EU probing German watchdog over Wirecard

The European Union is investigating Germany’s financial regulator over the collapse of payments company Wirecard in a rare move that heaps embarrassment on Berlin days before it is due to take over the EU’s rotating presidency.

Wirecard’s implosion on Thursday, owing creditors almost $4 billion, is shaping up to be one of Germany’s biggest corporate scandals, and regulator BaFin has come under fire at home and abroad for not spotting problems sooner.

The European Commission has asked the EU’s markets watchdog to assess if BaFin’s responses to allegations of improprieties at Wirecard, which stretch back years, were adequate to protect investor confidence in EU markets, according to a letter from the Commission to the EU watchdog.

News of the letter, seen by Reuters, came as the Philippines justice minister said Wirecard’s former operations chief, under suspicion in Germ-any over the accounting scandal, was in the Philippines this week, but had left for China.

Separately, German magazine Der Spiegel reported that Japanese investor SoftBank was planning to sue Wirecard’s long-time auditor EY over the scandal. EY declined to comment and SoftBank had no immediate comment.

Wirecard, which disclosed a $2.1 billion hole in its books, is the first member of the DAX stock index to go bust, barely two years after winning a spot among Germany’s top 30 listed companies.

EY said the hole in the company’s books was the result of a sophisticated global fraud.

In its letter to the European Securities and Markets Authority (Esma), the EC asked Esma to undertake a “fact-finding analysis” into BaFin’s response.