The European Securities and Markets Authority (ESMA) announced on Wednesday 15 July that it will further assess the response of the German regulator, BaFin, and the German Financial Reporting Enforcement Panel (FREP) to the accounting scandal involving the German payment service provider Wirecard (see EUROPE 12512/15).
“Quality financial information is essential for investors to have confidence in the capital markets and Wirecard’s bankruptcy undermined that confidence. It is therefore necessary to assess these events to help restore investor confidence”, she said in a statement.
An accelerated peer review of the application of the guidelines on the supervision of financial reporting (GLEFI) by these two authorities will be conducted and should be concluded by October 30. The GLEFI guidelines were designed by ESMA in 2014 to promote consistent application and supervision of IFRS accounting standards.
It was the European Commission that asked ESMA at the end of June to conduct a preliminary investigation into the adequacy of German supervision in this case (see EUROPE 12515/13).
“This is a useful first step. The ESMA report highlights potential weaknesses, possibly in terms of compliance with EU rules”, European Commission Executive Vice-President Valdis Dombrovskis told a press conference the same day.
In its press release, ESMA also points out that in 2017 a peer review involving seven countries, including Germany, had already been conducted on the application of these guidelines.
The confidential report on Germany at the time - which ESMA made public on the same day - had identified some areas for improvement, particularly with regard to procedures within the two authorities, but also with regard to independence and conflicts of interest within the FREP.
In this context, BaFin further stated that it was unable to comply with GLEFI due to “a lack of enforcement powers”.
ESMA’s 2017 report on Germany can be found at https://bit.ly/2B0QNnE (Original version in French by Marion Fontana)