Germany to overhaul accounting regulation after Wirecard scandal

Germany’s accounting watchdog is set to be stripped of its powers in the wake of the Wirecard scandal. 

The government will end its contract with the Financial Reporting Enforcement Panel (FREP) as soon as Monday, according to reports.

The job of overseeing company accounts will be taken on by Bafin, Germany’s financial regulator. 

“We have reached an agreement with the Finance Ministry to terminate the contract,” a Justice Ministry official told the Bild am Sonntag newspaper

Germany has been rocked by the collapse of payments company Wirecard, which filed for insolvency last week after admitting that €1.9bn (£1.7bn)  of cash on its balance sheet probably didn’t exist. 

Markus Braun, chief executive of the Dax-listed company, resigned on June 19 and was then arrested on suspicion of accounting fraud and market manipulation. 

German authorities are facing questions over their failure to root out the scandal, which is damaging to it reputation as it tries to win more international business. 

Regulators even filed a criminal complaint against Financial Times journalists as they published allegations of fraud against the fintech firm, once a stock market darling. 

Jorg Kukies, Germany’s deputy finance minister, told the Financial Times: “What the Wirecard affair has shown is that… self-regulation by the auditors doesn’t work properly. 

“So we will inevitably have to question whether the bodies that currently regulate the industry should continue to do so in their current form.”

Germany is already battling harm to its reputation from the Volkswagen emissions scandals.

Flagship lender Deutsche Bank is embroiled in legal action in the US where politicians want it to hand over information about president Donald Trump’s finances.

Authorities in the Philippines have opened an investigation into the Wirecard scandal, as the company had said the missing £1.7bn was in two Philippine banks that have denied any connection with the firm. 

Braun was released last week after posting bail of £4.5m.