German Finance Watchdog Defends Agency Amid Wirecard Scandal

(Bloomberg) -- The head of Germany’s financial watchdog defended the agency amid growing criticism over Wirecard AG’s collapse.

BaFin is doing exactly what German lawmakers asked, with a mandate that only allowed it to supervise small parts of the payments company, Felix Hufeld, the agency’s president, said in an interview with the Welt am Sonntag newspaper. It’s up to lawmakers to improve the regulation of tech firms, where there are lots of gray areas, he said.

Hufeld’s comments come as questions mount over how Wirecard, which straddled banking and technology, survived so long before disclosing last month that 1.9 billion euros ($2.2 billion) was missing from its balance sheet. The company filed for insolvency with a German court and several top executives have been arrested.

Wirecard escaped strict scrutiny for years as BaFin focused solely on its banking unit. The government is now overhauling who regulates who, potentially ushering in a regulatory rethink with consequences for the broader fintech industry.

The demands of some lawmakers to refashion BaFin along the lines of the U.S. Securities and Exchange Commission isn’t sufficient, Hufeld told Welt am Sonntag. “We can learn from the SEC model, but there are cases of fraud there, too,” he said. “The U.S. also has a different system of justice, that’s not easily transferred into Europe.”

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