BaFin President Links Greater Proportionality to Stronger Governance and Risk Culture at Institution

Key Takeaways

• In his closing speech at the Proportionality Conference in Bonn on September 16, 2026, BaFin President Mark Branson said the regulator will keep pushing for simpler, more proportionate, and more risk-oriented regulation, provided financial stability is not jeopardized.
• He tied the new flexibility to institutions' own governance and risk culture, and signaled that supervisors will scrutinize both more closely.
• Compliance teams should expect less rule-citing and more qualitative, institution-specific supervisory engagement.

Deep Dive

In his closing speech at the Proportionality Conference in Bonn on September 16, 2026, BaFin President Mark Branson said the regulator will keep pushing for simpler, more proportionate, and more risk-oriented regulation, provided financial stability is not jeopardized. He tied the new flexibility to institutions' own governance and risk culture, and signaled that supervisors will scrutinize both more closely. Compliance teams should expect less rule-citing and more qualitative, institution-specific supervisory engagement.

The main message for compliance teams is that more freedom comes with more responsibility. Principle- and risk-based supervision gives institutions leeway to use individual risk approaches instead of rigid formulas. BaFin expects that leeway to be used responsibly. Branson stated that supervisors will focus on governance and risk culture, and he named specific warning signs: management dominated by a strong CEO, where others hold back criticism and rubber-stamp decisions; and weak separation of functions between front-end and back-end operations. Culture cannot be prescribed through a checklist, so institutions should expect supervisors to assess how decisions are made, how roles are performed, and how power is exercised.

Supervisory practice is also changing. Supervisors must now identify the underlying governance problem behind a finding instead of merely citing the relevant paragraph. They will engage with institutions more individually, detect problem institutions earlier, and act and change course quickly. Branson warned that serious cases can have severe consequences for those involved, which signals continued attention to individual accountability. He also noted that irresponsible conduct by small German banks, and unnecessary restructurings, weaken the case for a European small bank regime. This makes the behavior of smaller institutions a factor in the outcome of the EU proportionality debate.

Recommended actions: (1) Review how the new MaRisk are being implemented, and use the added flexibility in a documented, risk-based way. (2) Assess governance for dominance by individuals, effective challenge at the management and board levels, and the independence of front- and back-office functions. (3) Prepare for discussions with supervisors that go beyond technical rule compliance to root causes and cultural drivers. (4) Strengthen early-warning indicators and escalation processes so that problems are detected and remediated before supervisors intervene. (5) Smaller institutions should consider the wider reputational and policy consequences of control failures.

Impact assessment: The immediate impact is low because no new obligations are introduced. The medium-term impact on governance, risk culture, and supervisory dialogue is moderate to significant. Institutions that treat flexibility as a reduction in control rigor face higher supervisory and enforcement risk, and may also jeopardize future proportionality measures at the EU level.

Source: Federal Financial Supervisory Authority