An EU agency on Tuesday said it has found various deficiencies in Germany’s two-tier finance sector supervision system after the collapse of payment services provider Wirecard in June.
Wirecard, once hailed as a rising star and listed on Germany’s DAX index of leading shares, imploded after admitting that 1.9 billion euros (2.2 billion dollars) in assets were likely non-existent.
German prosecutors are investigating former executives at the firm on suspicion of fraud which allegedly cheated banks and investors out of more than 3 billion euros.
The European Securities and Markets Authority (ESMA) said Germany’s lower-tier Financial Reporting Enforcement Panel (FREP) had not been sufficiently timely or skeptical in examining Wirecard’s financial reports.
Neither had it appropriately addressed media and whistle-blowing allegations against Wirecard, the ESMA said in a fast-tracked review requested by the European Commission.
The upper-tier Federal Financial Supervisory Authority (BaFin), meanwhile, had not been able to thoroughly assess FREP’s examinations of Wirecard and determine whether it should take over the process.
The ESMA said there was a mismatch in how BaFin and FREP saw each other’s roles, and strong confidentiality regimes may also have hindered the exchange of information between them.
The ESMA also expressed concerns about BaFin’s independence, citing a lack of information about its employees’ shareholdings and a risk of influence from the German Finance Ministry, to which it gave frequent detailed reports.
German Finance Minister, Olaf Scholz said in Brussels on Tuesday that the ESMA report was moving along the lines that Germany is taking in its legislative process to reform supervision and inspection.(dpa)
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