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R. Jakubeit - The Wirecard scandal and the role of BaFin: a case for unifying capital markets supervision in the European Union

The objective of this paper is to derive policy lessons for capital markets supervision in the EU from the 2020 scandal surrounding the insolvency of Wirecard AG, a German payment service provider and member of the DAX that had carried out balance sheet fraud on a large scale. To this end, I provide a synopsis of the events and analyse the handling of the case by BaFin, Germany’s financial markets supervisor. I find that BaFin failed as a supervisor in the Wirecard case due to a home-country bias, which led it to shield Wirecard from allegations coming ‘from abroad’ rather than investigating the truthfulness of the allegations. However, the analysis also indicates that the Wirecard scandal should not be viewed as an isolated incident but, on the contrary, as a textbook example of the structural shortcomings of nationally organised supervision in the context of international economic competition in the EU’s single market. In such a set-up, national supervisors are incentivised to protect national economic champions. Consequently, political reactions on the national level will not be enough to avoid similar cases of national supervisory forbearance in the future. In this sense, the Wirecard scandal provides an argument for unifying capital markets supervision at the European level.

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