Claims made by Luxembourg's Treasury Minister that custodian banks should compensate clients who lose money have been met with disbelief and criticism, as the country's regulator attempts to deal with the aftermath of exposure to fraudster Bernard Madoff's funds.

Treasury Minister, Luc Friedman, said in an interview yesterday that custodians had clear obligations to compensate investors for losses tied to Bernie Madoff and make restitution for lost assets, according to reports from Bloomberg.