Blame Game Starts for German Elite Seeking Wirecard Answers
The collapse of Wirecard AG has shaken Germany’s political classes and prompted calls for a comprehensive inquiry and possible leadership changes at financial regulator BaFin.
The dramatic demise of Germany’s erstwhile fintech star culminated Thursday when it filed for insolvency after admitting it could not locate $2 billion on its balance sheet. Its former chief executive officer was arrested earlier this week.
“How such an audacious level of fraud didn’t become apparent earlier will have to be investigated,” Olav Gutting, who represents Chancellor Angela Merkel’s CDU/CSU bloc on the Bundestag finance committee, told Bloomberg. “BaFin will also have to answer some questions on this.”
Danyal Bayaz, a committee member for the opposition Greens, said “a comprehensive parliamentary review is required.”
Finance Minister Olaf Scholz and Economy Minister Peter Altmaier “have to take responsibility and explain the actions of the authorities under their control,” Bayaz told Bloomberg, adding that “personnel consequences” -- code for sackings -- may be required.
Scholz called the scandal a “wake-up call that we need more supervision and control of financial markets” as he promised an overhaul of the regulatory structures. The Finance Ministry is examining changes to Germany’s regulatory regime, including giving BaFin more powers to “efficiently and quickly” conduct special audits, he said on Thursday evening.
The government was initially slow to react when the latest -- and most damaging -- news broke last week in a long-running accounting scandal at the payment-processing firm. Since then, top officials, including Scholz and Altmaier, have warned that the affair risks damaging the reputation of the finance sector and Germany as a place to do business.
That’s after once-mighty German lenders like Deutsche Bank AG have fallen on hard times and the auto industry continues to struggle with the fallout from the Volkswagen diesel scandal and the shift to electric cars.
Even before the most-recent revelations, the opposition Left party had summoned BaFin President Felix Hufeld to testify to parliament next Wednesday.
Fabio De Masi, deputy leader of the party’s parliamentary caucus, questioned whether Hufeld will be able to hang on to his job. BaFin took more than a year to report Wirecard for suspected market manipulation after receiving a tip-off from a whistle-blower about irregularities at the payments company, according to a written Finance Ministry response to questions from lawmakers.
“When the biggest collapse of a company in German history can happen under the eyes of BaFin, then the leadership must be straightened out,” De Masi told Bloomberg. BaFin did not immediately respond to a request for comment.
Hufeld issued an apology on Monday, saying that it was among institutions responsible for the “complete disaster” at Wirecard because it didn’t do a good enough job supervising.
He promised to sort out any potential shortcomings at the watchdog, but also tried to pass on some of the blame, saying that Wirecard’s top management as well as “scores of auditors” failed to act or realize what’s going on.
The finance spokesman for the liberal Free Democratic Party, Florian Toncar, said it is unacceptable that BaFin heaps red tape on small investors and banks while ignoring the insolvency of a company belonging to the DAX index.
“So far the Finance Ministry couldn’t explain how the irregularities at Wirecard could’ve been overseen,” Toncar said. “We demand a realignment of BaFin.”
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