Germany’s Deutsche Bank Offers A Lifeline To Wirecard Bank

Deutsche Bank, the Frankfurt-based multinational financial services company, is in talks with regulators to rescue Wirecard Bank, the deposit-taking division of the German payment company that is facing one of the country’s biggest accounting frauds, the Financial Times reported.

Wirecard Bank is separate from Wirecard AG, its parent company that filed for insolvency protection last week. The action was triggered when accountants reported $2.1 billion of supposed Wirecard deposits that were missing from two Philippines banks.

Deutsche told the Times it is considering providing Wirecard Bank with financial support. The move would be in collaboration with the Federal Financial Supervisory Authority (BaFin), Germany’s financial regulator.

“We are in principle prepared to provide this support in the context of a continuation of business operations, if such assistance should become necessary,” Deutsche Bank told the newspaper.

The bank declined to provide details, such as how much money it might make available or the terms of any deal.

BaFin confirmed the talks over the bank’s future, saying it welcomed support from Deutsche Bank for Wirecard.

Wirecard’s administrator, Munich-based lawyer Michael Jaffe, and Wirecard declined to comment.

The Wirecard saga has ensnared the Germany-based payment company’s auditor, Ernst & Young (EY). The firm is facing claims that it failed to identify unorthodox financial arrangements dating back four years, and that EY may have signed off on Wirecard’s audit despite financial questions.

Felix Hufeld, BaFin’s president, has denied that its regulators failed to investigate Wirecard. On Wednesday (July 1), he told members of the Bundestag, the nation’s Parliament that Wirecard was classified as a technology company, not a financial services provider, which means the company was not under BaFin’s jurisdiction.

In commentary on Monday (June 29), PYMNTS compared the Wirecard drama to the Enron Corp. scandal. The collapsed Houston-based company, which once had more than $60 billion in assets before filing for bankruptcy in 2001, resulted in the shuttering of Arthur Andersen LLP, then one of the largest auditing companies in the world.

Enron lived and eventually died in energy, while Wirecard is a payments processor, the report noted. But despite their differences, some of the warning signs echo.