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Banks call for regulatory reform after Wirecard scandal

Dhe executives of the German financial industry are dissatisfied with the Federal Financial Supervisory Authority (Bafin) after the Wirecard scandal. In a survey published on Thursday by the research institute of the Goethe University in Frankfurt, the Center for Financial Studies (CFS), 85 percent of those surveyed see a need for reform in financial supervision.

Bafin President Felix Hufeld is the focus of criticism from the opposition parties, who criticize his statements regarding the Wirecard balance sheet fraud in the Bundestag’s Finance Committee as contradictory, but among the bank managers surveyed, more than three quarters follow the ideas of Hufeld’s employer, Federal Minister of Finance Olaf Scholz, who wants to expand Bafin’s competencies. For the respondents, the main priority is that all financial services should fall within the area of ​​responsibility of the supervisory authority.

This was not the case for the Wirecard Group, because Bafin and the Bundesbank classified it as a technology group and not as a financial service provider, which has since led to harsh criticism. Bafin was only directly responsible for the Wirecard Bank subsidiary. The alleged balance sheet fraud also casts shadows on the auditors. For example, EY checked Wirecard’s balance sheets for many years, but did not realize that 1.9 billion euros were missing.

More independence from major accountants

In the survey, 58 percent of executives are in charge of building up auditor capacities at Bafin in order to become more independent of the four major accounting firms EY, Deloitte, KPMG and PWC. The Federal Ministry of Finance wants to make the control of the balance sheet more “state sovereign”. It is also examined how the Bafin can be integrated.

In the Ministry of Finance, it is viewed critically that the large accounting firms now generate more sales with consulting services than with the balance sheet audit. This can be a conflict of interest.

The position of the financial sector on the question of whether the banking supervision previously divided between Bafin and the Bundesbank should be merged is less clear. 58 percent of respondents are in favor of this, a good 36 percent think nothing of it. Around 70 percent see artificial intelligence as an instrument to increase the effectiveness of supervision.

CFS managing director Volker Brühl warns against all excitement about the Wirecard case falling into actionism. Thrashing at Bafin and the Federal Ministry of Finance did not help anyone. “Only when all the facts are known can the corresponding conclusions be implemented in a reform package,” advises Brühl. The facts are far from clear.

The mood in the financial sector brightened significantly in the second quarter. The CFS index rose to a level that signals growth. It was the strongest index increase since the start of the measurement in 2007, the CFS said. As a result of the Corona crisis, the index had fallen more sharply than in the previous quarter. “When it comes to business development, the financial institutions expect the favorable V scenario and a mild course of loan defaults,” said CFS Director Andreas Hackethal.

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