Draft:FlowBank

Logo-green-social.webp in Geneva.

FlowBank was declared bankrupt by FINMA, the Swiss financial market supervisory authority, on June 13, 2024.

Despite this history, the bankruptcy came as a complete surprise to Flowbank CEO Sabet: "I thought it was a joke. I was totally shocked. Security personnel asked me to leave my office immediately," he said in Neue Zürcher ZeitungNZZ interview.https://www.nzz.ch/finanzen/flowbank-will-den-konkurs-entscheid-der-finma-anfechten-wir-hatten-genug-kapital-sagt-der-chef-der-online-bank-ld.1835362

History
Geneva-based FlowBank has been declared bankrupt. The reason given by FINMA is depositor protection due to the bank's serious violations, including breaches of capital requirements and money laundering due diligence obligations. FINMA opened bankruptcy proceedings on June 13, 2024, citing the bank's failure to maintain the minimum required capital and concerns over its potential over-indebtedness

Following initial enforcement actions in October 2021 and subsequent measures in October 2022, FINMA continued to find significant deficiencies in FlowBank's operations, including incorrect financial reporting and engagement in high-risk business relationships without proper due diligence. These findings led to the withdrawal of FlowBank's license on March 8, 2024, although the decision was appealed.

The bankruptcy proceedings aim to protect depositors, with the law firm Walder Wyss appointed as the liquidator. According to FINMA, the bank's available funds should be sufficient to fully repay privileged deposits, so the Swiss banks' deposit insurance scheme (esisuisse) will not be needed. FlowBank employed around 140 staff worldwide and managed over 22,000 customer accounts.

Founder
FlowBank was founded in 2020 by Charles-Henri Sabet (1985 world backgammon champion). He previously created Synthesis Bank in the 1990s, which became Saxo Bank Switzerland, a subsidiary of Saxo Bank, a Danish investment bank founded in 1992 by Lars Seier Christensen, Kim Fournais, and Marc Hauschildt.

In a private interview with Swiss newspapers, Charles-Henri Sabet proudly announced that CBH Bank is the major shareholder of FlowBank.

Bankruptcy
The Swiss Financial Market Supervisory Authority (FINMA) commenced bankruptcy proceedings against FlowBank on June 13, 2024. This measure became necessary as the bank no longer had the minimum capital required for its business operations, with additional concerns about over-indebtedness. The bankruptcy proceedings aimed to protect depositors, and according to current calculations, privileged deposits could be repaid in full from the bank's available funds.

In October 2021, FINMA took its first enforcement action against FlowBank due to serious breaches of supervisory law concerning capital requirements and risk management. By October 2022, FINMA ordered comprehensive measures to restore compliance and appointed an independent auditor to monitor their implementation. In June 2023, further enforcement actions were taken, including appointing a monitor to oversee the bank's activities and investigate compliance failures.

FINMA's investigation found multiple compliance deficiencies, including ongoing breaches of capital requirements, inaccurate financial reporting, and inadequate risk management. The bank also engaged in higher-risk business relationships without proper due diligence, significantly increasing its risks.

On March 8, 2024, FINMA ordered the withdrawal of FlowBank's license and disqualified its guarantee of proper business conduct. During the appeal, various precautionary measures were enforced to prevent asset withdrawal by the bank.

After FlowBank's board of directors approved the 2023 financial statements, it became evident that the bank's financial situation was worse than reported. The bank was in clear breach of the minimum capital requirements at the end of 2023 and again in April 2024. Unable to carry out an eligible capital increase, FINMA intervened immediately to protect depositors, placing the bank into bankruptcy.

Repayment of Privileged Deposits
FINMA's primary aim is to protect depositors. The liquidator will repay deposits up to CHF 100,000 (privileged deposits) to the clients as quickly as possible. According to current calculations, these deposits can be repaid in full from the bank's available funds, so the Swiss banks' deposit insurance scheme (esisuisse) is not expected to be involved. Client custody accounts will also be segregated from the estate and repaid.