THE banking sector endured another torrid week after it was revealed several leading UK banks had significant exposure to Bernard L Madoff's fraudulent trading scheme.
Royal Bank of Scotland was the FTSE's biggest loser over the week, shedding 29.65% to close at 46.5p, after it revealed on Monday it is likely to lose £400m from the New York financier's giant Ponzi scheme.
The offices of Madoff's Wall Street tra
ding firm, which wealthy investors used to fight to give their money to, were closed off like a murder scene last week following the financier's arrest on December 11. It is understood he admitted the firm he founded in 1960 was based on "one big lie".
HSBC, which said it had a £1bn exposure, also saw its stock fall 17% over the week. Madoff, 70, has been ordered by a US judge to provide a written list of his assets and liabilities by the end of the year when it will become clear exactly how much he has squandered. It is estimated total losses worldwide could top $50bn.
But the banks were also dogged by comments from Bank of England deputy governor Charles Bean who warned that further capital injections may be needed in 2009.
HBOS fell 26.37% to close at 64.5p as Bean also raised the spectre of 0% interest rates next year.
Nevertheless, the FTSE received a late boost on Friday when news broke in America that the Bush administration had agreed a $17.4bn loan programme for the beleaguered US car industry.
The news cheered investors who were growing fearful for jobs worldwide after the US Senate failed to pass a similar $14bn rescue package earlier this month.
Outgoing US President George W Bush said on Friday that it would be irresponsible to let the car manufacturers go bust during a time of economic crisis. "The American people want the auto companies to succeed and so do I," he said.
However, the loans will come with a caveat: the Bush administration made it clear they would be called back if the companies involved cannot prove they are viable and sustainable by March 31. General Motors and Chrysler are expected to draw on the funds immediately.
The late announcement saw the FTSE end the week up marginally by 1.32% to close at 4,286.93. But it did not come early enough to save 300 staff at UK car parts maker Wagon, which shut its manufacturing plant in Birmingham on Friday.
