HSBC Sets Aside $1.1 Billion Following Luxembourg Court Ruling in Madoff Case

HSBC has set aside $1.1 billion in its Q3 2025 accounts after a Luxembourg court partially upheld claims related to the bank's involvement in the Bernard Madoff Ponzi scheme. The lawsuit, filed by Herald Fund SPC in 2009, alleges that HSBC's Luxembourg unit failed to prevent investor losses connected to Madoff's fraud. The bank has warned that the legal process could take several years to fully resolve.

The provision contributed to a 14% drop in pre-tax profits, down to $7.3 billion for the quarter. HSBC is also managing additional financial pressures, including a $1 billion provision for risks in China's and Hong Kong's real estate markets, and a 24% increase in operating costs due to ongoing restructuring. Despite these challenges, the bank reported a 15% rise in net interest income and a 12% increase in fee income, reflecting resilience in its core operations.

The Luxembourg ruling highlights the long-lasting financial and reputational impacts of the Madoff fraud on global banks. HSBC plans to appeal the decision and may pursue further legal avenues. While the ultimate resolution remains uncertain, the bank's measures demonstrate proactive risk management in navigating complex, multi-year litigation.