THE European Commission has asked the European Union financial authority to study whether German regulators were at fault in the build-up to the spectacular collapse of payments provider Wirecard.

According to a letter seen by AFP today, the commission asked the European Securities and Markets Authority (Esma) to carry out “a fact-finding analysis” and report back before July 15.

The study will examine whether Germany’s regulatory responses to early signs that Wirecard was in trouble “were adequate to protect investor confidence in EU securities markets”.

It will also ask “whether there is any evidence of administrative or legal obstacles that impeded the effective enforcement of applicable financial reporting requirements, or, if relevant, the effective sanctioning of any breaches of such requirements”.

Wirecard filed for insolvency yesterday after admitting that €1.9 billion (RM9.1 billion) missing from its accounts likely does not exist, in what German Finance Minister Olaf Scholz dubbed an “unparalleled scandal”.

Economy Minister Peter Altmaier has called for a thorough investigation, and banking supervision chief Felix Hufeld has admitted that his watchdog, BaFin, “had not been effective enough to prevent something like this from happening”.

Now, the head of the European Commission’s directorate general for financial stability, John Berrigan, has tasked Steven Maijoor, head of the Paris-based Esma, with conducting a parallel European probe.

“At this stage, this preliminary analysis should seek to establish a comprehensive description and assessment of the events, including the adequacy of the supervisory response to these events, leading to the collapse of Wirecard,” said the letter.

“In my view, it is essential that Esma look at the issue to ensure that EU investors are fully protected when investing in companies listed in a regulated market in the EU. This is also important to identify what next steps may be warranted.”

In an interview with Financial Times published today, the EU’s vice-president for financial services, Valdis Dombrovskis, said after Esma reports back, Brussels may seek a legal investigation that could lead to a report demanding that BaFin reform its practices. – AFP, June 26, 2020.