Germany’s Financial Regulator Exec Won’t Resign Over Wirecard Scandal

Despite calls for his resignation in the wake of the Wirecard AG scandal, the president of the German Federal Financial Supervisory Authority (BaFin) has refused to go.

While Felix Hufeld acknowledged the nation’s regulatory agency should have called for investigation sooner, he told reporters Wednesday (Sept. 2) that he will not resign “as long as my country and Europe have trust in me,” the Financial Times reported.

Members of the Bundestag, Germany’s Parliament, have raised questions about Hufeld’s lack of action over alleged criminal activity despite signs of trouble at the German payment company.

“We didn’t see the wood for the trees … for too long we relied on formal instruments,” he said, the newspaper reported.

In June, Wirecard filed for bankruptcy protection after it admitted 1.9 billion euros ($2.1 billion) said to have been deposited in two Philippines banks did not exist. It later collapsed under debt of 3.5 billion euros ($4.2 billion). Its former CEO and two other executives were arrested while police continue to search for other former employees on suspicion of orchestrating a criminal enterprise to inflate balances in order to hide losses.

Hufeld’s comments come one day after the Bundestag announced it plans to hold an inquiry into regulators’ failure to prevent the biggest corporate fraud since World War II.

“Over several months, the government has not succeeded in comprehensively and thoroughly clearing up the Wirecard scandal, despite special sessions, parliamentary questions and lots of opportunities,” said Danyal Bayaz, a member of the country’s Green political party. “There are still a lot of questions and inconsistencies. That’s why we need an investigative committee, with a clear mission.”

Last year, BaFin faced criticism for its temporary ban on investors betting against Wirecard shares, the first such restriction on an individual company in the country’s stock market history, FT reported.

Hufeld has blamed Ernst & Young Global Ltd. (EY), Wirecard’s auditor, for failing to uncover the problems.

“I don’t know any country in the world where financial supervision doesn’t rely on the audit of public companies,” he said.

But EY has said it was provided with false documentation and suggested Wirecard may be involved in large-scale international fraud.

In July, Bundesbank President Jens Weidmann said auditing of the nation’s financial institutions should be enhanced.

“Wirecard is a scandal, and we have to do more to prevent it in the future,” Weidmann said at the time, calling for more powerful auditing and accounting processes. “For example, the audit process and the tasks, powers and liability of auditors should be reconsidered.”