Wirecard’s collapse lends impetus to reforms – German minister

The stunning collapse of the payments provider Wirecard has created a window of opportunity to push through quick reforms to beef up regulation of the sector, Germany’s finance minister said on Thursday, September 3.

Digital payments provider Wirecard crumbled into insolvency in June after the company was forced to admit a 1.9-billion-euro ($2.3-billion) hole in its balance sheet.

The scandal described by Finance Minister Olaf Scholz as “unparalleled” has shocked Germany and sparked questions over oversight and audit of the sector.

“Let me express a small hope,” Scholz said at a conference in Frankfurt. “Everyone’s discussing Wirecard. And that creates a window for reforms.”

Supervisory authorities should be equipped with “more stringent instruments” to oversee companies, he added.

Scholz, who will lead his center-left Social Democrats into elections next year, said potential reforms included the possibility of reducing the number of years that auditors can audit a company and better separation between auditing and consultancy. 

Auditing giant Ernst & Young has been dragged into the scandal after it signed off Wirecard’s accounts for more than a decade. 

“If highly qualified auditors are not struck by such manipulation, even though the figures are entered into the financial report, that’s really something to worry about,” Scholz said.

But the finance minister warned that action must be taken swiftly to bring about change.

If interest in the issue waned, Scholz warned, “powerful lobby groups in the background will try to prevent new rules from being established.”

With questions mounting on how the government failed to prevent the country’s biggest post-war financial sector, Scholz himself is under fire over the case.

At a press conference last week, Chancellor Angela Merkel too had to defend promoting the company in China in 2019.

German lawmakers are now eyeing a full parliamentary inquiry, which could prove particularly damaging for Scholz as his ministry supervises the financial regulator BaFin. – Rappler.com