BAFin has recently imposed stricter supervisory measures on N26, an online bank, tightening regulatory oversight.
Key Actions
The new measures include limitations on certain aspects of N26’s operations in the Netherlands and the appointment of a special monitor to oversee compliance enhancements and governance improvements. This is the second time since 2021 that BAFin has directly overseen N26 due to regulatory concerns.
N26, which operates across several European markets under a German banking license, has faced ongoing challenges in operational stability and governance. Over the past year, there have been multiple changes at both management and supervisory board levels, indicating continuous efforts to meet regulatory requirements and address internal control issues. The bank maintains active cooperation with regulators and the special representative as part of its remediation process.
As per the latest measures, BAFin has restricted N26 from introducing new mortgage products in the Netherlands. This decision follows a significant audit conducted in 2024 that highlighted critical weaknesses in risk management, complaint handling, and lending business support structures. The identified shortcomings were deemed serious enough to violate Germany’s Banking Act.
Regulatory Concerns and Fintech Risk
This intervention underscores broader regulatory scrutiny of rapidly growing fintech banks operating across Europe. N26 serves over 8 million customers in approximately 24 countries, with a peak valuation of around USD 9 billion in 2021. The bank’s rapid expansion has historically placed strain on internal systems, especially in areas such as anti-money laundering and credit risk management.
BAFin has intensified its supervisory efforts across the financial sector recently. In 2023 alone, the regulator conducted numerous special audits and inspections focused on IT resilience, governance frameworks, and consumer protection. Similar tightening of oversight is observed among European banking authorities, reflecting lessons from past compliance failures and the growing complexity of digital financial services.
The renewed appointment of a special monitor for N26 signifies that previous remediation efforts have not fully met regulatory expectations. The monitor will oversee the implementation of corrective measures and ensure ongoing compliance. While these restrictions apply specifically to certain business lines and jurisdictions, they highlight the challenges fintech banks face in Europe’s heavily regulated financial environment.
