The EU wants independence from banking regulators in the wake of the Wirecard scandal

BaFin’s German financial adviser is expected to cut ties with bankers and ensure they do not follow the rules of the Ministry of Finance in accordance with the rules issued by Brussels following the Wirecard scandal.

The law prohibits bank regulators in all EU countries from “seeking or following instructions” or being subjected to any foreign agency, including regulatory agencies or government agencies. It will also strengthen regulatory framework for employees in the areas of the companies under review.

“Recent developments such as the Wirecard rhetoric have highlighted the need for more transparent and comprehensive work on the issue of autonomy for managers. This is incorporated in our minds,” said the agency’s chief.

The donations are being reviewed in Germany. BaFin has been widely criticized for cracking down on Wirecard, a pay-per-view group that collapsed in 2020 after exposing fraud for years.

A report by the European Securities and Markets Authority last year raised questions about BaFin’s independence from political infighting, meaning that the supervisor was radically reforming his finance ministry “sometimes before it happened”.

The report also listed Wirecard commercials with some members of the BaFin team as “related”.

The measures Brussels has now stated are part of a series of banking regulations that the European Commission seeks to strengthen EU financial management.

Sebastian Mack, Fellow Policy Fellow for European Financial Markets at the Jacques Delors Center in Berlin, said the submissions, which are part of a number of laws, “strongly promote the independence of BaFin and international regulators”.

BaFin has three financial corporate representatives on the 17-member governing body that oversees its operations and budget. It also has a special team of consultants and industry representatives. These representatives must leave under the plans of Brussels.

The German Ministry of Finance believes that the registration will not require the legal establishment of BaFin, according to someone familiar with the negotiations.

Berlin believes that BaFin has always been independent in making decisions on private banks, the man said, while a parliamentary inquiry into Wirecard cases showed that this was respected by the Ministry of Finance.

The Ministry of Finance said: “We welcome the European Commission’s view on changing the need,” adding that the process is still under discussion in Brussels.

The ministry said that Germany wanted strict and effective oversight of the independence process, but that the law required that all governments have oversight of parliament.

The German Banks, whose chief executive Christian Ossig is on BaFin’s board of directors and advisory board, told the Financial Times that this did not infringe on the rights of regulators.

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Gerhard Schick, a former Green MP and chief executive of Bürgerbewegung Finanzwende, Germany’s consumer advocacy group, told FT that “financial institutions do not have a financial center”, adding that it would “be a better option” if the proposals were met.

Mack, of the Jacques Delors Center, said the committee’s decision to ban regulators from seeking and following directives has barred the finance ministry from “appropriate and legitimate” control over BaFin elections.

But he added: “As long as the executive leader can be fired at any time without giving reasons, the authority still depends on the government.”

The committee said that when the new rules were released in October that “recent developments” highlighted the need for more clear and comprehensive policies to work on the principle of the right to proper jurisdiction.

BaFin declined to comment.

Additional reports from Daniel Dombey in Madrid