FlatexDEGIRO Faces Regulatory Pressure, Strong Performance
BaFin, the German Federal Financial Supervisory Authority, has fined flatexDEGIRO Bank AG, a publicly-listed online operator, EUR 1.05 million for violating banking supervisory regulations. The penalty order also requires the company to address the “serious lapses” in its internal control regarding supervisory reporting and anti-money laundering measures. BaFin has appointed a special representative to oversee the implementation of the ordered measures by the company. The penalty, which is legally binding, aims to ensure that the company limits its risks.
“We find the fact that BaFin has appointed a special officer to be extremely helpful in order to ensure close monitoring of the projects right from the start,” a flatexDEGIRO spokesperson said.
“The company is already in the process of implementing the initial measures of the remedies to the lapses”, he added.
On September 8, 2022, BaFin, the German Federal Financial Supervisory Authority, issued additional capital requirement orders on flatexDEGIRO Bank AG and the flatexDEGIRO AG financial holding group. These orders may require the companies to increase their capital reserves or meet other financial requirements to ensure that they have sufficient resources to manage their risks effectively. The specific details of the orders are not provided in the given statement, but they are likely part of BaFin’s efforts to strengthen the stability and resilience of Germany’s financial system.
The Market Correction
After the regulatory order was made public, the share price of flatexDEGIRO, which is listed on Germany’s primary stock market, the Frankfurt Stock Exchange, saw a significant correction. On Friday, the shares of the online broker dropped by 8.96 percent to EUR 7.07, making it one of the weakest stocks in the SDAX index that day. However, the company’s shares have since gained about three percent as of the time of this writing on Monday, indicating a recovery in investor sentiment towards the company.
Despite the recent regulatory challenges, the company has performed exceptionally well in recent quarters. In Q3 2022, flatexDEGIRO’s revenue increased by 4.3 percent to EUR 91.9 million, and its EBITDA rose by 25.1 percent to EUR 37.6 million. Additionally, the company’s revenue per transaction grew by 6.5 percent to EUR 5.15.
In the first nine months, the retail trading platform gained over 376,000 new customer accounts, resulting in a total customer base of 2.4 million at the end of the period. Notably, the company has maintained a high retention rate of 98.4 percent, indicating that the vast majority of its existing customers continue to use the platform for their trading needs.
