(Corrects name of Madoff's wife in 11th paragraph)

By Grant McCool and John Poirier

A federal judge ordered the 70-year-old former pillar of Wall Street confined to his Manhattan apartment and told Madoff's wife to surrender her U.S. passport by noon on Thursday.

Madoff will be fitted with an electronic ankle bracelet and confined to his Manhattan apartment, except for appointments prearranged with authorities.

The changes in bail conditions for the one-time Nasdaq Stock Exchange chairman were ordered a day after U.S. Securities and Exchange Commission Chairman Christopher Cox offered an embarrassing mea culpa for the agency's lack of oversight of Madoff's investment advisory firm.

A rewrite of U.S. regulations to prevent a relapse of the Madoff fiasco will be high on the agenda of the new U.S. Congress, U.S. Rep. Paul Kanjorski said, adding that he will convene a congressional inquiry in early January to focus on the case.

Kanjorski, who chairs House Capital Markets Subcommittee, called the matter "deeply disturbing," and said the scandal only weakens "already-battered investor confidence in our securities markets."

BNP's stock was the main loser among Europe's top banks after it announced an unexpected 11-month loss at its CIB investment bank unit, blamed partly on exposure to Madoff.

"Generally there is a sense of nervousness going on with Madoff's alleged fraud and BNP's losses," said Fox-Pitt Kelton analyst David Williams.

In Asia, Great Eastern Holdings Ltd, the insurance arm of Singapore's Oversea-Chinese Banking Corp, said it had an indirect exposure of about S$64 million (US$43.93 million) to Madoff, while in Europe, the Dutch pension fund of Royal Dutch Shell Plc said it had a $45 million exposure.

ANOTHER BLACK EYE

Madoff, who counted celebrities and many friends among his investors, was unable to obtain four co-signers to guarantee his $10 million bond.

Only two people, his wife, Ruth, and brother, Peter, who also worked at Madoff's firm, had signed it as of Wednesday morning.

In lieu of two additional signatures, Madoff and the government agreed that his wife surrender her passport and put up properties in her name in Montauk, New York, and Palm Beach, Florida.

Madoff will not be required to appear in court for a bail hearing unless the documents on the additional conditions are not filed by Monday, the deadline set by the magistrate judge.

In the United States, Cox's admission that the SEC had missed obvious red flags in the Madoff case was seen as the latest in a series of black eyes to the U.S. securities watchdog, already under fire for weak oversight as U.S. banks loaded up on risky assets that have ripped huge holes in their balance sheets.

Cox said the agency's failure to catch Madoff's alleged massive Ponzi scheme was "deeply troubling." Under a Ponzi scheme, later investors' funds were used to pay returns to initial investors.

Cox has asked the agency's inspector general to probe the agency's conduct in the Madoff case. Madoff's niece, Shana Madoff, a compliance lawyer at his firm, is married to a former SEC lawyer, Eric Swanson, who was the agency's assistant director in the office of compliance inspections and examinations.

A spokesman for Swanson said his romantic relationship with his wife began years after the compliance team he helped supervise inquired into Bernard Madoff's securities operations.

In another sign of Madoff's close ties to the powerful, U.S. Attorney General Michael Mukasey has removed himself from involvement in the investigation, a department spokesman said.

He declined to discuss the reason, but Bloomberg News reported that Mukasey's son Marc, a former federal prosecutor, is representing Frank DiPascali, an official at Bernard L. Madoff Investment Securities LLC, the broker-dealer that Madoff founded.

Madoff, accused of defrauding hundreds of wealthy investors including Ezra Merkin, the former chairman of auto finance company GMAC, and real estate and newspaper mogul Mortimer Zuckerman, faces up to 20 years in prison and a maximum fine of $5 million if convicted.

(Additional reporting by Rachelle Younglai; writing by Christian Plumb; editing by Jeffrey Benkoe)