Swiss begin bankruptcy proceedings against Espirito Santo private bank

ZURICH (Reuters) - Switzerland's financial regulator, FINMA, said on Friday it had initiated bankruptcy proceedings against Banque Privee Espirito Santo SA (BPES), part of the Portuguese Espirito Santo family's troubled business empire.

FINMA, had said earlier this month that it was investigating the role of the private bank, in distributing securities and financial products to the wider Espirito Santo group.

The Lausanne-based bank is owned by Espirito Santo Financial Group (ESFG), which has been under creditor protection since late July after it buckled under massive debts linked to its founding family.

"Recapitalising the bank through participation of the current shareholders is not possible, as the parent companies of the Espirito Santo Group are also insolvent," the regulator said in a statement. "FINMA has thus initiated bankruptcy proceedings against the bank and appointed a bankruptcy liquidator."

BPES officials were not immediately available for comment.

ESFG was also the biggest shareholder in Banco Espirito Santo (BES), once Portugal's largest listed bank, which had to be rescued by the state on Aug. 4 in a 4.9 billion-euro(3.85 billion pounds) bailout.

FINMA said the private bank is in a position to rapidly and fully reimburse privileged deposits of up to 100,000 Swiss francs ($106,689) to its clients, according to current estimates.

(Reporting by Joshua Franklin and Katharina Bart in Zurich and Andrei Khalip in Lisbon; Editing by Greg Mahlich)