Madoff house arrest ordered as European banks reel after fraud

Disgraced financier Bernard Madoff, accused of orchestrating a $50 billion fraud, was placed under house arrest yesterday as BNP Paribas became the latest European bank to be sideswiped by the scandal.

A federal judge ordered the 70-year-old former pillar of Wall Street confined to his $7 million Manhattan apartment and told Mr Madoff's wife to surrender her US passport by noon today.

Mr Madoff will be fitted with an electronic ankle bracelet and will only be allowed to leave his home for appointments prearranged with authorities.

The changes in bail conditions for the one-time Nasdaq Stock Exchange chairman were ordered a day after US Securities and Exchange Commission Chairman Christopher Cox offered an embarrassing mea culpa for the agency's lack of oversight of Mr Madoff's investment advisory firm.

A rewrite of US regulations to prevent a relapse of the Mr Madoff fiasco will be high on the agenda of the new US Congress, US Rep. Paul Kanjorski said. He said he will convene a congressional inquiry in early January to focus on the case.Mr Kanjorski, who chairs the House Capital Markets Subcommittee, called the matter "deeply disturbing," and said the scandal only weakens "already-battered investor confidence in our securities markets."

BNP's stock was the main loser among Europe's top banks after it announced an unexpected 11-month loss at its CIB investment bank unit, blamed partly on exposure to Mr Madoff.

"Generally there is a sense of nervousness going on with Madoff's alleged fraud and BNP's losses," said Fox-Pitt Kelton analyst David Williams.

In Asia, Great Eastern Holdings Ltd, the insurance arm of Singapore's Oversea-Chinese Banking Corp, said it had an indirect exposure of about S$64 million (US$43.93 million) to Mr Madoff.

In Europe, the Dutch pension fund of Royal Dutch Shell Plc said it had a $45 million exposure.

An investor protection group in the US said it could take several years to sort through investor losses.

The Securities Investor Protection Corp is overseeing the liquidation of Bernard L. Madoff Investment Securities LLC.Mr Madoff, who counted celebrities and many friends among his investors, was unable to obtain four co-signers to guarantee his $10 million bond.

Only two people, his wife, Ruth, and brother, Peter, had signed it as of yesterday morning. Peter Madoff also worked at Mr Madoff's firm.

In lieu of two additional signatures, Mr Madoff and the government agreed that his wife surrender her passport and put up properties in her name in Montauk, New York, and Palm Beach, Florida.

Mr Madoff will not be required to appear in court for a bail hearing unless he fails to file the documents on the additional conditions by Monday, the deadline set by the judge.

A preliminary hearing and appearance by Mr Madoff was scheduled for January 12.

Mr Cox's admission that the SEC had missed obvious red flags in the Madoff case was seen as the latest in a series of black eyes to the US securities watchdog, already under fire for weak oversight as US banks loaded up on risky assets that have ripped huge holes in their balance sheets.