Wolfram Kuoni couldn't avoid the collapse of Liechtenstein's Union Bank. The Swiss lawyer recounts to finews.com the tough regulatory negotiations which led to lights-out and fizzled plans with the world's largest crypto exchange.

Union Bank is shutting down: the Liechtenstein-based lender is handing back its banking license after it failed to win new backers. The bank had failed to meet capital requirements after a series of damaging scandals. 

Wolfram Kuoni, you're a lawyer and banker with a passion for history. Is the liquidation of Union Bank its last chapter?

I actually am interested in historical buildings, because their walls will outlive us all. Sadly that's not the case with Union Bank. The bank is being wound down through the liquidation and voluntary relinquishment of its banking license. I don't expect the bank to be revived.

It could keep going as a wealth manager.

We'd need new licenses from Liechtenstein's regulator. As long as the wind-down is still going on, we're not focusing on that.

Roughly 30 staff are losing their jobs. Is there a social plan for them? 

The liquidator decides this. My hope is that we can find a good solution, because behind the jobs are employees who worked together with us towards a new and sustainable foundation for the bank.

«I deeply regret Union shutting down»

We fought until the end and wrestled with our regulator. I deeply regret things ending this way. 

Last fall, the bank was required to restructure its shareholders and find a new, sustainable business model. Together, this was almost a mission impossible – shouldn't you have pulled the plug sooner?

Of course, a board can throw in the towel and disappear with as little fuss as possible. I took over the chair of Union Bank as crisis manager last fall with the clear intention of accepting the challenge, with the full knowledge that I personally would be vulnerable.

Union Bank reportedly was losing more than $500,000 a month this year. What's left?

I can't confirm that number. The fact is, Union Bank was subject to stringent regulatory requirements on its activities, which hurt its revenue. Our liquidity coverage ratio is 2,000 percent, which is 20 times the legal minimum. Clients won't be disadvantaged in the voluntary liquidation.

The regulatory sanctions were a consequence of the probe against the bank on suspicion of money laundering. In spring, the company had reported suspicious transactions to the regulator. Surely the regulator was right to get involved?

I can't comment on any ongoing or potential proceedings. I can say the bank's wounds were self-inflicted. I took over last September against this quite difficult backdrop. And yes, of course a bank in that situation needs to clarify a few things with its regulator, rightly so.

«A leading crypto firm would have been a very good fit»

We felt we had found a sustainable solution based on the concept of foundations and cryptocurrencies, two pillars of Liechtenstein's financial center strategy. Unfortunately, our regulator had other ideas – and we must accept that.

You're not affected by a criminal investigation but some top executives of Union Bank are. What can they expect to face? 

As I said, I can't comment on ongoing or potential proceedings. All involved persons enjoy the presumption of innocence until proven guilty.

Union lost a potential anchor investor when it emerged that Ukrainian billionaire Kostyantin Zhevago, another shareholder of the bank, is being sought for money laundering. 

Kostyantin Zhevago is primarily CEO of an extraordinarily successful commodities firm [Ferrexpo] based in Zug and listed in London. The company operates entirely independently of his foundation in Liechtenstein, which sold the majority of its shares to Union Bank in 2016.

You thought you had another investor in Binance. How did that come about?

We talked to a lot of interested parties and were supported by a consulting firm. Because of the overhaul of our business model that was mandated, a leading firm from the crypto sector – without naming names – would have been a good fit for Union Bank, especially since Liechtenstein is positioning itself as a crypto hub.

How would the world's largest crypto exchange and a tiny Liechtenstein commercial bank have fit together?

Established firms frequently have a huge client base in Europe. We could have provided affordable banking services for them out of Liechtenstein – not least thanks to our membership in the European Economic Area [EEA].

«Ultimately, perhaps a lack of political will»

The business model was hammered out by the investor, together with a big-four consulting firm.

The investment didn't come to pass: Binance didn't pass muster with the FMA, Liechtenstein's financial regulator. Why?

As I said, I can't name names, but it's always the regulator's judgment as to whether their requirements are fulfilled or not. It may have ultimately been a lack of political will. 

Binance's desire to provide the necessary capital in cryptocurrencies is said to have been one stumbling block.

Ultimately crypto assets would have been exchanged for fiat by the investor before being put towards the bank's balance sheet.

Chinese and other far-flung investors have taken stakes in Liechtenstein banks in recent years. Why were the rules different for Union Bank?

I don't get the impression that the FMA wanted to set an example with Union Bank. They simply came to a different conclusion in our case.

You lost a months-long struggle for Union Bank's future. Have you had enough of banking? 

Management and board negotiated with the regulator until the very end to try and find a solution acceptable to everyone. Ultimately we failed – no question – but I don't want to wallow in self-pity. That would be misguided and inappropriate given the consequences for Union Bank's employees, who have my full respect. But it is also clear that we are leaving the amphitheater with our head held high, and I will remain part of the financial services industry.

Wolfram Kuoni is the last chairman of Union Bank, which is in the process of being liquidated. The Swiss native is the founding partner of Kuoni, a Zurich-based white-collar law firm. He is on the board of directors at commodities firm Ferrexpo in Zug, which is controlled by Ukrainian billionaire Kostyantin Zhevago. Tremezzo, Zhevago's Liechtenstein foundation, was the main shareholder of Union Bank until 2016. Kuoni is politically active, and has campaigned for a parliamentary seat for the right-wing People's Party, SVP.