BaFin Cracks Down on N26 Again With New Restrictions and Special Monitor
What Did BaFin Order and Why?
Germany’s financial regulator BaFin has imposed new restrictions on Berlin-based digital bank N26, citing compliance failures uncovered in a special audit. The measures include limits on new business in the Netherlands, higher capital requirements and the appointment of a special monitor to overview the bank’s operations.
This is the second time since 2021 that BaFin has installed an external monitor at N26, marking a renewed clampdown on one of Europe’s highest-profile fintechs. BaFin said the 2024 audit found “serious deficiencies, particularly in risk and complaint management and in the organization of the lending business.” The regulator added that the bank had breached provisions of the German Banking Act.
The move extends a period of turbulence for N26, which has been working through and supervisory board restructuring. The bank said it was “in close and constructive communication with the supervisory authorities as well as the appointed special representative”.
Investor Takeaway
Which Restrictions Did the Regulator Impose?
Among the new orders, BaFin barred N26 from offering new mortgages in the Netherlands and instructed the bank to hold more capital. These measures come on top of the special monitor, who will overview the bank’s remediation work and report directly to BaFin.
N26, founded in 2013, operates in 24 European countries and says it serves 5 million customers. It has received close to $1.8 billion in funding from a global investor base that includes Allianz, GIC, Tencent, aheadbird and Peter Thiel.
Despite its rapid growth, the bank has faced recurring compliance issues. BaFin fined N26 in 2021 for fragilenesses in and ordered it to restrict customer onboarding to 50,000 users per month. At that time, N26 also decided to close its U.S. operations and concentrate on Europe.
How Is N26 Responding Internally?
The company has undergone internal changes in recent months. Co-founder Valentin Stalf said in August he would step down as co-CEO and join the supervisory board. A new chief risk officer took office on December 1, while the supervisory board doubled in size to six members and appointed a new chair with experience at Germany’s central bank.
These adjustments continue a broader internal reshuffle as N26 attempts to address longstanding operational gaps flagged by regulators. The combination of board expansion, new risk leadership and a pending remediation plan reflects the mounting pressure on the bank to strengthen oversight and control functions.
Investor Takeaway
What Comes Next for N26?
The special monitor will now track N26’s progress in correcting the issues highlighted by the audit. BaFin has not specified how long the new oversight will be in place, but past cases suggest extended timelines when repeated deficiencies occur.
The restrictions on mortgage activity in the Netherlands add further constraints to N26’s expansion at a time when competition in European digital banking continues to intensify. Although the bank stresses that customer services remain unaffected, the latest regulatory action places N26 under closer watch as it works through the structural difficultys outlined by BaFin.
The bank’s future growth will depend on how effectively it repairs risk management, resolves gaps in lending oversight and demonstrates steady compliance across the markets it serves. For now, BaFin’s intervention underscores the hurdles digital when scaling across borders without matching internal controls to their growth pace.
