HSBC to book US$1.1B Madoff provision after Luxembourg ruling

HSBC Holdings said on Monday it will book a US$1.1 billion provision in its third quarter results after a Luxembourg court rejected part of its appeal in a longrunning lawsuit connected to losses from the Bernard L. Madoff investment fraud. The bank said the Luxembourg Court of Cassation on Oct. 24 denied an appeal by HSBC Securities Services Luxembourg over restitution of securities claimed by Herald Fund SPC, while accepting HSBC’s appeal on a separate cash restitution claim.

Herald, a feeder fund that invested in Madoff-run vehicles, sued HSBC’s Luxembourg unit in 2009 seeking restitution of securities and cash it says were lost in the collapse of Bernard L. Madoff Investment Securities. In July the bank said Herald, which is in liquidation, sought the restitution of securities and cash worth about US$2.5 billion plus interest, or damages of roughly US$5.6 billion plus interest. HSBC said it will pursue a second appeal before the Luxembourg Court of Appeal and will contest the amount to be paid if that appeal fails.

HSBC said the US$1.1 billion charge will be recorded as a material notable item in its third quarter and estimated it would reduce the group’s common equity tier...