German Finance Minister Slams Wirecard Oversight, Demands Change
German Finance Minister Slams Wirecard Oversight, Demands Change
(Bloomberg) -- Germany must act as soon as possible to identify how supervision rules need to be changed to prevent another case like Wirecard AG, according to Finance Minister Olaf Scholz.
Markus Braun, the former head of the digital-payments company, has been detained by Munich prosecutors after 1.9 billion euros ($2.1 billion) went missing in a scandal that has rattled Germany’s financial industry. In less than a week, the fintech company once hyped as the future of finance in Europe’s biggest economy has lost most of its market value.
“The Wirecard case is extremely worrying,” Scholz said Tuesday. His comments were confirmed by the Finance Ministry after earlier being reported by the Frankfurter Allgemeine Zeitung newspaper.
“Critical questions also arise for the supervision of the company, especially with regard to accounting and balance sheet control,” Scholz said. “Auditors and regulators don’t seem to have been effective here.”
Munich prosecutors said former Chief Executive Officer Braun is suspected of inflating Wirecard’s balance sheet and sales volume by faking income from transactions with so-called third-party acquirers, possibly in cooperation with other perpetrators. That would make the company appear financially strong and more attractive for investors and customers.
Felix Hufeld, head of BaFin, Germany’s top financial regulator, issued a major apology on Monday, saying that it was among institutions responsible for the “complete disaster” at Wirecard because it didn’t do a good enough job supervising.
He promised to sort out any potential shortcomings at the watchdog, but also tried to pass on some of the blame, saying that Wirecard’s top management as well as “scores of auditors” failed to act or realize what’s going on.
Scholz noted that BaFin has “admitted its own mistakes,” which he said “have to be identified and remedied as soon as possible.”
“We need to quickly clarify how we have to change our regulatory requirements in order to be able to monitor complex corporate networks across the board, promptly and quickly,” Scholz said. “We owe this to shareholders, employees and investors -- and to Germany as a financial center.”
His comments echo Economy Minister Peter Altmaier, who said Monday that the revelations risk tainting Germany’s reputation as a reliable place of business and need to be thoroughly investigated to prevent further damage.
“We would have expected such a situation anywhere -- but not in Germany,” Altmaier, a close confidante of Chancellor Angela Merkel, said in an interview with German website t-online.de. “We cannot allow individual companies to destroy the reputation of an entire industry and thus damage the country.”
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