FILE PHOTO: German Finance Minister and Deputy Chancellor Olaf Scholz attend a press conference on coronavirus (COVID-19) in Berlin, Germany, April 8, 2020. REUTERS / Michele Tantussi / Photo File
BERLIN (Reuters) – German Finance Minister Olaf Scholz is seeking a regulatory overhaul to avoid a repeat of the failure of surveillance that allowed Wirecard to build a 2 billion euro hole in its account before it collapsed last month, Sueddeutsche Zeitung reported.
The proposal, contained in a draft seen by a newspaper on Thursday, involved easing of rules that prevented the governing body of auditors from informing the Ministry of Finance if they found irregularities.
Wirecard (WDIG.DE) collapsed in June after EY, its auditor for more than a decade, refused to sign his 2019 account. Three former top executives at payment companies were arrested on Wednesday. Prosecutors suspect they are falsifying company accounts.
In the future, based on the proposal, companies will be required to replace their auditors every 10 years and tighter divisions will be imposed between auditor consultation and business auditing.
The proposal also envisions new powers for Bafin’s financial regulators to intervene when suspecting irregularities in banks, insurance companies or payment service companies.
The proposal is a reaction to the suggestion that regulators are slow to act even though they have received reports from reporters since 2015 about irregularities in the Wirecard.
Scholz, who is the main candidate to lead the Social Democratic Party (SPD) to the national election next year, faced criticism from other parties after it emerged that he had been notified of irregularities at the company 18 months ago.
The minister plans to review the issue of auditors’ civil liability for their failures and also consider possible changes in criminal law, the newspaper said.
“I want to strengthen the rules so that cases like this will never happen again,” he said.
Reporting by Thomas Escritt; Editing by David Goodman