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.
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).
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.
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.’
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