The European Commission has called for the EU financial authority to launch a probe into whether BaFin, the banking regulator of Germany, played a part in the collapse of Wirecard.
It comes as the German lender collapsed into insolvency yesterday, following an ongoing scandal into missing funds from its accounts.
It was earlier revealed that €1.9bn (£1.7bn) had gone missing from its books, with the group blaming “possibly fraudulent” transactions for the lost funds.
The firm is the first DAX member to collapse into insolvency, leaving creditors owed €3.5bn (£3.1bn)
Brussels has now launched the probe after reportedly warning that the collapse of Wirecard “poses a threat to investor trust” in the EU, according to the Financial Times.
Valdis Dombrovskis, the EU’s executive vice-president who leads the financial services policy, told the paper that he has written to the financial authority, asking it to assess BaFin’s handling of Wirecard.
Ahead of the probe, Dombrovskis warned that the EU should prepare to launch a formal investigation into the regulator for a “breach of union law” if the European Securities and Markets Authority probe “discovers shortcomings” in BaFin’s abidance of EU rules on financial reporting.
According to the Financial Times, BaFin president Felix Hufeld earlier this week acknowledged that “a whole range of private and public entities including my own have not been effective enough” at preventing the “complete disaster” at Wirecard.
Dombrovskis added: “We will be asking ESMA to investigate whether there have been supervisory failures and if so to set out a possible course of action. We need to clarify what went wrong.
“Given long-standing allegations about Wirecard’s financial accounting, we expect the German authorities including BaFin will now thoroughly investigate whether Wirecard accounts correspond to EU legislation.”
The authority has been given a deadline of mid-July to respond with their findings.
It comes as former CEO Markus Braun was arrested by German authorities last Tuesday (23 June) on charges of inflating the company’s balance sheet. On the same day, the company said it was likely that the missing funds did not exist, however.
In a statement, the group said: “The management board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of €1.9bn do not exist.”