Austria to run Madoff-hit bank

Bank Medici is one of many financial institutions hit by the fraud.

Austria is taking control of Bank Medici after the small, private bank was hit by the Bernard Madoff scandal.

The country's financial regulator has appointed a supervisor to the board of the Vienna-based bank to safeguard creditors' interests.

The Financial Market Authority said the bank would not be able to make key decisions without state consent.

Banks, funds and charities worldwide have sustained billions of dollars in damage from the alleged $50bn fraud.

A state financial inspector, Gerhard Altenberger, will oversee all bank operations to ensure the lender "carefully adheres to all legal and contractual obligations", the authority said.

The move was needed because there "was a risk that the financial institution will not respect its obligations to creditors, particularly in managing funds entrusted to it," it added.

Medici's chief executive Peter Scheithauer and Werner Tripolt, who oversaw the its executive committee, have resigned.

Losses unknown

The bank had earlier said that it held investment products affected by the fraud but maintained that it had a solid capital base.

Reports said that it had placed about $2.1bn in funds controlled by Mr Madoff.

The Austrian government is not expected to provide financial support to the bank.

The full extent of the losses caused by Mr Madoff's fraud is not yet known.

He is under house arrest in his Manhattan apartment and his assets have been frozen.