HSBC announced it will set aside $1.1 billion in its third-quarter results following a Luxembourg court ruling related to the Bernard Madoff investment fraud.
The case stems from a 2009 lawsuit filed by Herald Fund SPC against HSBC’s Luxembourg unit, seeking restitution for securities and cash lost in the fraud. The court denied HSBC’s appeal on securities restitution but accepted its appeal on cash claims. HSBC said it will file a second appeal before the Luxembourg Court of Appeal and may challenge any payment amounts if unsuccessful.
Madoff, who ran the largest investment fraud in U.S. history, defrauded investors of up to $65 billion before his 2008 arrest.
In its 2025 interim report, HSBC said Herald had claimed up to $5.6 billion in damages plus interest. The bank noted that several of its non-U.S. entities provided services to funds tied to Madoff’s firm.
The $1.1 billion provision will lower HSBC’s CET1 ratio—a key measure of financial strength—by about 15 basis points, ahead of its quarterly earnings announcement. Analysts had forecast a CET1 ratio of 12.89%, compared to 12.82% in Q2.HSBC is currently restructuring under CEO Georges Elhedery, splitting operations into “Eastern” and “Western” markets, aiming to cut costs by $300 million this year.