Wirecard collapse brings EU fintech rules into sharper focus

The headquarters of Wirecard AG, an independent provider of outsourcing and white label solutions for electronic payment transactions is seen in Aschheim near Munich, Germany April 25, 2019. REUTERS/Michael Dalder

The collapse of German payments firm Wirecard has become a focal point for an overhaul of how the European Union regulates the finance industry as it evolves away from traditional banks towards fintech companies, its financial services chief said.

Wirecard’s implosion to leave a $2.1 billion hole in its books came more than a decade after the first allegations of fraud by some investors and journalists.

As a financial technology company, albeit one that owned a bank, Wirecard was long considered as being in a grey area when it came to traditional bank supervision.

“We will assess how to improve the relevant EU rules so these kinds of cases can be detected,” Valdis Dombrovskis told reporters, adding that the review is set to end after the summer.

It will look at whether changes are needed to the bloc’s rules on transparency requirements for listed companies, accounting norms and existing regulation aimed at stamping out market abuses, he said.

Wirecard seems not to have provided reliable and trustful information to investors and therefore was in breach of current rules, Dombrovskis said.

But there was also a need to examine supervision by regulators, and not just the rules themselves, he said.

Germany’s financial supervisor BaFin and the accounting watchdog – the privately-owned Financial Reporting Enforcement Panel (FREP) have come under scrutiny in the wake of Wirecard’s collapse. BaFin and FREP supervised Wirecard.

Wirecard was a hybrid company that processed electronic payments and also owned a bank, leaving regulators at odds over how it should be supervised.

Lessons from Wirecard could also be applied to the bloc’s work on how to supervise “critical third party” providers such as tech-related companies, Dombrovskis said.

The Commission had launched a public consultation on its digital finance strategy, though it was unclear if the German company would have come under this criteria.

The strategy looks at how the same risks, whether from a technology or a financial company, should be regulated and supervised in the same way.

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.