German digital bank N26 has once again come under regulatory pressure after financial watchdog BaFin imposed a new set of restrictions, citing serious operational weaknesses. The move marks the latest challenge for the online lender, which has been under scrutiny for several years.
According to BaFin, a special audit conducted last year uncovered major deficiencies within N26’s internal systems. Regulators highlighted problems in risk management, complaint handling, and the overall organisation of the bank’s lending operations. These shortcomings raised concerns about whether the institution can effectively manage growth while maintaining regulatory compliance.
In response, BaFin ordered N26 to take immediate corrective steps. A special representative has been appointed to closely monitor the bank’s progress and ensure that required reforms are properly implemented. The regulator also instructed the bank to strengthen its capital base as a precautionary measure.
One of the most significant actions includes blocking N26 from offering new mortgage lending services in the Netherlands. This restriction directly impacts the bank’s expansion plans in a key European market and underscores regulators’ cautious stance toward its lending activities.
N26 responded by confirming it is working closely with supervisory authorities. In a statement, the bank said it is in constructive dialogue with both BaFin and the appointed special representative. It added that a comprehensive improvement plan is already underway, including changes to governance structures and internal processes.
Founded in 2013, N26 operates in 24 countries and has positioned itself as one of Europe’s most prominent digital banks. However, its rapid growth has repeatedly collided with regulatory expectations, particularly around compliance and customer protection.
The bank has been under regulatory observation since 2018, when a media investigation revealed that accounts could be opened using forged identification documents. That revelation led to increased scrutiny of N26’s anti-money laundering controls and resulted in a substantial fine.
Concerns over compliance later prompted regulators to cap the number of new customers N26 could onboard. While that restriction was lifted last year, ongoing operational issues have kept the bank in the spotlight.
Earlier this year, as regulatory pressure intensified, N26 reshuffled its senior leadership in an effort to stabilize operations and reassure regulators. The latest measures suggest that authorities remain unconvinced that previous reforms were sufficient.
For Europe’s digital banking sector, the case highlights the growing regulatory expectations placed on fintech firms. While online banks have transformed financial services with speed and convenience, regulators are making it clear that innovation must be matched with robust controls, transparency, and accountability.
N26’s ability to resolve these issues swiftly will likely determine how quickly it can regain regulatory trust and resume its growth ambitions across Europe.
