The Swiss Financial Market Supervisory Authority (FINMA) has announced the initiation of bankruptcy proceedings for FlowBank SA, an online brokerage and trading bank headquartered in Geneva, due to its failure to maintain the minimum capital required for business operations and the potential issue of insolvency.

FlowBank SA Bankruptcy Proceedings

Since October 2021, FlowBank SA has been under close scrutiny by FINMA. At that time, the regulator discovered that the bank was in serious violation of regulatory laws, particularly concerning capital requirements, organizational appropriateness, and risk management. Despite extensive measures implemented in October 2022 and the appointment of an independent auditor, the bank continued to violate capital ratio requirements and exhibited deficiencies across various operational aspects.

According to FINMA's statement, the primary goal of the bankruptcy proceedings is to protect depositors. Current calculations indicate that privileged deposits of up to CHF 100,000 per customer can be fully repaid using the bank's existing funds. The regulator has appointed the law firm Walder Wyss AG as liquidator to oversee the bankruptcy process.

In June 2023, FINMA took further enforcement actions against FlowBank SA, appointing a monitor to oversee the bank's activities and investigate its compliance failures. The monitor's report revealed multiple violations of capital requirements, inaccuracies, and incompleteness in bookkeeping and financial reporting, as well as failures in disclosure and reporting obligations to the regulator.

"Additionally, the investigation found that the bank entered into numerous high-risk business relationships and processed large transactions without proper due diligence into the background of these business relationships and transactions," FINMA noted in its press release.

FINMA considers this a serious breach of the bank's anti-money laundering due diligence obligations and a violation of the regulator's prohibition against engaging in additional high-risk business activities.

License Revocation and Appeal

In light of the bank's ongoing misconduct and inability to rectify its non-compliance, FINMA decided on March 8, 2024, to revoke FlowBank SA's banking license. The regulator also questioned the bank's capability to ensure proper business conduct. Although the bank has appealed to the Federal Administrative Court, FINMA has implemented various precautionary measures to prevent unauthorized withdrawals during the appeal process.

Upon reviewing FlowBank SA's 2023 financial statements, FINMA concluded that the bank's financial condition was more unstable than initially disclosed. The regulator found that the bank seriously violated minimum capital requirements at the end of 2023 and in April 2024. Furthermore, there is substantial reason to believe that the bank was insolvent as of April 2024.

FlowBank SA has total assets of approximately CHF 680 million, with over 22,000 customer accounts and around 140 employees worldwide. It has subsidiaries in London and the Bahamas. During the liquidation process, the appointed liquidator will prioritize repaying the affected customers' privileged deposits. Additionally, customer custody accounts will be segregated from the bank's assets and returned to their rightful owners in due course.

Earlier this year, FINMA announced the appointment of former European Central Bank executive Stefan Walter as CEO, effective April 1, 2024. Last year, FINMA's former CEO Urban Angehrn resigned due to health reasons.