EU to Probe German Watchdogs’ Handling of Wirecard More Closely

The European Union’s top markets cop will take a closer look at how German regulators handled oversight of Wirecard AG, the payments company whose collapse rattled financial markets.

The probe of BaFin and a separate private sector watchdog is looking into whether the two adequately applied European guidelines on enforcing the reporting of financial information. It is scheduled to be concluded by Oct. 30, the European Securities and Markets Authority said Wednesday.

ESMA also said that an undisclosed 2017 review of Germany’s adoption of the guidelines had identified some shortcomings, including a “legalistic approach” at BaFin to accounting issues, rather than weighing their “economic substance.”

Wirecard went from Germany’s dream of a home-grown technology giant to national disgrace when it said last month that a quarter of its balance sheet probably doesn’t exist. That set off a blame game between banks, auditors and regulators and revealed large gaps in the country’s oversight of non-financial companies.

Germany is one of relatively few countries to split accounting enforcement between a private-sector watchdog and the markets regulator. Since Wirecard’s collapse, the country’s Justice Ministry canceled its contract with the former, while the Finance Ministry says BaFin needs investigative powers similar to prosecutors.

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