Germany’s financial watchdog BaFin would be equipped with a stronger bite under a plan just rolled out by Germany’s coalition government.
Reacting to the blockbuster Wirecard financial fraud scandal, Germany’s finance and justice ministers have unveiled a reform plan that would grant stronger investigative and oversight powers to BaFin (the abbreviation for the Federal Financial Supervisory Authority) according to Reuters.
Germany financial regulators would gain the power to collect information from third parties, “conduct forensic investigations,” and “inform the public at an early stage about its actions on balance sheet control,” Reuters reported.
Wirecard filed for insolvency in June, a precipitous fall from grace for a FinTech once considered a rising star with a valuation of $28 billion at its height. Wirecard had claimed it had deposited $2.1 billion in a pair of banks in the Philippines, only to later admit the money never existed.
“We want the BaFin watchdog to have more bite,” Finance Minister Olaf Scholz, a member of the Social Democrats (SDP), said the day before the launch of a parliamentary inquiry into the Wirecard meltdown.
As the German government pushes forward with reforms to toughen up its financial regulations and oversight, it is looking to the Securities and Exchange Commission in the United States as a role model, according to Reuters.
The proposal by the German coalition government also wants to shake up the at-times incestuous world of auditing and oversight, in which conflicts of interest can prevent adequate monitoring of a company’s financials.
Under the proposal, companies would be required to change external auditors every 10 years, the news outlet reported.
“We’ll also sharpen the separation between auditing and consulting in companies of public interest,” according to the German government plan reviewed by the news agency.
Justice Minister Christine Lambrecht, also an SDP member who helped hammer out the plan, has said one aim is to make it easier to bring civil suits against auditors in cases like the Wirecard scandal, according to Reuters.