European banks hit by ties to Madoff
Already fuming over a worldwide financial crisis they blame on Wall Street, European banks are alarmed that U.S. investment manager Bernard L. Madoff could have cost them billions more dollars through fraud.
Some of the biggest banks in Spain, France and Britain acknowledged Monday that they had significant exposure to funds tied to Madoff. U.S. authorities say the celebrated trader, once considered a paragon of integrity, duped clients from around the world into buying into what was essentially an enormous Ponzi scheme, on the promise of impressive returns.
Spanish banking giant Santander said it had invested about $3.1 billion in Madoff’s firm. In Britain, two household names in retail finance, the Royal Bank of Scotland and HSBC, revealed that together they could lose about $1.6 billion. And Natixis, a French bank, pegged its exposure at as much as $600 million.
Such potential losses would add insult to the injury already dealt to European financial institutions as a result of the worldwide credit crunch and the meltdown of the global banking system. The Royal Bank of Scotland has been particularly battered in recent months and partially nationalized by the British government to keep it from going under.
Spain’s economy minister, Pedro Solbes, and the governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, both expressed surprise Monday that U.S. regulators had not detected the alleged scam earlier and called for reforms of the monitoring system.
But Fernandez Ordonez described the effect of the scandal on the Spanish banking sector as minimal compared with the effects of the global financial meltdown.
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sebastian.rotella@latimes.com
