A prominent change is underway at the German neobank, which has appointed former Bundesbank executive Andreas Dombret to lead its supervisory board amidst ongoing regulatory challenges and internal strife. This move aims to stabilize the fintech, which is considered the most valuable in Germany, as it has faced issues that could impede its growth.
Dombret, who held a significant position at the Bundesbank from 2010 to 2018, is set to be nominated at an extraordinary general meeting attended by both the bank’s founders and its investors. His extensive background in banking supervision is expected to assist the bank in addressing the scrutiny it currently encounters from the German regulator BaFin.
This leadership transition involves other notable shifts within the organization. The chair of the supervisory board, Marcus Mosen, will transition into a co-CEO role, partnering with founder Maximilian Tayenthal. Co-founder Valentin Stalf recently stepped down from his role as CEO but will remain involved as a member of the supervisory board after a transition period.
One of N26’s investors remarked that Mosen has a deep understanding of the company and is trusted by stakeholders, indicating confidence in his ability to facilitate long-term growth as co-CEO.
Dombret’s professional experience in financial services spans several decades, including high-level roles at major firms such as J.P. Morgan and Rothschild & Co. He was previously Vice Chairman at Bank of America during the tumultuous period of the financial crisis and was a founding member of the European Central Bank’s Supervisory Board. His advisory roles post-Bundesbank, including positions at major banks and as a Global Policy Advisor for Financial Services at Amazon Web Services, complement his regulatory insights and can guide the bank as it aims for innovative growth while adhering to necessary compliance standards.
The changes in leadership come in response to increasing regulatory pressures from BaFin, which has raised new concerns that could lead to further sanctions. Previously, the regulator imposed restrictions on customer onboarding and appointed special compliance monitors due to deficiencies in the bank’s anti-money laundering strategies and risk management protocols. A recent audit by BaFin highlighted weaknesses in internal controls and planned formal warnings to members of the management team.
These issues exacerbate previously established regulatory hurdles, as BaFin had only lifted a cap on new customer onboarding last year. The limitations had significantly restricted the bank’s capacity for expansion since 2021, resulting in fines for non-compliance with anti-money laundering regulations.
Simultaneously, tensions behind the scenes between the bank’s investors and its founding members had been escalating. Together, Stalf and Tayenthal control around 20% of the bank’s equity and have traditionally held veto powers over substantial company decisions. Investors have sought to eliminate these privileges, particularly given the recent regulatory problems.
Amid discussions about governance, the founders are negotiating to relinquish their veto rights in exchange for reduced returns guaranteed to investors during a previous fundraising round. This fundraising valued the neobank at €7.7 billion and assured investors a 25% annual return. The proposed deal would adjust these guaranteed returns as part of the compromise.
Furthermore, it is anticipated that Tayenthal may conclude his role in management by the end of the year, reflecting the ongoing shifts within the company’s hierarchy.
Pending BaFin’s standard approval, Dombret is poised to take on his new responsibilities as soon as October. His extensive experience in banking oversight suggests that securing regulatory approval should be straightforward.
The urgency of these changes highlights the pressing need to address the bank’s governance challenges. Invitations for the general meeting to confirm Dombret’s nomination are anticipated to be issued in the coming week.
N26, launched in 2013 as a digital-only bank, has navigated the dual challenges of rapid growth and regulatory compliance, which are critical as it seeks continued international expansion while adhering to German regulations.