EU economy chief hints towards Wirecard scandal led supervision overhaul

The Wirecard scandal has led the emphasis to grow stronger on the need for better and effective defenses against such frauds, says one of the top officials at EU bloc. He also hinted that the scandal will stimulate Brussels’ efforts to renovate financial supervision at EU strata.

The European Commission’s Executive Vice-President for Economic Policy Valdis Dombrovskis said that the collapse of the German payment group, Wirecard has reinforced previous attempts by Brussels to have EU financial watchdogs more vigilant.

“We are looking at how we can strengthen the system to avoid that kind of situation happening again. It’s clear we are dealing with a case where investors were not given the truthful information about the state of play of the company,” Mr. Dombrovskis said.

He also relayed the latest development regarding approach by Brussels post the scandal by exploring ways to incorporate audit committees’ role at the companies listed to ensure due diligence by them.

In one of the biggest corporate scandals in the European Union’s history, Wirecard had filed for insolvency in June end after it admitted that its “apparent” cash of €1.9 bn probably “didn’t exist”. Through investigations, it was further revealed that EY, the company’s auditor, had flawed accounting leading to lapse in the company’s bank balances for over three years. Furthermore, German regulators have also been put at fault for being inadequate at supervising the company business adequately.

Dombrovskis has called for investigations regarding failed role and functioning by German authority’s inadequate enforcement of the EU rules regarding Wirecard’s financial reporting.

Brussels is rather skeptical of the unfolding of scandal, the biggest in EU history – mainly because it had breached three lines of defense which ideally should have been covered by EU investors. These were regulatory requirements and corporate governance issues to make sure companies show righteous and sound accounts; auditors’ role which is regulated by EU; and efficient supervision by public authorities.

Mr. Dombrovskis elaborated, “Wirecard’s failure potentially raises issues at all three levels of defense and that is why we are now looking at those issues comprehensively to draw all lessons that need to be launched and take necessary actions.”  

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