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Swiss Regulator Close Cryptocurrency-Friendly FlowBank SA
Cryptocurrency-linked bank FlowBank SA closed on Thursday, June 13, following a bankruptcy filing from the Swiss financial regulator.
Among other reasons, the regulator expressed well-founded concerns about the bank’s financial health.
Swiss FlowBank closes
THE Swiss The Financial Market Supervisory Authority (FINMA) has closed cryptocurrency-linked bank FlowBank SA, citing financial reasons. According to relationship, the creditor does not have sufficient capital to continue operating as a bank. FINMA expresses serious concerns about FlowBank’s minimum capital requirements and indicates that the bank is “over-indebted”, potentially making restructuring impossible.
«FINMA found last week that FlowBank SA no longer has sufficient capital for its banking business. Minimum capital requirements, which must be respected at all times, were significantly and seriously violated,” the report reads.
Reportedly, FINMA has FlowBank on its watch list since 2021 due to serious violations of supervisory regulations. The bank did not meet the capital requirements and did not respect the risk organization and management thresholds. With this, FINMA developed extensive measures that FlowBank would have to follow to restore compliance.
FINMA has also commissioned an independent auditor to monitor implementation. However, findings of inadequacies in the bank’s compliance further worsened the situation, including capital ratio breaches. The report also cites another engagement between FINMA and FlowBank in June 2023, in which the regulator appointed a supervisor over the bank’s activities to investigate its compliance flaws.
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The findings revealed that FlowBank SA repeatedly violated capital requirements and exhibited multiple organizational deficiencies. These problems, along with recent developments, led to the regulator’s decision to dissolve the bank after a week. Ultimately, FlowBank SA and its management bodies failed to sustainably restore compliance with capital requirements within the required timeframes.
“The bank also entered into numerous high-risk business relationships and carried out large transactions without adequately investigating the background to these business relationships and transactions,” FINMA noted.
As of this writing, FlowBank was unavailable for comment. The company has already deactivated its official status X account.
Letter to FlowBank customers
FlowBank acknowledged the dissolution in a letter to its customers, highlighting the revocation of the banking and securities license. However, FINMA assures FlowBank customers that deposits of up to 100,000 Swiss francs (nearly $111,710) are protected. Refunds will occur within seven business days, during which Swiss law firm Walder Wyss AG oversees the bankruptcy liquidation process.
Unfortunately, the fate of customers’ crypto deposits remains unclear, entirely in the hands of Walder Wyss. According to FINMA, the liquidator is responsible for determining whether cryptocurrencies will be treated as “bank claims”. Otherwise they would pass as assets in custody and, therefore, securities in bankruptcy proceedings to be repaid.
«FINMA’s main objective is the protection of depositors. In a first step, the liquidator will therefore refund deposits of up to CHF 100,000 (preferred deposits) to the affected clients as soon as possible. According to current calculations, privileged deposits can be fully reimbursed with the bank’s funds. We therefore do not expect any involvement of the deposit insurance system of Swiss banks (esisuisse). Customer deposit accounts will also be separated from assets and refunded,” the regulator said.
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The Swiss regulator’s action is not surprising, given Switzerland’s reputation as one of the most cryptocurrency-friendly European countries. Several Swiss banks, including AMINA (SEBA), Maerki Baumann and Swissquote, support operations with digital assets. Closing a platform that does not meet the operational criteria aims to prevent an outcome similar to that FTX implosion rather than taking action against cryptocurrencies.
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