FINMA starts FlowBank Bankruptcy Proceedings

FINMA established in the last week that FlowBank no longer has sufficient capital for its operations as a bank. The minimum capital requirements, which must be always met, have been significantly and seriously breached. FlowBank SA and its management bodies were unable to take steps to sustainably restore compliance with the capital requirements within the required timeframe. Moreover, there are well-founded concerns that the bank is currently over-indebted. As there is no prospect of a restructuring, the bank must be wound up. FINMA has appointed the law firm Walder Wyss AG as liquidator to carry out the bankruptcy proceedings.

Serious breach of supervisory law

FINMA took enforcement action against FlowBank SA in October 2021 for serious breaches of supervisory law concerning capital requirements, organizational adequacy, and risk management. Despite measures ordered in October 2022 and the appointment of an independent auditor, ongoing compliance deficiencies, including breaches of capital ratio requirements, led to further action in June 2023. A monitor reported repeated violations, inadequate organization, and inaccurate financial reporting. Additionally, FlowBank engaged in high-risk business relationships and transactions without proper due diligence, violating money laundering due diligence obligations and FINMA's prohibition on high-risk activities, highlighting significant and ongoing compliance failures.

Given the serious malpractice, the prolonged non-compliance with licensing conditions and the bank’s inability to restore compliance with the law, FINMA ordered the withdrawal of the bank’s licence on 8 March 2024 and disqualified its guarantee of proper business conduct. This ruling does not yet have legal force due to a pending appeal at the Federal Administrative Court. However, during the appeal various precautionary measures decreed by FINMA, e.g. to prevent assets from being withdrawn by the bank, are in effect.

FINMA intervening immediately

After the bank's board of directors approved the 2023 financial statements just a few days ago, and confirmed data to assess the risk of insolvency has only been available for a short time, FINMA established that FlowBank SA’s financial situation is much worse than the bank originally reported. The bank was clearly in breach of the minimum capital requirements at the end of 2023 and again at the end of April 2024. In addition, there are well-founded concerns that the bank is over-indebted as at the end of April 2024. The bank was unable to carry out an eligible capital increase within the required timeframe. This new situation requires FINMA to intervene immediately to protect depositors, which is why it has placed the bank into bankruptcy.

Repayment of privileged deposits

FINMA’s primary aim is to protect depositors. In a first step the liquidator will therefore repay deposits up to CHF 100,000 (privileged deposits) to the clients concerned as quickly as possible. According to current calculations, the privileged deposits can be repaid in full out of the bank’s available funds. "Therefore, we do not expect the Swiss banks’ deposit insurance scheme (esisuisse) to be involved. Client custody accounts will also be segregated from the estate and repaid." says FINMA's Spokesperson Patrizia Bickel.

FlowBank SA is a bank offering online brokerage and trading with its head office in Geneva and subsidiaries in London and the Bahamas. The bank has total assets of approximately CHF 680 million, holds over 22,000 client accounts and employs around 140 staff worldwide.

(Press release)