LONDON (MarketWatch) -- European banking giants UBS and HSBC may be liable for around $3.2 billion of losses from the Bernard Madoff scandal due to their role as custodians of funds in Ireland and Luxembourg, according to a published report Thursday.

Custodians are responsible for the oversight of funds and the transfer of cash to and from investors. Individuals and institutions with money in funds that had UBS UBS, -0.54% (002489948) and HSBC (HSBA) HBC, -0.48% as custodians are claiming the banks failed to do their job because they didn't keep track of where the assets were, Bloomberg reported.