German Finance Minister Olaf Scholz and Economy Minister Peter Altmaier faced hours of questioning by Parliament Wednesday (July 29) over allegations they failed to prevent the Wirecard AG accounting scandal.
Reuters reported Scholz stuck to his previously stated defense that no mistakes had been made.
“It was a good, necessary discussion with many details,” Scholz told reporters after the closed-door hearing.
The German payment processing firm filed for insolvency last month after admitting that €1.9 billion ($2.1 billion) said to have been deposited in two Philippines banks did not exist.
Prosecutors have arrested former Wirecard CEO Markus Braun and two other executives on suspicion of orchestrating a criminal enterprise to inflate revenue and balances to hide billions in losses.
As a result of the alleged misconduct, one of the biggest in post-war history, Scholz said financial oversight must be strengthened and auditing rules reformed, Reuters reported.
He noted that a big, internationally renowned accounting firm had not detected the irregularities at Wirecard for many years, alluding to Ernst & Young.
The news service reported Florian Toncar, a member of the Free Democratic Party, said the government failed for years to detect the massive accounting scandal.
Fabio De Masi, a lawmaker from the opposition Left Party, said a more formal investigative Parliament committee should be established to determine who is to blame.
Last week, Scholz announced a plan for significant financial reforms. Under the plan, the Federal Financial Supervisory Authority (BaFin), Germany’s financial watchdog, will be granted powers that allow the agency to intervene immediately in publicly-traded companies.
The plan also promises to strengthen APAS, the German agency whose mission is to oversee auditing firms, by providing it with the power to impose tougher sanctions. Under the proposal, companies would be obliged to replace their auditor every 10 years.
In addition, Scholz said the Ministry would lobby to turn the European Securities and Markets Authority (ESMA), the European Union’s financial oversight body, into a “European Securities and Exchange Commission” modeled on the U.S. Securities and Exchange Commission, which has more power to demand information from listed companies.
This week, a high-ranking German regulator again called for major changes in response to the Wirecard scandal. Bundesbank President Jens Weidmann said auditing should be improved.
“Wirecard is a scandal, and we have to do more to prevent it in the future,” Weidmann said, adding that he called for more powerful auditing and accounting processes.