RBS exposed to Madoff hedge funds

The Scottish bank has advised it may see £400m in losses if fraud is found in Bernard L Madoff hedge funds

Morningstar.co.uk Editors 15 December, 2008 | 9:06AM

The Royal Bank of Scotland Group has revealed it may lose as much as £400m as a result of its exposure to Bernard L Madoff Investment Securities (BMIS), which is under scrutiny after its US founder was arrested last week. The Scottish bank said it had exposure through trading and collateralised lending to funds of hedge funds.

Bernard L Madoff Investment Securities LLC was founded by Bernie Madoff, a former chairman of the Nasdaq stock market, who has been arrested and charged with running a US$50bn hedge fund fraud in New York. Madoff is alleged to have been running a pyramid-type investment scheme through his hedge fund business.

RBS said this morning that if as a result of the alleged fraud the value of the assets of the BMIS hedge funds is nil, RBS's potential loss could amount to approximately £400m. The news has not had an immediate impact on the share price of RBS, which as of 8:45am saw a rise in price of just over 3% to price the stock at 57.80p, according to Hemscott data.

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