“It’s a total disaster”, founder Sven Hagströmer said.

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Sweden’s financial watchdog revoked on Saturday investment bank HQ Bank’s license to operate and applied for its liquidation, saying the company broke regulations.

Financial Supervisory Authority, Finansinspektionen, said in a statement that the bank “has grossly breached the most central provisions of Swedish legislation” and that “HQ Bank has overvalued its trading portfolio for a long time”.

“It’s a total disaster”, Sven Hagströmer, one of the founders of the investment bank and chairman of HQ’s main owners, Öresund, told Svenska Dagbladet. “On Sunday we must have found a buyer, or its all over”.

The bank's financial position has also been reported inaccurately. A correct valuation would have shown that the bank was undercapitalised since December 2008.

However, HQ said in a statement it was not insolvent and had good financial strength and liquidity. The previous day it announced terms for a capital increase for up to 1 billion kronor ($135m).

“All financial instruments in client custodian accounts are entirely separated from the bank’s own funds and are entirely unaffected by any closure,” the bank said, adding it would maintain regular opening hours on Monday.

In June the bank said it was selling its HQ Fonder Sverige AB fund unit in a move to cover losses from its trading division. It also sacked its chief executive officer.

Since the bank is relatively small its problems will not affect Sweden’s financial stability, the watchdog said. HQ AB has a market capitalization of 1.55 billion kronor, according to data compiled by Bloomberg.

Following the Financial Supervisory Authority's decision stock market operator NASDAQ OMX decided to suspend HQ Bank's equity trading membership at the Nordic stock exchanges.

Sven Hagströmer started a finance company in 1981, which became Hagströmer & Qviberg in 1990 when Mats Qviberg joined the company as a partner to Hagströmer.