UBS AG, HSBC Holdings PLC and other custodian banks for Luxembourg-based mutual funds have "clear" obligations to compensate investors for losses tied to Bernard Madoff, Treasury Minister Luc Frieden said.
"The principle is very clear: The custodian bank has to indemnify investors," Frieden, 45, said in an interview at the Luxembourg Ministry of Finance.
His comments may put pressure on UBS and HSBC to participate in Frieden's plan to settle dozens of lawsuits involving Luxembourg mutual funds that invested with Madoff. The nation's financial regulator estimated that Luxembourg funds lost as much as 1.9 billion euros, or $2.7 billion. Seventeen funds were forced to close after Madoff's Ponzi scheme was uncovered last year.