Madrid - Santander shares dropped by 2.1 per cent Monday after trading started at the Madrid stock exchange.

The fall followed an announcement by Spain's largest bank that one of its investment funds had an exposure of 2.3 billion euros (3.1 billion dollars) to Madoff Securities, a Wall street broker suspected of a massive fraud.

Fewer than 1,000 wealthy clients were exposed through the high-risk Optimal hedge fund unit, with institutional and international private banking clients accounting for 2.01 billion of the money.

Santander said it had also invested 17 million euros of its own funds in Madoff.

The bank said it could not cover the losses of its clients, given that Madoff had been supervised by the US authorities. "Santander is not responsible for frauds committed by third parties," a bank source said.

Known for its prudent policies, Santander had hitherto been seen as weathering the international banking crisis remarkably well. (dpa)