The fallout from Bernard Madoff’s alleged $50bn fraud spread through the global financial system on Monday as more banks revealed exposures to his firm and the beleaguered hedge fund industry braced for withdrawals from worried clients.

The potential losses reported by large financial institutions that invested or lent to investors in Mr Madoff’s failed venture reached $10bn after HSBC confirmed the news, first reported in the Financial Times, that it could lose up to $1bn.