ESMA is to launch an assessment of the supervisory response in the financial reporting area by BaFin and the Financial Reporting Enforcement Panel (FREP) to the events leading to the collapse of Wirecard AG. The assessment will be completed by October 30, 2020. The assessment will focus on the application of the Guidelines on the Enforcement of Financial Information (GLEFI) by BaFin and FREP, which are the designated competent authorities for the supervision and enforcement of financial information in Germany under the Transparency Directive. The fast-track assessment will be conducted using GLEFI and the peer review methodology of ESMA, within a compressed timeframe. This announcement follows the June 25 EC letter, which invited ESMA to conduct a fact-finding analysis of the events leading up to the collapse of Wirecard AG.
ESMA issued the GLEFI in 2014, on its own initiative, to promote consistent application and supervision of IFRS and in 2017. In support of this work, ESMA conducted a peer review with onsite visits in seven member states. The review focused on three GLEFI guidelines: guideline on human and financial resources, guideline on selection methods, and guideline on examination procedures. The review identified significant differences in national approaches, resources allocated, and actions taken in relation to enforcement of financial information. The review included BaFin and FREP and, while the country-specific report highlighted positive aspects of the German enforcement model, it also identified areas for improvement. These included:
- Procedures in place in both FREP and BaFin
- Selection and examination of issuers
- Independence and conflict of interests in FREP
- Cooperation between the two authorities
ESMA also invited BaFin and EC, in the country-specific onsite report, to investigate whether the Transparency Directive is correctly transposed in Germany, given BaFin’s self-declared inability to comply with the GLEFI due to a lack of enforcement powers. The peer review tool has been chosen, as the Transparency Directive only contains high-level principles regarding financial reporting and its supervision and the IAS regulation is not included in the list of acts for which ESMA may launch a Breach of Union Law investigation.
Keywords: Europe, EU, Germany, Banking, Securities, Wirecard, Reporting, FREP, GLEFI, Transparency Directive, IFRS, BaFin, ESMA
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