Westpac The Only Big 4 Australian Lender Clean in Madoff Affair
Australian financial institutions are still trying to work out whether they have any exposure to the US$ 50 billion ponzi scheme operated by disgraced money manager Bernard Madoff. Currently the only big four lender which has said it has zero exposure is Westpac. Whilst none of the big four say they have any direct exposure to the scheme, Other than Westpac they are yet to say they have a clean sheet.
Only Westpac has confirmed it has no exposure whatsoever and a Westpac spokesperson was quoted as saying “We have no exposure to Madoff,”
The banks are in the process of trying to identify their indirect exposure to the financial scandal through any counterparties they may have. CBA has said it is still investigating and a spokesperson said “At the time our risk management team was asked to identify and assess possible exposures and contact customers accordingly, which is an ongoing process,”
Similarly NAB is still looking at its clients and counterparties but a spokesperson did say that the bank is “not aware of any material impact on counterparty risk,”
ANZ echoed the sentiment and through a spokesperson also said “We have been reviewing possible indirect effects, but at this stage we appear to have no indirect exposures to Maddoff,”
Investor anger has been directed to custodian banks which played the role of funelling investment funds into the ponzi scheme. Global banking giants HSBC and UBS both of whom operate substantial custodian businesses and have come in for particular criticism.
The two banks were the largest European custodians for “feeder” funds which channelled billions of dollars to Madoff, holding assets on behalf of investors.
However, the custodians’ legal relationship with investors is at question since Madoff required his clients to open accounts giving custody to Bernard L. Madoff Investment Securities, effectively forcing the fund custodians to outsource custody to him as sub-custodian.
Custodians’ duties include overseeing funds and managing cash inflows and payments to investors.
In 2003 Commonwealth Bank of Australia sold its custodian business to National Australia Bank and as a result has had no activity in the sector. NAB now operates Australia’s largest domestic and master custodian business by market share. ANZ also offers custodian services with the assets held by ANZ Nominees.
NAB has categorically stated that its custodian unit had no direct relationship with the Madoff scheme.”National Custodian Services has never had Madoff as a client or sub-custodian,” NAB said. NAB declined to discuss any indirect relationships as a result of clients’ instructions to invest in entities associated with Madoff.
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