Yahoo Finance Wirecard collapse exposed German financial flaws, Merkel admits
Angela Merkel has said that the collapse of Wirecard exposed serious flaws in German financial regulation, amid a deepening scandal over the online payments firm.
The admission came amid reports that employees carried millions of euros in cash out of Wirecard’s offices in Victoria’s Secret shopping bags.
Wirecard was once lauded as a crown jewel in German tech but collapsed in June. Questions have since been raised over its accounting practices, several former executives have been arrested by fraud investigators and watchdogs have been accused of turning a blind eye into problems at the business.
Addressing a Parliamentary inquiry into what went wrong, the Chancellor said: “Speaking objectively, the entire German supervisory side was not well enough set up. That is very clear.”
Witnesses have told German police they saw staff carrying as much as €700,000 (£600,000) out of Wirecard's office at a time, according to reports in the Financial Times and Germany’s Manager magazine.
Plastic shopping bags from Aldi and Lidl were also used, and at times were too small to hold the sums involved. At one point €500,000 (£435,000) was delivered to Wirecard’s office when its safe was already full.
The alleged cash withdrawals have been linked to a former Wirecard executive who is also claimed to have moved large sums to private accounts by electronic transfer. German prosecutors and police declined to comment on the new allegations.
Problems at the business have stained Germany's reputation as a financial hub and could undermine the country's efforts to lure business away from the City of London to Frankfurt in the wake of Brexit.
Mrs Merkel’s government has already announced sweeping reforms of BaFin, the German financial regulator, which failed to investigate allegations against Wirecard for months.
Instead the regulator imposed a short-selling ban on the company to prevent speculators from betting against its stock, and leaked unsubstantiated allegations against journalists who uncovered irregularities in its Asian operations.
It has since emerged that staff at BaFin were themselves trading in Wirecard shares at the time.
Mrs Merkel’s remarks came as she testified to a parliamentary inquiry on how much she knew about concerns over the company when she lobbied the Chinese government on Wirecard’s behalf in 2019.
She said: “At that time, despite press reports, there was no reason to assume serious irregularities at Wirecard."
At the time the Financial Times had already published allegations of serious irregularities in Wirecard’s Asian operations, but they were not taken seriously by the BaFin.
Mrs Merkel told MPs Wirecard was one of a number of German companies she promoted on her visit to China, and that she had no reason to doubt her officials had properly vetted them.
