HSBC ‘may be liable’ over Madoff losses

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The issue revolves around the banks' duties as custodians of investors funds put into Madoff's investment scheme.

Custodian banks are responsible for the safekeeping of assets such as equities and bonds and the collection of dividends. They usually are expected to provide information on the investment targets.

"If they aren't required to pay the money, then investor protection doesn't mean anything and people might as well just invest in offshore funds," said Isabelle Wekstein-Steg, a lawyer at Wan Avocats in Paris who is representing 10 French retail investors and two institutions burnt in the Madoff affair.

HSBC says its custodial business should not be a source of exposure to Madoff. UBS refused to make any comment.