Germany’s Next Top Finance Regulator Braces BaFin for Change

Germany’s top financial regulator may need a change of culture after its reputation suffered in the wake of an accounting scandal, Mark Branson, who was tapped by the government to overhaul it, told lawmakers behind closed doors.

Speaking to a parliamentary committee after being named the next leader of BaFin, Branson also said that complex companies with both financial and non-financial businesses should either be supervised as a whole or there should be clear ring-fencing of those units, according to a person familiar with the matter.

He declined to speak at length about BaFin, citing the need to develop a picture for himself, the person said, asking not to be identified because the remarks weren’t intended for a broader public. BaFin spokesman declined to comment as did a spokesman for Swiss regulator Finma, which Branson currently leads.

BaFin’s top leadership resigned earlier this year after a series of missteps in the Wirecard AG scandal undermined confidence in Germany as a place to do business. BaFin hadn’t investigated allegations of accounting fraud as forcefully as it did journalists and shortsellers who pointed to irregularities. A ban on bets against Wirecard stock also gave the impression that BaFin and the German authorities wanted to protect the company.

“BaFin desperately needs cultural change,” Antje Tillmann, a member of Chancellor Angela Merkel’s Christian Democratic Union, said in an emailed statement. “BaFin needs to be instilled with a culture of looking closely in financial oversight, policing of accounts and money laundering supervision. The next BaFin president will have a singular role and responsibility in this.”

As financial regulator, BaFin was only responsible for direct oversight of Wirecard’s banking unit, meaning the rest of the company escaped scrutiny. While the German regulator had other failings, that set-up limited its actions.

Germany is expanding BaFin’s remit and strengthening the role of its president to help prevent a repeat of the Wirecard scandal. The watchdog plans to hire more highly-qualified professionals and build a task force to carry out forensic probes and investigate potential accounting fraud on its own, rather than a rely on a separate authority.

Branson is scheduled to take over leadership of BaFin by the middle of the year. The committee should hold a public meeting with Branson “soon” to discuss his views on how Germany’s financial oversight system can be improved, according to Christian Democrat Matthias Hauer.

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