EU To Examine Role Of Germany’s Financial Watchdog Over Wirecard Collapse

The role of the German regulators in the accounting scandal and the ultimate collapse of the country’s fintech giant Wirecard will be looked into by European Union officials. Specifically, the extent to which the regulators were aware of the development and whether they had ignoring red flags surrounding the scandal will be scanned.

This move by the EU, which is being described as rare, is yet another embarrassment for Germany, more so because it is due to take over the rotating presidency of EU very soon.

The insolvency of Wirecard due to a debt of almost $4bn in cash, which the company acknowledged did not exist in the company, has shaped up to become one of the greatest corporate scandals of Germany and there has been criticism of the country’s regulator BaFin over its inability to spot the scandal sooner.

According to reports quoting a letter from the Commission to the EU watchdog, EU’s markets watchdog has been tasked by the European Commission to examine whether the responses to allegations of improprieties at Wirecard by BaFin were of adequate nature. There have been accusations of fraud against the company for several years now.

Wirecard’s former operations chief, under suspicion in Germany over the accounting scandal, had been in the Philippines but had left for China, said the Philippines justice minister just a day ago.

A report published by the German magazine Der Spiegel claimed that legal action against Wirecard’s longtime auditor EY was being planned by Japanese investor firm SoftBank because of the scandal. There were o comments from EY and SoftBank over the issue in the report.

In a review published in April, auditors KPMG had said that it was unable to whether Wirecard had about 1 billion euros ($1.1bn) in cash balances while also questioning how the accounted for its acquisition. KPMG had also said that it could not find any trace of hundreds of millions of euros in cash advances sent to merchants by the company.

The European Commission asked the European Securities and Markets Authority to conduct a “fact-finding analysis” into BaFin’s response to the allegations and file a report by July 15, according to the letter sent to ESMA by the Commission. ESMA has also been directed to find out whether there was any evidence of “administrative or legal obstacles” that created impediments to the enforcement of reporting requirements.

The implosion of Wirecard has given rise to demands for an overhaul of corporate supervision in Germany since here were allegations of financial impropriety against the company for years.

The scandal has been defined as a “total disaster” by BaFin chief Felix Hufeld.

The news of ESMA being asked to look at how BaFin enforced the EU’s transparency directive was confirmed by the market regulator. The investigation will  cover financial reporting requirements for listed companies.

The findings from ESMA’s analysis could be used by EU financial services chief Valdis Dombrovskis to pass an order of a formal “breach of union law” investigation which would then make it mandatory for BaFin to provide information to ESMA.

(Adapted from

Categories: Economy & Finance, Geopolitics, HR & Organization, Regulations & Legal, Strategy, Sustainability, Uncategorized

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