Swiss watchdog investigates Espirito Santo private bank

ZURICH (Reuters) - Switzerland's financial regulator said on Wednesday it is investigating Banque Privee Espirito Santo SA (BPES), a Swiss private bank which is part of the Espirito Santo family's troubled business empire. 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. ESFG was the biggest shareholder in Banco Espirito Santo, which was Portugal's largest listed bank that had to be rescued on Aug 4 in a 4.9 billion euro (6.44 billion US dollar) deal. The Swiss regulator FINMA said its investigation would focus on the role of the Swiss bank, which is undergoing voluntary liquidation, in distributing securities and financial products for the wider group. "The influence of the owners of the bank on procedures in Switzerland will also be examined," FINMA said in a statement posted on its website. In early July, the Geneva-based bank became the first Espirito Santo group entity to acknowledge that its clients had not been reimbursed on debt issued by Espirito Santo International. FINMA said it has also appointed an independent third party to clarify the circumstances surrounding the issues. In July, a FINMA board member stepped down unexpectedly due to a role he held at BPES. Last month, BPES said it would sell large parts of its private banking business to rival Swiss bank CBH Compagnie Bancaire Helvetique SA, after being ordered by FINMA to seek a buyer for some of its assets. (Reporting By Katharina Bart. Additional reporting by Laura Noonan in London. Editing by Jane Merriman)