Man Group PLC (EMG.LN), the world's largest publicly traded
hedge-fund manager, said it has $360 million invested in two funds
that are directly or indirectly sub-advised by Madoff Securities
and for which Madoff Securities acts as broker-dealer executing the
investment strategy.
Irfan Younus, research analyst at NCB Stockbrokers, said that
"it will take time before the full scale of the losses become
clear, but it is clear that, while manageable for most of the
larger banks, losses could be substantial." An informal tally made
by Younus shows financial institutions worldwide so far have $24.1
billion in exposures to Madoff.
Steven Philippsohn, senior partner of London law firm PCB
Litigation and chairman of the Commercial Fraud Lawyers
Association, said that "this is the tip of the iceberg and an early
example of the news that we are going to get very used to hearing
during this recession. As the credit crunch bites, more and more
problems will come to light...No institution is immune (from this
type of fraud)."
Some firms were eager to remove any suspicion that they might be
exposed. "Firms wouldn't usually disclose their exposures to single
names (or lack thereof), but in this case I think they are keen to
be transparent," one industry spokesman said.
Lloyds TSB Group PLC (LYG) said it has no direct exposure.
"Madoff funds and sub-funds have never been on our recommendation
list and we've had a sell recommendation on them for years," a
spokeswoman said.
RSA Insurance Group PLC (RSA.LN), Standard Life PLC's (SL.LN)
Standard Life Investments, F&C Asset Management PLC (FCAM.LN),
Alliance Trust PLC (ATST.LN), Aberdeen Asset Management PLC
(ADN.LN), Bluebay Asset Management PLC (BBAY.LN) and Friends
Provident PLC (FP.LN) all said they have no exposure to Madoff. A
person familiar said Prudential PLC (PUK) has no exposure, while
HBOS PLC (HBOS.LN) declined to comment.
Standard Chartered PLC (STAN.LN), Aviva PLC (AV.LN), Legal &
General Group PLC (LGEN.LN), Old Mutual PLC (OML.LN), Schroders PLC
(SDR.LN) and the Pearl Group didn't immediately return calls for
comment.
-By Ragnhild Kjetland and Andrea Tryphonides; Dow Jones
Newswires; +44 207 842 9268; ragnhild.kjetland@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.
Abrdn Property Income (LSE:API)
Historical Stock Chart
From Jun 2024 to Jul 2024
Abrdn Property Income (LSE:API)
Historical Stock Chart
From Jul 2023 to Jul 2024