The tax dispute with the U.S. and the structural adjustment in Swiss banking have claimed another victim: The Swiss banking regulator has opened bankruptcy proceedings against a bank that existed for more than two centuries.

Finma has opened the proceedings against Zurich-based Bank Hottinger & Cie on Monday because the bank is in danger of becoming overly indebted, the banking regulator said in a statement.

The possibilities of restructuring the business were evaluated, but to no avail, Finma said. The assets available should suffice to entirely cover the preferential deposits.

Losses and Unresolved Litigation

Bank Hottinger's capital fell below regulatory demands a while ago because of a string of losses and unresolved litigation, as finews.ch reported previously.

Finma engaged in intensive talks with the bank and other participants to assess the options for returning the bank to a stable and sustainable position.

The efforts by the bank and employees weren't successful, however. A recapitalization wasn't carried through and the bank remained unable to meet the minimum capital requirement. No suitable investor could be found either, leaving no option for a restructuring of the business.

Bankruptcy Proceedings

With capital below the legal limit and no outlook for a sustainable restructuring, the bank needs to be liquidated. There is also the risk of the bank becoming overly indebted resulting from the costs of the liquidation, leading to the opening of bankruptcy proceedings, Finma said.

The regulator put Brigitte Umbach-Spahn and Karl Wüthrich (Wenger Plattner Zürich) in charge as responsible bankruptcy liquidators.

Preferential Deposits Covered

Finma's priority is to protect the customers of Hottinger. Accounts with assets of up to 100,000 francs will be reimbursed in a first step. These preferential deposits should be covered by assets available at the bank, making unnecessary the activation of the esisuisse depositor protection scheme. In a further step, securities deposits will be segregated and refunded.

Bank Hottinger is a banking group specialized in asset management with its headquarters in Zurich and an important branch in Geneva. It has assets worth 145 million francs, 1,500 customers and about 50 employees.