LONDON (UK) – The EU markets watchdog said on Tuesday that German regulators were “deficient” when it came to supervising payments firm Wirecard and were at risk of being overly influenced by the Finance Ministry.
The firm’s former CEO Markus Braun and other executives have been held on charges of running a criminal racket that defrauded creditors of 3.2 billion euros (2.9 billion pounds) in what is seen as Germany’s biggest post-war corporate fraud.
However, Braun and the accused deny the charges.
The European Securities and Markets Authority (ESMA) initiated a fast-track review in July into how German markets regulator BaFin and the Financial Reporting Enforcement Panel (FREP) implemented EU transparency norms governing company information for markets and investors.
In its 190-page report, ESMA said it unearthed a number of deficiencies, inefficiencies and legal and procedural impediments regarding BaFin’s independence from issuers and the Finance Ministry.
“For BaFin … there is a heightened risk of influence by the Ministry of Finance given the frequency and detail of reporting to the MoF in the Wirecard case, in some cases before actions were taken,” the ESMA report said.
The European Commission asked ESMA to undertake the review and its findings will be used by the EU executive to determine if there is a need for more centralised EU supervision of markets to prevent such scams.
“The Wirecard case has once again highlighted that high-quality financial reporting is essential for maintaining investor trust in capital markets, and the need to have consistent and effective enforcement of that reporting across the European Union,” ESMA Chair Steven Maijoor said in a statement.