D.Em President of the Federal Financial Supervisory Authority (Bafin), Felix Hufeld, criticism of his authority in the accounting scandal of the payment service provider Wirecard is still causing problems. On Thursday he said at a virtual conference of the financial news agency Bloomberg that the Wirecard case had damaged Germany’s reputation. The company has committed a high level of fraud, which should not happen again. The country’s authorities worked to restore confidence. The most important thing is how the balance sheets of companies where the current system has proven to be too slow could be controlled, Hufeld said.
Hufeld’s statements do not come as a surprise, but they make it clear how much the Dax company’s collapse has damaged the confidence of foreign investors in the German financial center. That is why the Federal Ministry of Finance presented a draft of the “Law to Strengthen Financial Integrity” on October 23, on which the associations were able to comment by Monday. As the umbrella association of banks and savings banks, the Deutsche Kreditwirtschaft (DK) supports the legislator’s goal of strengthening confidence in the German financial market. At the same time, the DK pointed out that the Wirecard scandal was primarily a case of fraud. Existing rules were deliberately violated in such a way that only limited consequences for the legal framework could be derived.
In the Wirecard law, Finance Minister Olaf Scholz tries to enforce stricter inspection and liability rules more quickly in order to be able to prevent and punish investment and balance sheet fraud more quickly. Essentially, it boils down to stricter requirements for auditors and tougher crackdown on financial regulators when criminal activity is suspected. In particular, the powers of the Bafin, which is the focus of criticism alongside the Wirecard auditor EY, are to be expanded to include an extended right to audit the balance sheets.
With the new tasks of Bafin, additional costs may arise, which banks and savings banks in particular would have to bear as part of the pay-as-you-go system. The bill speaks of “companies in the financial sector”. These may incur higher costs in the form of an increase in the allocation as part of the financing of the financial supervision. In this context, banks and savings banks, which until now have had to finance the Bafin, are demanding that the “polluter pays principle” be observed, according to which the administrative costs are generally borne by the supervised or affected companies. The Wirecard Act aims to expand the tasks of the Bafin to “capital market companies” or “companies of public interest”, which are usually to be found outside the financial sector. As a group, Wirecard was not supervised by Bafin either, only the comparatively small subsidiary Wirecard Bank.
The Deutsche Aktieninstitut (DAI) also announces a need for improvement. Due to the proposed regulations, companies threatened to be prematurely pilloried by the supervisory authorities. The final audit is becoming less attractive as a service, and the concentration on the auditor market continues to increase.
The sharpest criticism so far has come from the auditors, such as the F.A.Z. reported on Tuesday. The “planned tightening of auditors would not prevent a second Wirecard,” warned the Chamber of Auditors. The Institut der Wirtschaftsprüfer IDW fears that the law will damage Germany’s financial center. Above all, the auditors oppose the significant increase in their liability. So far, they have been liable for gross negligence when examining a capital market-oriented company with up to 4 million euros, with other companies with up to one million euros. According to the draft law, liability for capital market-oriented companies is to be increased to 20 million euros.