Germany’s Financial Regulator Imposes New Sanctions on N26 Amid Leadership Changes
Germany’s financial watchdog, BaFin, has imposed new sanctions on the fintech company N26, increasing pressure on the company as it works through leadership changes and resolves a dispute between its founders and investors. The new sanctions come after a recent review by the regulator. The full story can be found Here.
New Sanctions and Their Implications
As a result of BaFin’s recent review, N26, a Berlin-based digital bank, has been ordered to stop new mortgage lending activities in the Netherlands. Additionally, BaFin has levied further capital requirements related to the halted business activities and highlighted general deficiencies in N26’s risk and complaints department. Furthermore, a special monitor has been appointed by BaFin to oversee changes.
The latest intervention comes after a previous monitor appointed by BaFin left the bank late last year. This had resulted in the lifting of a 50,000-a-month cap on new customers that had been imposed over alleged failures in anti-money laundering controls.
Shareholder Agreement and Leadership Changes
The renewed scrutiny brought on by these sanctions hastens the negotiations over a new shareholder agreement, which has remained unsigned despite months of talks. Under the proposed terms, the two founders, who together own about 20% of the shares, would relinquish special voting rights that grant them veto power over significant decisions. They would also only be allowed to nominate two supervisory board members instead of the current four.
In return, the 25% annual returns guaranteed to new investors who participated in a 2021 fundraising would be reduced. Maximilian Tayenthal, one of the co-founders, is expected to leave the management board at the end of 2025 as part of this deal. His co-founder, Valentin Stalf, had already stepped down as chief executive earlier this year with the intention of joining the supervisory board.
The Way Forward for N26
Recently, N26 appointed three new members to its supervisory board, including former Bundesbank executive Andreas Dombret as chair, who replaced Marcus Mosen after he became interim chief executive. The board is currently searching for an external chief executive to succeed Tayenthal, according to people familiar with its thinking.
In an interview with German newspaper Börsen-Zeitung, Mosen mentioned that he was a temporary “man for the transformation”, brought in by investors to stabilize the bank, address BaFin’s findings, and guide a strategic reset.
N26 stated that it was working closely with supervisory authorities and the special monitor. The bank also mentioned that teams across the company were implementing governance and operational measures to ensure “coordinated and timely execution” as part of a broader overhaul of controls, processes, and structures.
When asked to comment on the shareholder agreement and the search for a new chief executive, the bank referred to the supervisory board. A spokesperson for supervisory board chair Dombret declined to comment.
