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(Updates with comments by bank)
ZURICH, Sept 3 (Reuters) - Switzerland's financial regulator said on Wednesday it was investigating Banque Privee Espirito Santo SA (BPES), a Swiss private bank that 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 also the biggest shareholder in Banco Espirito Santo, once Portugal's largest listed bank, which had to be rescued by the state on Aug. 4 in a 4.9 billion euro ($6.44 billion) bailout.
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 to 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.
BPES said it was collaborating with Swiss authorities in the investigation, which it expected to continue until January.
"BPES management always acted in a correct and transparent way, always fulfilling rules and regulations for banking activity, both in Switzerland and Portugal," it said in a statement.
In early July, the Geneva-based bank became the first Espirito Santo group entity to acknowledge that its clients had not been repaid debts issued by Espirito Santo International.
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.
BPES said it would continue to defend the interests of its clients exposed to the Espirito Santo Group.
FINMA said it had appointed an independent third party to find out what happened at BPES. In July, a FINMA board member stepped down unexpectedly due to a role he held at BPES. (1 US dollar = 0.7606 euro) (Reporting By Katharina Bart. Additional reporting by Laura Noonan in London and Axel Bugge in Lisbon; editing by Jane Merriman and Tom Pfeiffer)