Private banks face up to USD 5 bln losses from Madoff

16th December 2008, Comments 0 comments

Private banks in Switzerland may lose USD 5 billion from the US fraud scheme, while bigger banks UBS and Credit Suisse have limited exposure.

ZURICH – Swiss private banks face losses of up to USD 5 billion (CHF 5.9 billion) from the alleged scam run by US trader Bernard Madoff, although UBS and Credit Suisse have "insignificant" exposure, bankers said Monday.

Estimating the exposure to the scam by Swiss private banks in Geneva, Steve Bernard, who is director of the banking group Geneva Financial Centre, said: "Five billion is a possible number."

But he stressed that "the exposure is very modest compared to the total amount of funds managed."

"This could pose problems for the reputation but would not weaken the banks or pose systemic problems," he added.

Geneva-based Union Bancaire Privee, one of the biggest private banks in Switzerland, said in a statement that it had an exposure of CHF 1.26 billion in the Madoff funds.

Another Geneva bank, Benedict Hentsch, said it has an exposure of CHF 56 million.

The scandal has also affected private banks in other parts of Switzerland, with the Neue Privat Bank of Zurich saying that it had invested about USD 5 million, or less than 1 percent of its assets under management.

Lucerne-based Reichmuth & Co, meanwhile, had indirectly invested CHF 385 million in these funds, it said.

Michel Derobert, secretary-general of the Association of Swiss Private Banks, acknowledged that Switzerland had been affected, but he stressed that "in terms of the sum managed in Switzerland, the risks are relatively limited."

The total amount of assets under management here stands at CHF 4.5 trillion.

Meanwhile, the two biggest Swiss banks, UBS and Credit Suisse, said they had no "material" exposure to an alleged scam.

The exposure of UBS investment bank is "limited and insignificant," a spokeswoman from the world's biggest wealth manager said.

The country's second-biggest bank Credit Suisse also said it did not have "material" exposure to the scam.

Both banks have lost billions in the United States subprime home loan crisis and the ensuing financial crisis, with UBS forced to accept an aid package worth almost USD 60 billion dollars from the state.

Madoff, a 70-year-old Wall Street veteran who was arrested on Thursday, is alleged by US prosecutors to have confessed to having defrauded investors of USD 50 billion in a giant pyramid scheme that collapsed in the global financial crisis.

[AFP / Expatica]

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