Banks and investment funds across the world lined up yesterday to admit investing billions of dollars in the companies of Bernard Madoff, whom US authorities accused of masterminding a massive fraud.
Britain's HSBC Holdings Plc was the latest bank to join the growing list, saying it had exposure of around $1 billion, making it one of the biggest victims of the alleged $50 billion fraud.
Royal Bank of Scotland and Man Group in the UK, Japan's Nomura and France's Natixis also said they were hit by the worldwide scandal.
Financial companies, reeling after a year of enormous writedowns on bad credit assets, have so far tallied up more than $10 billion in direct and indirect exposure to the possible fraud by Mr Madoff, the 70-year old trader who was arrested on Thursday.
"There is a broader danger here for the industry," an equity analyst at a large European bank said, asking not to be named because of a corporate policy.
"This huge fraud, supposedly in blue chip funds, is going to make people nervous, and you've already seen massive redemptions," the analyst said.
Shares in France's Natixis were down 4.7 per cent after it said it had as much as €450 million of exposure to the fiasco. The wider DJ Stoxx banking index was 0.9 per cent lower.
US prosecutors and regulators have accused Mr Madoff, a former chairman of the Nasdaq Stock Market, of running the fraud through his investment advisory business, which managed at least one hedge fund.
Man Group, the world's largest listed hedge fund manager, said it was exposed to Mr Madoff through its fund of funds business RMF, which has $360 million invested in funds directly or indirectly sub-advised by Mr Madoff.
Also Swiss private bank Benedict Hentsch said it had undone its recent merger with alternative investment specialist Fairfield Greenwich, which said it had put half of its assets in one of the funds set up by Mr Madoff.
A rising number of banks across Europe detailed their potential losses from Mr Madoff, who allegedly set up a so-called Ponzi scheme, in which existing investors are paid out with money from new clients, not from actual investment returns. BNP Paribas and Santander detailed potential losses on Sunday, and others joined at the start of the trading week, with Italy's UniCredit SpA revealing exposure of around €75 million.