HSBC Holdings has announced it will set aside $US1.1 billion ($1.7 billion) to cover potential litigation costs related to investor losses stemming from Bernard Madoff’s extensive fraud. This provision marks the latest instance of a global bank facing substantial financial repercussions from legal disputes originating years ago. HSBC is a global banking and financial services company, providing a wide range of services to personal, commercial, and corporate clients. The provision will be reflected in HSBC’s forthcoming third-quarter results and is expected to impact the group’s common equity tier 1 capital ratio by approximately 15 basis points, according to a statement released on Monday.
The litigation involves a claim brought by Herald Fund SPC back in 2009, with HSBC defending against demands for restitution of securities and cash. In July, the bank revealed that the fund was seeking the return of securities and cash amounting to $US2.5 billion, in addition to interest, or damages of $US5.6 billion, plus interest. The case has been proceeding through the courts in Luxembourg.
Last Friday, a Luxembourg court rejected HSBC’s appeal regarding Herald’s securities claim but upheld the appeal concerning the cash demand, according to the bank’s statement. HSBC, headquartered in London, has indicated its intention to pursue a second appeal. This multinational firm offers various financial products and services, including retail banking, commercial banking, and wealth management.
HSBC cautioned that due to the pending second appeal and the inherent “complexities and uncertainties associated with determining the quantum of restitution, the eventual financial impact could be significantly different”. The bank’s provision reflects an attempt to account for potential liabilities arising from this long-standing legal battle.
