Germany proposes beefed up regulation in response to Wirecard collapse

German ministers on Wednesday, October 7, rolled out plans to beef up oversight of the financial sector in Europe’s biggest economy, on the eve of a parliamentary inquiry into the spectacular collapse of former fintech darling Wirecard. 

The payment-service provider crumbled in June after it was forced to admit 1.9 billion euros ($2.2 billon) was missing from its balance sheet, a scandal described by Finance Minister Olaf Scholz as “unparallelled” in Germany.

Scholz, himself under fire over Wirecard’s downfall, on Wednesday together with Justice Minister Christine Lambrecht unveiled an “action plan” that would give financial regulator Bafin “more bite.”

Bafin would be able to take over control of auditing in cases of suspected accounting fraud, while listed companies would have to change auditors every 10 years, rather than 20.

Tougher penalties would also be imposed for balance-sheet manipulation, reaching a maximum of 5 years in prison from 3 currently.

Scholz said that Germany must “regain lost trust” as a financial center, and “more effective inspection measures” were required.

The Wirecard case showed that “balance sheet control systems reach their limits against strong criminal intent,” Lambrecht said. 

The company’s former chief executive officer Markus Braun and several other top executives have been arrested on fraud charges since Wirecard’s collapse.

But ministers including Scholz have struggled to put down criticism over their failure to prevent the scandal.

The case is also proving to be embarrassing for Chancellor Angela Merkel who had on a trip to China discussed Wirecard’s planned foray into the Chinese market. – Rappler.com