Wirecard Collapse Puts Pressure On Germany’s Finance Minister

fintech, finance

One of Germany’s most prominent politicians comes under fire for ‘failure of responsibility’ after Wirecard falls into insolvency amidst fraud allegations

Germany’s Social Democrat (SDP) finance minister Olaf Scholz has been called upon to account for the regulatory failures around the collapse of failed fintech firm Wirecard after it emerged that he knew of concerns about the company as early as February 2019.

The criticism of Scholz, one of Germany’s most prominent lawmakers and a candidate to succeed chancellor Angela Merkel when she steps down next year, is a sign of how far-reaching the impact of Wirecard’s collapse has become.

Wirecard filed for insolvency in June after disclosing a 1.9 billion euro (£1.7bn) hole in its accounts that auditors said resulted from company-wide accounting fraud.

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Regulatory shock

The collapse was all the more shocking as it came after years of reports of financial misconduct within Wirecard, which regulator BaFin failed to act upon.

According to a German parliamentary report, Scholz acknowledged he had been informed that investigators were looking into Wirecard in February 2019, when regulators banned short-selling of Wirecard’s shares.

Parliament was “insufficiently informed” on the Wirecard case by the Ministry of Finance and BaFin, preventing parliament’s finance committee from exercising proper oversight, Hans Michelbach, finance spokesman for the Christian Social Union (CSU) party, told local media.

Meanwhile, Free Democratic Party (FDP) politician Florian Toncar argued that “key questions in the Wirecard scandal remain unanswered”.

‘Political responsibility’

He accused the Federal Ministry of Finance of failing to recognise the “explosiveness of the allegations” against Wirecard, adding that Scholz’s awareness of the situation brought up the question of “exercising political responsibility”.

Danyal Bayaz, finance spokesman for the Greens, told Reuters that Scholz’s knowledge of the affair “strengthens the sense of a collective failure of responsibility”.

Merkel’s Christian Democrats, which are in a coalition with the Scholz’s SPD, urged Scholz to stop “looking away” and to focus on BaFin’s alleged regulatory failings.

But so far the scandal has had little effect on Scholz’s popularity, with SPD politician Jens Zimmermann saying he did not think the affair would be dangerous for Scholz.

“He had to go along with what BaFin was telling him,” Zimmermann told Reuters.

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