The European Commission has asked its markets regulator to investigate German financial watchdog BaFin over its handling of accounting scandal at Wirecard AG, which led to the collapse of the payments company. Bloomberg reported that the Commission asked for the initial analysis to be concluded by July 15.
BaFin was criticized for failures in its supervision of Wirecard, mainly its decision to ban short-selling Wirecard shares. BaFin reportedly received a tip-off from a whistle-blower about irregularities at the payments company in January last year, but took more than a year to report Wirecard for suspected market manipulation.
Wirecard on Thursday decided to file an application for the opening of insolvency proceedings.
The report said, citing a letter by the Commission, that the European Securities and Markets Authority has been asked to look into the supervisory responses to the alleged improprieties as well as a report by auditor KPMG in April on Wirecard's accounts. The market regulator would check whether these were adequate to protect investor confidence in EU securities markets.
The accounting scandal at Wirecard had led to the arrest of its former chief executive officer Markus Braun by the German police.
Braun resigned last week as member of the management board of Wirecard as the auditor Ernst & Young found that no sufficient audit evidence could be obtained of cash balances on trust accounts to be consolidated in the consolidated financial statements in the amount of 1.9 billion euros.
Later, Wirecard said the missing 1.9 billion euros of cash probably does not exist.
The company withdrew its preliminary results for the financial year 2019 and the first quarter of 2020. Wirecard also confirmed that it is in constructive discussions with its lending banks with regard to the continuation of the credit lines and the further business relationship.
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