German watchdog to be probed over Wirecard collapse

The European Union is to investigate Germany’s financial regulator (BaFin) over the collapse of payments company Wirecard, news wires reported. The move puts pressure on Berlin days before it is due to take over the EU’s rotating presidency. Wirecard’s collapse, owing creditors almost €3.56bn, is to be one of Germany’s biggest corporate scandals.

The Commission has asked the EU’s markets watchdog to assess if BaFin’s responses to allegations of improprieties at Wirecard, which stretch back years, were adequate to protect investor confidence in EU markets, according to a letter from the Commission to the EU watchdog.

In its letter to the European Securities and Markets Authority (ESMA), the Commission asked ESMA to undertake a “fact-finding analysis” into BaFin’s response to the allegations and report back no later than 15 July. It also asked ESMA to assess if there was any evidence of “administrative or legal obstacles” that hampered the enforcement of reporting requirements.

News of the letter, seen by Reuters, came as the Philippines justice minister said Wirecard’s former operations chief, under suspicion in Germany over the accounting scandal, was in the Philippines this week, but had left for China. Separately, German magazine Der Spiegel reported that Japanese investor SoftBank was planning to sue Wirecard’s long-time auditor EY over the scandal.

Wirecard, which disclosed a €1.87bn hole in its books, is the first member of the DAX stock index to go bust, barely two years after winning a spot among Germany's top 30 listed companies. EY said the hole in the company’s books was the result of a sophisticated global fraud. Auditors KPMG said in a review published in April it was unable to verify €1bnin cash balances, questioned Wirecard’s acquisition accounting and said it could not trace hundreds of millions of euros in cash advances to merchants.

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