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Banking

US pyramid scam may hit troubled Dutch banks

Banking

19/12/2008US pyramid scam may hit troubled Dutch banks

Dutch government-owned banks Fortis Nederland and ABN Amro may be among the victims of the fraudulent investment banker Bernard (Bernie) L. Madoff. Fortis says it is expecting to lose as much as one billion euros.

Pressure mounts on US regulators over Madoff scam

Brussels court rules in favour of Fortis small shareholders

Fortis bank, saved from collapse, again on shaky ground

Chinese want Fortis money back

The US trader was arrested on Thursday, charged with defrauding investors of 50 billion dollars in a pyramid scheme.

Smiled all the way to the bank: Bernard L. Madoff (photo: yu.edu)

Madoff promised investors an unusually high 8 percent interest. He ran a so-called Ponzi scheme, where investors are paid out with money from new participants, instead of money from actual investment returns.

So far, no major US banks have come forward as investors in Madoff's scheme. A number of Japanese banks have announced they stand to lose billions of euros in the scheme. The biggest victim in Europe looks likely to be Spanish Banco Santander, which had a three billion euro stake in Madoff's Investment Securities.

ABN Amro is refusing to specify the amount of damage it is likely to suffer, but those losses will hit the section of ABN that was sold to Bank of Scotland. This bank says it stands to lose some 600 million euros in all over the pyramid scam.

Dutch Fortis says it did not participate in the Madoff scheme directly, but it supplied about one billion euros in loans to funds that invested in the pyramid scheme. The bank emphasises, however, that a loss of this size will not endanger its existence, nor that of its affiliates.

Investors that stand to lose money over the Madoff scam

Banco Santander, Spain: 3 billion euros

HSBC Holdings, United Kingdom: 1 billion euros

Fortis, Netherlands: 1 billion euros

ABN Amro, Netherlands: as yet unknown

Sterling Equities, New York, USA: as yet unknown

Charities, such as:

Steven Spielberg's Wunderkind Foundation

Chais Family Foundation

Jewish Federation of Greater Los Angeles

More Fortis woes

On Friday, Fortis suffered another blow when a Belgian appeals court ruled that the breakup and subsequent sale of Fortis in October should have been agreed with the shareholders. The bank was sold to the Dutch and Belgian governments. Belgium later sold its part to Paribas Bank of France.

The case had been brought by 2,000 small shareholders whose stocks plummeted in the wake of the bank's breakup.

At the request of Fortis, trade in its shares on the Amsterdam and Brussels stock exchanges was suspended on Friday and will resume on Wednesday. Fortis has announced it will publish an explanation about the financial consequences of the court's decision.

Radio Netherlands