The German government on Friday dismissed the head of the country’s markets regulator after months of intensifying criticism over the agency’s handling of the Wirecard AG scandal.
Finance Minister Olaf Scholz said he and BaFin President Felix Hufeld agreed that the agency needed new leadership as part of a broader overhaul following one of Europe’s biggest postwar accounting scandals.
BaFin has been under fire from investors and opposition politicians for dragging its feet before investigating Wirecard, initially targeting whistleblowers, traders and journalists instead of questioning the company’s senior management, and tolerating widespread trading in Wirecard shares by the agency’s staff.
“The Wirecard scandal has revealed the need to reorganize German financial supervision so that it can fulfill its oversight role more effectively,” Mr. Scholz said.
The Finance Ministry didn’t name a successor. A BaFin spokeswoman declined to comment.
Mr. Hufeld couldn’t be immediately reached for comment. In the statement from the Finance Ministry, which oversees the agency, Mr. Hufeld said he was grateful for his six years heading the regulator.
“BaFin has developed significantly and gained relevance in many ways. Now there are other tasks to tackle, and I wish my successor the best in dealing with them,” he said.
Mr. Hufeld’s departure follows months of calls for the watchdog’s chief to resign after a number of revelations that showed the agency failed on repeated occasions to act on red flags about irregularities at Wirecard, the disgraced fintech company.
The ministry’s decision follows a disclosure by BaFin on Thursday that it had filed a criminal complaint against an employee suspected of using insider information to trade in Wirecard securities.
BaFin had earlier dismissed criticism that it had let its staff trade on the company’s shares while it was investigating it—something BaFin allowed as long as the employees notified the transactions and didn’t use insider information for trading. Many regulators around the world ban staff from trading shares in companies they supervise. Amid the backlash, BaFin decided to forbid the transactions in October.
“The dismissal of Mr. Hufeld was long overdue,” said Fabio de Masi, a lawmaker from the Left Party who is part of a parliamentary probe into Germany’s role in the Wirecard scandal.
Wirecard filed for bankruptcy in June after disclosing that more than $2 billion of its cash supposedly held in escrow accounts likely didn’t exist. Prosecutors are investigating allegations ranging from accounting manipulation to money laundering.
German prosecutors suspect former Chief Executive Markus Braun, Wirecard’s longtime chief operating officer Jan Marsalek and others colluded to inflate the company’s results by booking fake income for years before the collapse. Mr. Braun was arrested in June, along with other former executives. He has consistently denied wrongdoing and not yet been charged. Mr. Marsalek has eluded authorities and is on Interpol’s list of most wanted. His lawyer has declined to comment on allegations.
While investors and journalists raised questions about Wirecard since at least 2008, BaFin, Germany’s equivalent of the U.S. Securities and Exchange Commission, played down the allegations, kicked the ball to other agencies and delayed examining the company’s accounts, The Wall Street Journal reported. It also went after the short sellers and reporters who raised questions about Wirecard, sometimes at the request of the company.
Mr. Hufeld has called the Wirecard collapse a disaster but insisted Germany’s supervisory mechanisms were sound.
A report into BaFin the finance ministry issued last fall will be published next week, the finance ministry said.