HSBC, a London-based financial institution, is set to acknowledge a significant provision following a court ruling in Luxembourg, in relation to an ongoing lawsuit tied to the infamous Bernard Madoff scandal.
HSBC is expected to make an accounting provision amounting to $1.1 billion in its third quarter financial results. This move comes as a consequence of the Luxembourg court’s ruling on Bernard Madoff’s fraudulent investment scheme, as stated in an official report.
The lawsuit dates back to 2009, when Herald Fund SPC sought legal action against HSBC’s Luxembourg division. The fund sought the recovery of assets it asserted were lost in the Madoff fraud scandal. It is important to note that the British bank served as a service provider to several investment funds involved with Bernard L. Madoff Investment Securities LLC.
The Luxembourg court, on October 24, 2025, rejected an appeal by HSBC Securities Services Luxembourg (HSSL) regarding the recovery of securities. Nevertheless, the court accepted HSSL’s appeal related to a separate cash recovery claim. In response, HSSL plans to file another appeal. If this appeal is unsuccessful, the firm will challenge the sum to be paid in subsequent legal proceedings.
The sizable provision is estimated to affect HSBC’s common equity tier 1 (CET1) capital ratio by approximately 15 basis points. However, it is expected to have no impact on the yearly return on tangible equity, excluding notable items, nor on the distribution of dividends.
What is the value of the provision HSBC is expected to recognize?
HSBC is expected to recognize a provision of $1.1 billion in its third quarter results.
Why is HSBC recognizing this provision?
This provision is a result of a Luxembourg court ruling tied to the Bernard Madoff investment fraud scandal.
What will be the impact of this provision on HSBC’s financials?
The provision is estimated to affect HSBC’s CET1 capital ratio by about 15 basis points, but it will not impact the yearly return on tangible equity, excluding key items, or the distribution of dividends.
