BRUSSELS (Reuters) – The European Commission will ask its markets watchdog to investigate whether German financial regulator BaFin failed in its supervision of payments company Wirecard.
FILE PHOTO: European Commission Vice-President Valdis Dombrovskis holds a joint press conference with EU Economic Affairs Commissioner Paolo Gentiloni on Recovery and Resilience at the European Commission headquarters in Brussels, Belgium May 28, 2020. Aris Oikonomou/Pool via REUTERS
Germany’s Wirecard collapsed on Thursday owing creditors almost $4 billion.
Depending on that preliminary probe’s results, the Commission could launch an investigation into whether BaFin broke EU law on financial reporting, Valdis Dombrovskis, the Commission’s executive vice president, told the Financial Times newspaper in an interview.
“We will be asking ESMA (the European Securities and Markets Authority) to investigate whether there have been supervisory failures, and if so, to set out a possible course of action,” Dombrovskis told the newspaper.
“We need to clarify what went wrong,” he said, adding he would set a mid-July deadline for ESMA to reply.
ESMA confirmed that it had been asked to look at how BaFin enforced the EU’s transparency directive which covers financial reporting requirements for listed companies.
“We have received a request from the European Commission for a fact-finding analysis of events leading up to the collapse of Wirecard and supervisory responses to the events,” an ESMA spokesman said.
Dombrovskis could use the findings from ESMA’s analysis to order a formal “breach of union law” investigation, requiring BaFin to provide information to ESMA.
If a breach is found, BaFin could be ordered by Brussels to make changes to its practices, an embarrassing situation for a national regulator.
The EU’s transparency rules aim to ensure that investors are given the proper flow of information about a company.
Reporting by Jan Strupczewski and Huw Jones, editing by Jason Neely