The head of Germany’s financial watchdog has rejected calls to resign over the scandal at Wirecard, while saying that with hindsight he should have called for prosecutors to open an investigation sooner.

Felix Hufeld said at a conference on Wednesday that he would not resign “as long as my country and Europe have trust in me”.

The BaFin boss, whose position has been called into question by some German MPs, conceded “we didn’t see the wood for the trees” and “for too long we relied on formal instruments”. He said the regulator was “too late” in finding the alleged “criminal activity”.

Wirecard collapsed into insolvency on June 25 after admitting that about €1.9bn in cash was missing from its accounts. German prosecutors suspect the group was looted, with $1bn funnelled to opaque partner companies even as the payments group fought allegations of accounting fraud.

Germany’s parliament on Tuesday opened a full inquiry into the matter.

BaFin has been criticised for not investigating allegations properly and for the disclosure that its staff were trading Wirecard shares shortly before it declared insolvency, raising questions about potential conflicts of interest.

Last year, BaFin banned investors from betting against Wirecard shares for two months, the first such restriction on an individual company in German stock market history. That was quickly followed by a criminal complaint against two Financial Times journalists who had reported whistleblower allegations about alleged fraud at the payments company.

Mr Hufeld criticised a “lack of open mindedness” among his detractors and pointed the finger of blame at Wirecard’s auditor EY by adding: “I don’t know any country in the world where financial supervision doesn’t rely on the audit of public companies”.

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The FT reported in June that Wirecard’s auditors in EY’s German office failed for at least three years to request crucial account information from a Singapore bank where Wirecard claimed it had up to €1bn in cash, a routine audit procedure that could have uncovered the fraud.

“We’ve established that third parties, with a deliberate aim to deceive, provided EY with false documentation in connection with its 2019 Wirecard audit. The extent and sophistication of these suggest a large-scale international fraud at Wirecard,” EY said at the time.

In Germany, the accounting and financial reporting of listed companies has long been regulated by a separate body called the Financial Reporting Enforcement Panel. But the government plans to ditch this and switch its responsibilities to BaFin.

Via Financial Times