For the time being, the smartphone bank may not accept more than 50,000 customers per month worldwide and a total of no more than 500 million euros in construction financing.
(Photo: dpa)
Frankfurt A damper for the N26 smartphone bank: The financial supervisory authority Bafin has published a list of growth restrictions with which it is responding to the deficiencies in the fintech’s risk management. Accordingly, the sanctions are more extensive than what N26 had made public after the conclusion of its financing round in October.
“The growth in new customers at N26 Bank GmbH will be materially reduced and will be limited to 50,000 new customers per month,” said the Bafin. N26 had spoken of 50,000 to 70,000 new customers a month. However, the Bafin notification only mentions that the restrictions could be adjusted “depending on the progress made in eliminating defects” and “gradually”.
The Bafin has also limited the volume of FinTech mortgage loans: The “receivable value on risk positions secured by real estate” may not exceed 500 million euros, writes the Bafin. This new customer and new business limit includes “all countries” in which the N26 Bank is active.
Restricting new business is a serious supervisory measure that needs to be justified in detail in legal terms. The order has only been final since November 6th.
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N26 was more likely to have fraudulent accounts
However, the Bafin had long complained about deficits at Neobank. The supervisors justified the brake on growth with “deficiencies in particular in risk management in the areas of information technology and outsourcing management”. These shortcomings “are due to the strong growth of the bank,” the authority continues.
Law enforcement agencies and consumer advocates have recently seen N26 more frequently in connection with fraudulent accounts. The Bafin and State Criminal Police Offices accuse N26 of major weaknesses, especially when it comes to identifying new customers
It was only in June that Bafin N26 imposed a fine of 4.25 million euros on account of a “high number” of late reports of suspected money laundering and provided the bank with a special watchdog for money laundering. The Bafin reminded of this in its communication.
Now N26 is even getting another Bafin special representative: This time to monitor the improvements in risk management. Two Bafin special representatives at the same time are a novelty in the German banking market.
The Handelsblatt published in August that N26 is threatening Bafin’s growth. The start-up was able to successfully complete the latest financing round in October: The smartphone bank received around 780 million euros from investors, increasing its valuation to around 7.8 billion euros, which was nine billion US dollars at the time. At times there was even a valuation of more than nine billion euros. The problems with the Bafin are considered to be one reason that this did not happen.
More: Fraudsters could have used more than 1000 accounts from N26