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Nomura could lose millions in Madoff affair

Latest update : 2008-12-17

Japan's lead broker Nomura and several South Korean firms joined the list of financial institutions facing the fallout from a failed pyramid scheme allegedly run by former Nasdaq chief Bernard Madoff. Nomura says it could lose up to $303 million.

 

Click here to read our Business Editor's blog: How did Madoff pull off a $50bn fraud?

 

Watch our Web News show to find out what bloggers make of the Madoff fraud.

 

AFP - Japan's top broker Nomura and a clutch of South Korean firms on Monday joined the growing list of victims of an alleged multi-billion-dollar swindle on Wall Street.
   
Nomura said it may lose up to 27.5 billion yen (303 million dollars) from the scandal involving once high-flying fund manager Bernard Madoff, who was arrested last week on suspicion of operating a giant pyramid scheme.
   
In Seoul, financial authorities said South Korean institutions have a total exposure of 95.1 million dollars to the alleged financial fraud, including an insurer and six asset management firms.
   
The Financial Times, citing people close to the situation, said Britain's HSBC may have exposure of about one billion dollars from loans it provided to institutional clients who invested with Madoff. The bank declined to comment.
   
Prosecutors say that the 70-year-old, a Wall Street veteran and former chairman of the Nasdaq stock market, has confessed to losing at least 50 billion dollars.
   
Nomura said it could easily cope with the loss, but it is the latest in a series of setbacks for the broker, one of Japan's biggest victims of the US-born credit crunch.
   
The broker suffered a net loss of 149.5 billion yen (1.6 billion dollars) in the six months to September. It is also paying two billion dollars for Lehman Brothers' operations in the Asia-Pacific, Europe and the Middle East.
   
Nomura shares ended up 0.6 percent, lagging behind the benchmark Nikkei index which soared 5.2 percent.
   
So far Nomura has been the only Japanese financial institution to have warned of potential losses in connection with the scandal, but European banks have also been hit.
   
Spain's largest bank, Santander, said Sunday its investment fund unit may have lost 2.33 billion euros (3.1 billion dollars), while French bank BNP Paribas also revealed it could lose up to 350 million euros in the scandal.
   
European media have said Union Bancaire Privee of Switzerland could also have suffered losses.
   
In Britain, a spokeswoman for Royal Bank of Scotland told AFP the bank had "some exposure" to Madoff, but declined to give details.
   
A British investment fund that also acknowledged being a Madoff client criticised what it called the "systemic failure" of US regulators.
   
Bramdean Alternatives Limited said the accusations against Madoff raised "fundamental questions" about the American financial regulatory system.
   
British newspapers reported that among Bramdean's clients is property magnate Vincent Tchenguiz, one of Britain's richest men, who apparently invested 40 million pounds (60 million dollars) with the firm.
   
Swiss bankers, led by Union Bancaire Privee, a major asset management institution specialising in hedge funds, face losses of up to five billion dollars, Geneva's Le Temps newspaper said.
   
UBP refused to comment on the report, which said 90 percent of fund management companies operating in Geneva invested in products of Bernard L. Madoff Investment Securities LLC.
   
Italy's stock market watchdog, the Consob, and the Bank of Spain separately have launched an investigation into the impact of the scandal on their national financial systems, news reports said.
 

Date created : 2008-12-15

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