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Germany’s BaFin easing rules for FinTechs.

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TLDR:

  • Germany’s financial regulator, BaFin, is set to relax its crackdown on FinTechs after seeing improvements in controls.
  • The regulator has been leading a clampdown on neobanks and payment firms but will loosen restrictions on some this year.

Germany’s financial regulator, BaFin, has announced plans to ease its crackdown on FinTechs after observing improvements in controls among several firms. BaFin Executive Director Birgit Rodolphe stated that while progress has been seen at individual firms, not all have met the necessary standards. The crackdown, which included sanctions on about a dozen companies in recent years, was initiated after BaFin failed to prevent a scandal involving Wirecard, leading to the appointment of a new head at the regulator, Mark Branson.

Rodolphe acknowledged that the increased scrutiny has resulted in higher costs for FinTechs, and external monitors have been appointed to oversee sanctioned firms’ progress in enhancing controls. The regulator is intensifying inspections at supervised firms, including FinTechs, to ensure sustainable improvements and prevent financial crime. BaFin aims to raise the barrier to entry for money laundering in Germany’s financial system by conducting inspections, encouraging sustainable improvements, and moving on to other areas of supervision.

In November 2022, BaFin launched a FinTech Innovation Hub to facilitate dialogue between policymakers and companies developing new financial technologies. The web portal serves as a knowledge source and publishing platform for the regulator to communicate its rules with FinTech players falling under its supervision.

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