German Regulator Imposes Stricter Controls on N26 Over Significant Deficiencies

The German Federal Financial Supervisory Authority (BaFin) has intensified its regulatory oversight of digital bank N26 following the identification of critical shortcomings in the bank's risk management, complaint handling, and credit operations. The financial watchdog has implemented a series of measures requiring the Berlin-based fintech company to address deficiencies in its organizational structure to ensure compliance with established regulatory standards.

A special representative has been appointed by BaFin to monitor the bank's progress in implementing the mandated improvements. According to BaFin's findings, both a special audit conducted in 2024 and a review of N26's annual financial statements for that year revealed lapses in the proper organization of business processes. These results prompted a reshuffling of the bank's management earlier this year as part of efforts to address the regulator's concerns.

One of the most significant restrictions now imposed on N26 is the prohibition of issuing new mortgage loans in the Netherlands. In addition to halting new mortgage business, BaFin has also barred the bank from securitizing claims originated through its Dutch mortgage activities, effectively preventing N26 from packaging and selling these loans as tradeable securities.

Furthermore, N26 is now subject to increased capital requirements. The regulator has specified that the bank must allocate additional own funds to bolster its capacity to absorb potential risks. These measures, which became legally binding as of 10 and 13 December 2025, are designed to strengthen N26's risk position and ensure greater resilience against possible financial setbacks.

This is not the first time N26 has faced regulatory intervention. The bank has previously encountered issues with BaFin, particularly concerning anti-money laundering (AML) compliance. In 2021, BaFin criticized N26 for not doing enough to combat money laundering amid rapid business expansion, resulting in a fine of 4.25 million euros for delayed reporting of suspicious activities. Subsequently, a special representative was assigned to oversee the bank's AML procedures.

In 2024, further penalties were imposed when N26 was fined 9.2 million euros due to late reporting of money laundering suspicions from the 2022 financial year. Despite these compliance challenges, N26 remains active in 24 European countries and, as of the end of 2024, reported having 4.8 million fully verified and revenue-generating customers.

The recent regulatory actions form part of BaFin's efforts to enforce stricter supervision of fintech entities operating in Germany, ensuring that rapidly growing digital banks maintain robust governance and risk management frameworks. The measures are intended to protect customers and the integrity of the financial system by compelling N26 to implement effective organizational controls and to meet heightened prudential standards.