EU watchdog to probe German oversight of Wirecard

The European Commission in a rare move has asked its markets watchdog to investigate German financial regulator BaFin over the collapse of payments company Wirecard .

Battered German fintech company Wirecard AG has filed for insolvency proceedings, days after revealing that more than $2 billion in cash missing from its balance sheet probably didn’t exist.

The company’s implosion owing creditors almost $4 billion is shaping up to be one of Germany’s biggest corporate scandals.

The company 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.

Wirecard’s long-time auditor, EY, said the hole in the company’s books was the result of a sophisticated global fraud.

The EU executive said in a letter to the European Securities and Markets Authority (ESMA) that its “fact-finding analysis” should assess if BaFin’s responses to allegations of improprieties, and to a critical report from auditors KPMG in April, were adequate to protect investor confidence in EU markets.

Founder and former chief executive Markus Braun was arrested on Monday on suspicion of false accounting and market manipulation before being released on bail.

As the price of Wirecard’s shares and bonds plunged in recent days, the company has been locked in urgent negotiations with banks owed €2bn. The company has a further €1.4bn of debt issued in September last year.