(Bloomberg) -- German politicians grappling for answers over the collapse of Wirecard AG plan to quiz the European Central Bank on why it wasn't classified as a financial company that would have been subject to stricter scrutiny.
Lawmakers will ask ECB President Christine Lagarde how the electronic-payments provider could have retained the label of a technology company, said Hans Michelbach, a member of Chancellor Angela Merkel's political bloc. He spoke after Felix Hufeld, president of German financial regulator BaFin, testified in parliament on Wednesday in Berlin.
Hufeld said that the ECB decided against classifying Wirecard as a financial institution, according to Michelbach.
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“The events are very serious, a disgrace for Germany as a financial center and that generated a lot of damage for investors,” said Michelbach. “One has to be able to assume that supervision works.”
A Bafin spokeswoman said Hufeld didn't say that the “classification of Wirecard as a financial holding company failed because of the European Central Bank. Instead he emphasized that all previous decisions were taken in consensus with the involved institutions, the German Bundesbank and the ECB.”
An ECB spokeswoman declined to comment.
Even with ample warning, German authorities failed to catch accounting issues at the digital-payments company, whose collapse has shaken confidence in the country's finance industry. The BaFin president acknowledged last week that his institution is among the organizations responsible for the scandal at Wirecard and pledged to remedy deficiencies. The government is also plugging gaps in its regulatory framework, potentially handing BaFin more powers.
“What's become clear today is that we definitely need changes to the structure,” said Jens Zimmermann, a member of the Social Democrats, who are Merkel's junior coalition partner. “You can't point all fingers at BaFin without having given it the proper tools first.”
Opposition lawmakers were more critical of Hufeld, with some saying they weren't satisfied with his testimony.
More Humility
“He just passed the buck,” said Fabio de Masi, a lawmaker with the opposition Left party. “There was more humility needed. The issue of why Wirecard wasn't classed as a financial institution wasn't sufficiently answered.”
Frank Schaeffler, a member of the opposition Free Democrats, said BaFin should have been more involved in scrutinizing Wirecard and that needs to be held against the regulator's leadership. “That's a mistake. When there are doubts, BaFin has to step in,” he said.
The lawmakers on the parliamentary finance committee will be seeking a written statement on failings related to Wirecard from the German Finance Ministry by the middle of this month, said Michelbach.
“The damage for the financial center is enormous,” said Danyal Bayaz, from the opposition Green party. “Parliament will pursue this. It cannot be that we are in a situation of collective dilettantism shirking responsibility.”
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