The Swiss Financial Market Supervisory Authority (Finma) has initiated bankruptcy proceedings against the investment banking firm FlowBank due to serious and repeated violations of capital requirements.
FlowBank, which specializes in online brokerage and trading, is headquartered in Geneva and has subsidiaries in London and the Bahamas. It manages over 22,000 client accounts and employs around 140 staff globally.
The Swiss regulator’s decision to commence wind-up proceedings aims to protect depositors amid concerns of the bank’s over-indebtedness. Finma first took action against FlowBank in October 2021, citing significant breaches of supervisory laws, particularly related to capital adequacy, organizational adequacy, and risk management. In October 2022, the regulator mandated extensive measures to ensure compliance with the law and appointed an external auditor to oversee their execution.
As issues at FlowBank escalated, Finma introduced an independent monitor to supervise the bank’s operations and investigate compliance failures. The monitor’s findings revealed that FlowBank consistently violated capital requirements and exhibited deficiencies in various operational areas.
The bank’s financial records were deemed inaccurate and incomplete. Operating on a Temenos core banking platform, FlowBank also failed to meet its disclosure and reporting obligations to Finma. Furthermore, the investigation uncovered that the bank had engaged in numerous high-risk business relationships and processed substantial transactions without adequate anti-money laundering (AML) checks.
Following the release of its 2023 financial statements, which clearly indicated breaches of minimum capital requirements at the end of 2023 and again at the end of April 2024, Finma revoked the bank’s license in March and began insolvency proceedings.
The law firm Walder Wyss AG has been appointed as the liquidator to oversee the bankruptcy process. In the initial phase, the liquidator will reimburse deposits up to CHF 100,000 to clients. Current assessments suggest that these privileged deposits can be fully repaid from the bank’s available assets without needing to access the Swiss banks’ deposit insurance scheme. Additionally, client custody accounts will be kept separate from the estate and repaid accordingly.