The neobroker Trade Republic, which has so far operated as a securities trading bank, has successfully upgraded to a full bank. As announced by the company at the beginning of December, it has obtained the corresponding license from the European Central Bank (ECB). Consequently, Trade Republic will now be able to offer essential banking services such as deposits and deposit business directly.

Until now, the Berlin-based company had covered this through partners such as Solarisbank and Deutsche Bank. They offered a wide range of services, including a 4% interest rate on overnight accounts linked to the depots, thereby setting standards in interest rate competition.

From now on, Trade Republic will be supervised not only by BaFin but also by the ECB in terms of regulatory oversight. To meet these requirements, co-founder Christian Hecker has established a new audit committee. This audit committee includes Ute Gerbaulet, CFO of the Oetker Group, Christiana Riley, North America Chief of Santander and former board member of Deutsche Bank, as well as Andreas Willius, former managing director of Trade Republic and CEO of the Stuttgart Stock Exchange. The committee still needs approval from BaFin, which should not pose a major hurdle.

"With the full banking license, a new chapter begins for Trade Republic. The fact that we are now taking the next step is also reflected in our future corporate governance structure", said Christian Hecker in the statement. Trade Republic describes itself as "Europe's largest savings platform" after setting up comprehensive savings plans in Germany. The institute is now almost entirely European: in addition to Germany, Austria, France, Spain, Italy, and the Netherlands, Trade Republic is also operational in eleven other European countries.

However, expansion on regulatory and sales levels requires significant investments. For the financial year 2021/22 (as of September 30), Trade Republic recently reported a pre-tax loss that increased to 124 million euros. But most of the necessary expenses should be managed by now. Moreover, the company is well-equipped with equity.

Given the ban on rebates (payment for orderflow), the neobroker will need to come up with a plan to keep trading fees low for customers and how to compensate for potential revenue losses. Rumors suggest that rebates account for a third of revenues. Nevertheless, strategically, Trade Republic can now efficiently engage in self-market making as a full bank.

The Berlin-based company now has more than 600 employees. Hecker and his co-founders had hired experienced top talent early on to be well-positioned on the compliance side. Unlike N26, there have never been complaints about possible deficiencies. In dialogues with supervisors about the allocation of further licenses, it is helpful to be cleanly set up with regard to regulations such as the Minimum Requirements for Risk Management (MaRisk).

The full banking license was also granted relatively quickly. Behind the scenes, there are reports indicating that occasionally time-consuming procedures had occured, particularly in the event of managerial changes within the associated VC funds. This is because, in such cases, the individual must undergo the complete ownership control process again. However, this meticulous approach is also a benefit of the local regulatory framework, ensuring that speculators do not secure a license.

For Trade Republic, a new chapter is beginning shortly before its fifth birthday. As a full bank, they can now roll out a range of products that complement each other. This includes the ability to engage in card business and enter into securities lending.

Additionally, Trade Republic has direct access to ECB facilities, which should bolster interest results as there is no longer a need to share with partners.