Germany’s Top Finance Watchdogs Resign Over Wirecard Scandal
(Bloomberg) -- Germany’s top financial regulator is stepping down after repeated scandals surrounding the collapse of payments company Wirecard AG highlighted the watchdog’s failure to prevent the country’s biggest corporate scandal in years.
BaFin President Felix Hufeld announced his departure in a joint statement with German Finance Minister Olaf Scholz on Friday. “We are combining the planned organizational reform at BaFin with a management restart,” Scholz said. Elisabeth Roegele, the second-highest official at the watchdog, also resigned.
Wirecard’s crash from rising star to national disgrace turned the spotlight on why BaFin and other authorities failed to detect the fraud after multiple warnings, prompting a parliamentary hearing in an election year and shock at the extent of the deception. BaFin’s controversial ban on bets against the stock in 2019 drew criticism that the German establishment appeared more keen to protect the company rather than rigorously investigate it.
Hufeld had come under increasing pressure after repeated details of BaFin’s deficiencies emerged. Most recently, the regulator discovered a case of suspected insider trading in Wirecard securities by a member of its own staff. That appeared to be the final blow for Hufeld.
The scandal surrounding Wirecard shows BaFin needs to be reorganized to carry out supervision more effectively, according to the finance ministry. Opposition lawmakers lined up to back the decision.
“Finally we see personnel consequences,” said Frank Schaeffler, a lawmaker for the opposition Free Democrats and member of BaFin’s administrative board. “But this can only be the beginning. We need a fresh start.”
Similarly, Fabio de Masi, a lawmaker from the opposition Left party, said Hufeld’s departure was “overdue.”
Roegele, who leads securities supervision, agreed with the ministry that her department also needs a new leader, BaFin said in a statement.
The looming national election in September had raised the stakes for Scholz, who is running for the Social Democrats as their chancellor candidate.
Scholz said on Thursday that the finance ministry will present the results of an assessment on how BaFin can be reformed in coming days.
Hufeld has previously acknowledged that BaFin is among the authorities to blame for failing to catch the fraud. Still, he rejected the idea that BaFin sought to protect the company and pledged to help prevent a repeat of the scandal by overhauling his institution.
Hufeld is also a member of the European Central Bank’s supervisory board, which oversees large banks in the region.
Wirecard had been unprofitable for years and relied on fake transactions with overseas partners to cover up the fraud. Short sellers, whistle-blowers and journalists flagged accounting irregularities.
The scandal has already resulted in the suspension of Germany’s top auditing regulator, who told lawmakers that he traded Wirecard shares while his agency was reviewing the company’s external audits. Wirecard Chief Executive Officer Markus Braun was arrested last year and has been in a jail near Munich since. His second in command is a fugitive.
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