The Wirecard scandal surrounding the German payment processor missing $2.1 billion has spilled over the border to Belgium.
Brussels is seeking an investigation into the Federal Financial Supervisory Authority (BaFin), Germany’s financial regulatory authority, for its failure to supervise Wirecard, the Financial Times reported.
Valdis Dombrovskis, the European Union’s (EU) executive vice-president in charge of financial services policy, said Wirecard’s collapse threatens investor trust in the EU, the newspaper reported.
Dombrovskis told the Times he will ask the 27-nation bloc’s markets supervisor to evaluate BaFin’s handling of the one-time rising star German financial technology company.
“We will be asking ESMA (European Securities and Markets Authority) to investigate whether there have been supervisory failures and, if so, to set out a possible course of action,” Dombrovskis told the FT. “We need to clarify what went wrong.”
He also said the EU should investigate whether the German regulator broke the law if ESMA determines BaFin failed to uphold the bloc’s financial reporting rules.
A mid-July deadline for a reply from ESMA has been set, he added.
Earlier this week, BaFin’s president Felix Hufeld acknowledged “a whole range of private and public entities including my own have not been effective enough” at preventing the “complete disaster” at Wirecard, the FT reported.
Wirecard’s rapid fall has rocked the EU.
On Thursday (June 25) the embattled company filed for insolvency seeking the court’s protection, making it the first member of the country’s Frankfurt Stock Exchange to do so. Wirecard said its new CEO applied to the Munich court “due to impending insolvency and over-indebtedness.”
One week ago, Wirecard founder and CEO Markus Braun, 50, resigned. On Monday (June 22), he was arrested on charges of misrepresenting Wirecard’s accounts and market manipulation. He has since been released on 5 million euros ($5.6 million) bail.
Munich prosecutors have said they will look at all possible criminal offenses.
Braun has denied any wrongdoing. He has said allegations about Wirecard’s accounting practices are false and misleading, the newspaper reported.
“This is certainly something that requires investigation,” Dombrovskis said. “As we deepen capital markets and we move forward with the next stages of the Capital Markets Union, an important element is investors’ trust investing in publicly listed companies. Investors need to be sure that they are receiving proper and truthful information … and that provision of this financial information is properly supervised.”