German regulator orders oversight, limits on GIC-backed online bank N26

Germany’s financial regulator BaFin on Monday (Dec 15) announced stricter oversight of Berlin-based online bank N26, including limits on new business in the Netherlands and the instalment of a special monitor, after finding lapses in compliance by the lender.

The measures mark the second time since 2021 that BaFin has ordered a special monitor to oversee the fast-growing Berlin-based bank, and they amount to a significant crackdown on a prominent name in finance in Europe’s largest economy.

The lender, one of Europe’s most valuable financial startups, has seen tumultuous times in recent months, with an array of management and supervisory board changes.

N26 said that it was “in close and constructive communication with the supervisory authorities as well as the appointed special representative”.

Among the orders announced on Monday, BaFin prohibited N26 from offering new mortgages in the Netherlands and required the bank to hold more capital.

BaFin said that a special audit in 2024 revealed issues.

“There were serious deficiencies, particularly in risk and complaint management and in the organisation of the lending business. The institution thus violated the provisions of the German Banking Act,” BaFin said.

N26, founded in 2013, says it has five million customers in 24 countries in Europe. It has raised nearly US$1.8 billion from investors, including insurer Allianz, Singapore’s sovereign wealth fund GIC, Chinese Internet group Tencent, venture capital firm Earlybird and Silicon Valley investor Peter Thiel.

In August, one of the original founders, Valentin Stalf, said he would step down as co-CEO and join the supervisory board. A new chief risk officer was also appointed starting on Dec 1.

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The bank this year doubled the size of its supervisory board to six, installing a new chair who once sat on the board of Germany’s central bank.

N26 ran into regulatory problems in 2021, when it was fined by BaFin for lapses in money-laundering controls and ordered to limit the number of customers it takes on to 50,000 a month.

At the time, N26 said it would close its US operations and focus on Europe.

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