FINMA pulls the plug on FlowBank as bankruptcy proceedings commence
The Swiss Financial Market Supervisory Authority (FINMA) has initiated bankruptcy proceedings for FlowBank following a “serious breach of supervisory law” by the Geneva-based investment banking challenger.
Bankruptcy proceedings against FlowBank begin
Commenced on 13 June with law firm Walder Wyss appointed as liquidator, the proceedings mark the latest development in FINMA’s ongoing efforts to shore up FlowBank’s rate of compliance.
According to a filing by the regulator, these efforts began in Q4 2021, less than a year since the bank’s launch. FlowBank gained a banking licence in mid-2020 and opened for business by the end of the year, aiming to combine traditional banking with a model similar to retail investment apps like Robinhood.
In October 2021, FINMA called into question FlowBank’s adherence to various capital, organisational and risk management requirements.
Its investigation uncovered that the challenger had “repeatedly breached the capital requirements” and “failed to fulfil disclosure and reporting obligations”, with its bookkeeping and financial reporting procedures condemned as “inaccurate and incomplete”.
Hitting the rocks
FlowBank is also alleged to have “entered into numerous higher-risk business relationships” without conducting the necessary due diligence, which “increased its risks considerably”.
The filing goes on to confirm that the challenger “no longer has sufficient capital for its operations as a bank” and that it has, as a result, “significantly and seriously breached” the minimum capital requirements set out by FINMA.
The regulator also makes known its “well-founded concerns that the bank is currently over-indebted” as of April 2024, and that “there is no prospect of a restructuring, the bank must be wound up”.
FlowBank’s “serious malpractice” and “prolonged non-compliance” culminated in the withdrawal of its banking licence by FINMA on 8 March 2024, which brought into effect “various precautionary measures” including a stop on the withdrawal of its assets. And having now established that FlowBank’s financial situation is “much worse than the bank originally reported”, FINMA says the primary aim of its latest intervention is to “protect depositors”.
With this, Walder Wyss is to repay deposits up to CHF 100,000 ($120,000) to the bank’s former clients “as quickly as possible”, with FINMA predicting that the current quota “can be repaid in full out of the bank’s available funds”.
