HSBC to book $1.1 billion provision after Luxembourg court ruling in Madoff case

Core Viewpoint - HSBC Holdings will recognize a provision of $1.1 billion in its third-quarter results due to a Luxembourg court ruling related to the Bernard Madoff investment fraud [1][2]. Group 1: Legal Proceedings - The Luxembourg Court of Cassation denied HSBC Securities Services Luxembourg's appeal regarding the restitution of securities claimed by Herald Fund SPC but accepted an appeal on a separate cash restitution claim [2]. - HSBC will pursue a second appeal before the Luxembourg Court of Appeal, and if unsuccessful, it will contest the amount to be paid in subsequent proceedings [2]. Group 2: Financial Impact - The provision of $1.1 billion is estimated to impact HSBC's common equity tier 1 (CET1) capital ratio by around 15 basis points [3]. - This provision will be classified as a "material notable item" and will not affect the full-year return on tangible equity excluding notable items or the dividend payout [3]. Group 3: Future Considerations - Given the pending appeal and complexities in calculating the restitution amount, the eventual financial impact could differ significantly from the current estimate [4]. - The case originates from Herald Fund SPC's claim for restitution of securities and cash lost in the collapse of Bernard L. Madoff Investment Securities LLC, which was involved in one of the largest Ponzi schemes in history [4].