The Bitter End of a Digital Bank

Leodan's Advertising

Leodan's Advertising

The story looked quite straightforward: a small bank based in Zurich is fined by the U.S. justice department for accepting untaxed assets belonging to U.S. citizens and decides to give up its business. However, the two things have nothing to do with each other.

The news release by the U.S. Department of Justice (DoJ) left little room for doubt: Shareholders of Leodan, whose headquarters are located at Zurich's Loewenstrasse, had convened on January 11 and decided to wind down its banking operations. The decision came shortly before the bank agreed to pay $500,000 in exchange for a non-prosecution commitment by the U.S. authorities for tax-related criminal offenses.

Even though the context suggested as much, the decision to close the bank has nothing to do with the imposition of a fine by the U.S. authorities, a Leodan spokesman told finews.ch.

The bank wanted to communicate its decision taken a few weeks ago today Tuesday, at the same time as its announcement in the commercial register of the Swiss federal administration. The DoJ, which had been kept abreast of the changes at Leodan, preempted this communication plan by the company.

Too Small to Survive

Leodan has assets under management of 540 million francs and 17 employees, making it too small to survive in an industry that is currently undergoing a restructuring. The bank is in talks with a medium-sized Swiss private bank with a view to sell the assets under management. Leodan hopes the new owner will take on its employees as well.

The spokesman said that the solution will likely be presented in February. It will be the end of a young institute. Founded under the name of PHZ Privat- und Handelsbank by Marcel Eichmann and Pascal Frei in 2009, it attempted a relaunch last year under the Leodan brand.

Core of the new strategy was a combination of traditional client advisory with digital services, such as asset allocation. Leodan also had its own Website for economic news.

Victim of the Digital World

After half a year, the company is giving up, having realized that it would take too long to reach break even. The abrupt end to the experiment may serve as a reminder to fintech enthusiasts that digital banking isn't a guarantee for success. Leodan worked together with Crealogix, a partner with a reputation in the industry.

Hence, Leodan wasn't a victim of aggressive U.S. policies, but rather the first victim of the digital revolution sweeping through the financial service industry.

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