The report by the European Securities and Markets Authority (Esma), identifies a number of "deficiencies, inefficiencies and legal and procedural impediments" in the two-tier German supervisory system, which splits responsibilities for enforcement between BaFin and the Financial Reporting Enforcement Panel (FREP).

Problem areas highlighted include the independence of BaFin from issuers and government, including "a heightened risk of influence by the Ministry of Finance" given the frequency and detail of reporting by BaFin before actions were taken.

Wirecard was a rising blue chip star before its collapse following the discovery of a gaping €1.9 billion hole in its balance sheet and regulatory bodies appeared at times to be more interested in defending the firm against a rising tide of allegations rather than dig deeper into its financial accounts. Esma says Frep's examination procedures of Wirecard financial reports did not appropriately address areas material to the business of Wirecard, nor the media and whistle-blowing allegations against the firm.

Equally, a lack of information about Wirecard's employees’ shareholdings was found to raise doubts on the robustness of BaFin’s internal control system regarding conflicts of interest of its employees vis-à-vis issuers

Steven Maijoor, Esma chair, says: “The Wirecard case has once again highlighted that high-quality financial reporting is essential for maintaining investor trust in capital markets, and the need to have consistent and effective enforcement of that reporting across the European Union."

“Today’s report identifies deficiencies in the supervision and enforcement of Wirecard’s financial reporting. The report’s recommendations can contribute to the review of the German regime for supervision and enforcement.”

The outcome is likely to lead to an overhaul of the German supervisory regime to address the limitations in the two teir reporting system and the respective roles of BaFin and Frep.