Regulators have a clear responsibility: identify risks, challenge institutions where necessary, and act decisively. Spending three years under special audit and regulatory oversight showed us just how seriously BaFin takes that responsibility. And that is a good thing. Strong supervision is essential for Germany as a financial center.

At the same time, our experience also showed that there is still room to improve how regulators and companies work together, especially when it comes to processes, structures, and communication. What we need is a professional and constructive relationship between regulators and the institutions they supervise.

In financial services and payments, trust is the most important currency. That is why strong, reliable, and decisive supervision matters. It protects markets and strengthens confidence across the entire system.

Over the past few years, our industry has been shaped by major regulatory changes, driven in part by several high profile scandals. The result has been stricter requirements and a much more critical view of financial institutions overall. That was necessary and justified. We operate in a highly sensitive environment where trust can disappear quickly, often with consequences far beyond a single company.

Regulation as an Opportunity: Lessons From the Past, Priorities for the Future

At Unzer, we experienced this firsthand. A BaFin special audit led to extensive regulatory measures and requirements. That was undoubtedly challenging, but it was also transformative.

Even before the audit, we had already started strengthening our compliance structures. The regulatory process accelerated that work and pushed it firmly to the center of our priorities. For three years, it became our main focus.

Today, we are a different company: more resilient, more transparent, and much better prepared for the future.

I firmly believe that investing in compliance and strong governance means investing in trust and therefore in long term, sustainable success. At the same time, I also believe supervisory systems themselves can improve further. Oversight must be effective, but it also needs to remain proportionate and efficient. Too much procedural complexity can drain resources and slow down progress.

Looking ahead, I would like to see three things in particular: clearer incentives for efficient audits, more direct dialogue between regulators and companies, and a culture of mutual trust combined with clear consequences when rules are broken.

Efficiency Requires the Right Incentives, Especially in Special Audits

Let me start with the first point. In my view, there is a classic principal agent problem in the supervision of regulated institutions.

Special audits and regulatory mandates are important supervisory tools. They help regulators address weaknesses and monitor remediation efforts. But the structure itself also creates systemic challenges: the auditor is appointed by the regulator, while the supervised company pays the bill.

On paper, that may seem reasonable. In practice, however, it can create problematic incentives. The longer and more extensive the audit becomes, the higher the compensation. Companies therefore end up paying for processes whose efficiency they can barely influence.

The question is not whether audits should happen. Of course they should. The real question is how efficiently and purposefully they are conducted.

Regulators alone cannot fully solve this structural issue. Policymakers also need to step in and create incentives that reward efficiency. Possible approaches could include capped budgets with justified extension options, standardized audit criteria, or stronger involvement of supervised companies in contract design.

Only then can special audits fulfill their purpose without becoming a permanent economic burden.

Direct Dialogue Builds Trust and Speeds Up Solutions

A second issue is communication.

In Germany, especially during sensitive supervisory phases such as special audits or regulatory mandates, communication with regulators often happens indirectly through external audit firms. Direct and fast interaction between institutions and regulators is still more the exception than the rule.

That is very different from other countries, where regular face to face discussions between regulators and supervised institutions are a normal part of the regulatory process.

More direct communication would improve understanding on both sides. Regulators would gain deeper insight into operational realities, while institutions could resolve implementation questions much faster during remediation processes. Especially in highly detailed implementation phases, direct communication can significantly accelerate solutions.

Less Detail, More Impact: A Modern Approach to Regulation

A third point concerns our broader understanding of regulation.

Germany is known for its procedural thoroughness, and that has real value. But it can also create unnecessary complexity. If every process has to be documented in extreme detail to eliminate any room for interpretation, the system does not automatically become stronger. In many cases, it simply becomes slower and less efficient.

BaFin President Mark Branson addressed exactly this issue in a speech in May 2024. He argued for leaner European rulebooks, fewer overlaps, and a more principle based approach, very much in the spirit of a “strong and simple” regime.

I believe we should move confidently in that direction. Principle based regulation is not less secure. But it is more efficient and creates a more outcome oriented supervisory approach. Everyone involved would benefit from that.

A Case for a Modern Supervisory Culture

Regulation is not a static framework. It is a learning system that can and should evolve.

The challenges created by digitalization, the growing importance of technology driven business models, and increasing global competition make a professional and cooperative relationship between regulators and companies more important than ever.

That requires mutual respect. But it also requires the willingness to continuously rethink and improve structures, incentives, and communication models.

We need a supervisory culture in which regulators do not only control, but also guide. And we need companies that do not simply react to regulation, but actively take responsibility themselves.

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