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Banks

UPDATE 1-Spain's Santander details exposure to Madoff

(Recasts with Santander’s exposure to Madoff funds)

MADRID, Dec 14 (Reuters) - Spain's largest bank, Santander SAN.MC, said on Sunday one of its investment funds had exposure of 2.33 billion euros to Madoff Securities, whose founder Bernard Madoff is accused of masterminding a $50 billion fraud.

Santander said in a statement that the 2.33 billion euro ($3.05 billion) exposure of its investment fund Optimal includes 2.01 billion euros in funds invested for international institutional investors and private banking clients. It also includes 320 million euros in the investment portfolios of private banking clients in Spain, which are qualifying investors.

Santander’s statement came as newspaper El Mundo reported that the Bank of Spain and Spanish stock exchange regulator CNMV are assessing the impact on investors of the alleged fraud by Madoff. The newspaper, citing sources close to the investigations, said the two regulators are confident the impact will be “limited.”

No one at the Bank of Spain or the CNMV was immediately available to comment on the report.

U.S. prosecutors and regulators have accused the 70-year-old Madoff, founder of Bernard L. Maddoff Investment Securities LLC and a former chairman of the Nasdaq Stock Market, of masterminding a fraud of epic proportions through his investment advisory business, which managed at least one hedge fund.

Hundreds of people, investing with him through the firm’s clients, entrusted Madoff with billions of dollars, industry experts have said.

The Bank of Spain’s investigation was opened on Friday, El Mundo said.

Deputy Governor Jose Vinals is coordinating the probe while a parallel investigation at the CNMV is being headed by Jose Maria Marcos.

Santander said its exposure came from an investment company managed by Optimal, called Optimal Multiadvisors Ireland, which was authorised by the Irish Financial Services Regulatory Authority.

The Irish-based company had a subfund called Optimal Strategic US Equity which had used Madoff Securities to carry out its investments.

The custodian of Optimal Multiadvisors and Optimal Strategic is HSBC Institutional Trust Services in Ireland, which belongs to the group HSBC HSBA.L, said Santander.

It said the Santander group also had 17 million euros invested in Madoff-related investments through another fund.

Spain's second largest bank, BBVA BBVA.MC, told Reuters on Saturday that no BBVA customers in Spain were exposed to the alleged fraud.

“BBVA has not commercialised in its network of retail clients or private banking in Spain products managed or deposited in Madoff Investment Securities,” a spokesman said.

For recent stories on the Madoff affair please double click on [ID:nN13268813] ($1=.7537 euros) (Reporting by Sarah Morris; Editing by Leslie Adler)

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