HSBC, RBS, Santander hit by fraud Biggest fraud of world’s biggest banks

15 December 2008

Holiday money

With a weaker dollar, an iPod nano is cheaper in the US

HSBC, RBS, Santander – which owns Abbey and the savings business of Bradford and Bingley – and French bank BNP Paribas have revealed that they have fallen victim to one of the biggest cases of financial fraud.

Former chairman of the Nasdaq stock exchange Bernard Madoff has been charged with de-frauding major world banks of £33 billion.

Which? has produced a guide to help ensure your savings are protected.

The Financial Services Compensation Scheme (FSCS) offers a safety net for savers and investors if their bank goes bust. Since 7 October 2008 it has protected up to £50,000 of an individual’s savings held with each authorised provider (previously the limit was £35,000).

If you have savings with a bank that is authorised by the Financial Services Authority (FSA) and it went under, you should get the first £50,000 of savings refunded to you through the FSCS.

Banks established outside the European Economic Area (EEA) must be authorised by the FSA before they can operate in the UK. If these banks failed, your savings would be covered by the FSCS. For example, Indian bank ICICI is covered up to the £50,000 FSCS limit.

Banks’ billions at risk from Wall Street fraud

According to court documents, Bernard Madoff  told his employees at his New York based investment firm's offices that his operations were 'all just one big lie' and 'basically, a giant Ponzi scheme'.

A Ponzi scheme is a fraudulent investment vehicle which pays very high returns to existing investors paid for by money put into the scheme by newcomers.

Madoff's arrest will raise questions about the effectiveness of regulatory authorities, which failed to notice the scam.

HSBC, RBS and Santander loses could be £33 billion

The Royal Bank of Scotland - 58% owned by the taxpayer - said £400 million was at risk in the hedge funds invested with 70-year-old Madoff, who was arrested last week after police said he admitted a £33 billion scheme to defraud investors.

Spanish bank Santander, which owns Abbey and the savings business of Bradford & Bingley, said its potential exposure was more than £2 billion, while HSBC could reportedly lose up to £668 million.

However, HSBC has played down the amount it has possibly lost in the fraud, saying that a small number of institutional clients who invested in funds with Madoff. A spokesperson from the bank said on the: ‘information presently available, HSBC is of the view that the potential exposure under these financing transactions is in the region of 1 billion US dollars.’

For the latest money saving news direct to your inbox sign up the weekly Which? Money email to receive top money saving tips, product reviews and the latest news every Wednesday.


For daily consumer news, subscribe to the here. If you have an older web browser you may need to copy and paste this link into your newsreader: . Find out more about RSS in the Which? guide to news feeds.