Australian banks check Madoff exposure

Australia's big banks are still determining their possible indirect exposures to
Bernard Madoff's $US50 billion ($A75.82 billion) `Ponzi' scheme in the United
States.
Westpac has emerged as the only cleanskin, so far.
While all of the big four banks have no direct exposures to Madoff's alleged fraud -
the biggest Ponzi scheme in history - the process of identifying counterparties to
any indirect exposures began last month as offshore financial institutions scrambled
to discover the scope of their losses.
Of the major local banks, only Westpac has confirmed it has no indirect exposures to
the scheme run by Bernard L. Madoff Investment Securities LLC, whose assets were
frozen on December 12 in a deal with US federal regulators.
"We have no exposure to Madoff," Westpac's Jane Counsel told AAP.
Madoff's Ponzi scheme involved using money from new investors to pay old ones.
Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) are still
identifying counterparties and possible indirect exposures.
"At the time our risk management team were asked to identify and assess possible
exposures and contact customers accordingly, which is an ongoing process," CBA said.
NAB's investigations were also progressing but the bank is "not aware of any
material impact on counterparty risk," a NAB spokesperson said.
No indirect exposures have come to light at ANZ.
"We have been reviewing possible indirect effects, but at this stage we appear to
have no indirect exposures to Madoff," ANZ spokeswoman Cherelle Murphy said.
The process of identifying counterparties comes as global banking giants UBS AG and
HSBC Holdings plc face lawsuits from investors angry at their custodian role in
funnelling funds to Madoff.
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 LLC, 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.
CBA sold its $30 billion custodian business to NAB in June 2003 and has not been
active in the space since then, the bank said.
NAB now operates Australia's largest domestic and master custodian business by
market share and said the unit had no direct relationship with the Madoff scheme.
"National Custodian Services has never had Madoff as a client or sub-custodian," NAB
told AAP.
NAB declined to discuss any indirect relationships as a result of clients'
instructions to invest in entities associated with Madoff.
ANZ also offers custodian services with the assets held by ANZ Nominees Ltd.