HSBC Holdings announced on Monday that it will record a $1.1 billion provision in its third-quarter financial results following a partial loss in a Luxembourg court appeal related to Bernard Madoff’s infamous Ponzi scheme. The bank, which served as a service provider to several funds invested in Madoff’s fraudulent operations, faced a lawsuit from Herald Fund SPC in 2009 seeking restitution for assets lost in the scheme. Last Friday, the Luxembourg Court of Cassation rejected HSBC’s appeal regarding securities restitution but accepted its appeal on a separate cash restitution claim. HSBC plans to file a second appeal with the Luxembourg Court of Appeal and, if unsuccessful, will contest the amount to be paid. The bank cautioned that the final financial impact could differ significantly from its current estimate. HSBC, Europe’s largest bank by assets, disclosed in July that Herald Fund, now in liquidation, sought restitution of securities and cash worth $2.5 billion plus interest or damages of $5.6 billion plus interest. The provision is expected to impact HSBC’s common equity tier 1 (CET1) capital ratio by approximately 15 basis points, adding to the 125 basis points impact from its $13.6 billion acquisition of Hang Seng Bank. Analysts suggest the charge may slightly dampen investor sentiment but note the impact is limited due to HSBC’s suspension of dividend payments for the next three quarters. HSBC’s Hong Kong-listed shares remained flat in morning trading, underperforming the 1% rise in the Hang Seng Index. Madoff’s Ponzi scheme, one of the largest financial frauds in history, was estimated at $64.8 billion and remained undetected for years until his confession in December 2008. Madoff died in April 2021 while serving a 150-year prison sentence. HSBC previously settled with Kalix Fund in 2012 for an undisclosed amount over losses tied to Madoff’s collapse.