A former executive from Germany’s central bank is expected to lead the supervisory board of a well-known German neobank, marking a significant shift in leadership as the organization seeks stability amid recent regulatory challenges and internal conflicts. This change represents a critical effort to address investor concerns and heal the rift within the founding team of the financial technology company.
The new chair is a seasoned banking professional with extensive experience, including significant roles on the executive board of the Bundesbank from 2010 to 2018. His appointment by the company’s founders and investors will be formalized at an extraordinary general meeting. His background in banking supervision is anticipated to assist in navigating the regulatory scrutiny from Germany’s financial regulator, BaFin.
Alongside this leadership transition, other prominent adjustments are occurring. The current head of the supervisory board will transition to a co-CEO role, collaborating with one of the remaining founding members. A co-founder has recently stepped down from the CEO position and will take a seat on the supervisory board after a planned cooling-off period.
One of the investors expressed confidence in the new co-CEO, highlighting the individual’s longstanding knowledge of the company and his trustworthiness from an investor perspective. This sentiment suggests optimism for stabilizing the firm’s direction and fostering long-term growth.
The new chair brings formidable expertise that encompasses both private sector and regulatory experiences, having worked at major financial institutions including a prominent role at J.P. Morgan and serving as Vice Chairman Europe at Bank of America during a tumultuous financial crisis. His role in the European Central Bank and involvement with the Bank for International Settlements add layers to his regulatory knowledge. Since finishing his term at the Bundesbank, he has continued to advise leading financial organizations and holds a position with Amazon Web Services, relevant for blending technological innovation with regulatory requirements.
The timing of these leadership changes coincides with renewed regulatory scrutiny. Recent concerns raised by BaFin have led to potential sanctions against the bank, as audits revealed weaknesses in internal controls and a lack of compliance in anti-money laundering efforts. These issues compelled BaFin to impose previous restrictions, including a cap on customer onboarding that hampered growth.
The organization’s regulatory hurdles intensified after BaFin identified weaknesses in its internal control systems. Formal warnings may be issued to certain members of the management as the regulator considers additional oversight measures. Reinstating growth has become critical, particularly since restrictions on new customer acquisition disrupted momentum since 2021.
Tensions between the company’s investors and its founding team have reached a critical point. The founders, who collectively hold around 20% equity in the company, have maintained special rights over significant decisions. However, investor dissatisfaction over regulatory failures has prompted discussions aimed at relinquishing some of these governing privileges. Negotiations are ongoing concerning the possibility of adjusting investor guarantees made during a substantial fundraising round, which previously valued the neobank at €7.7 billion with pledged returns.
As governance issues remain pressing, the establishment of the new chair may occur soon, contingent on approval from BaFin. Invitations for the extraordinary general meeting to finalize this nomination are anticipated shortly.
Since its inception in 2013 as an exclusively online banking service, the firm has navigated the dual challenges of rapid expansion while striving to meet stringent regulatory standards. Efforts to broaden its international reach have often collided with the need for compliance within the rigorous German regulatory framework, resulting in ongoing challenges.