How Bafin boss Felix Hufeld justifies himself

Berlin, Frankfurt Felix Hufeld was more important for the finance politicians this Wednesday afternoon than the Chancellor. The hearing of the Bafin chief in the finance committee should actually end by 1 p.m. at the latest, since then Angela Merkel (CDU) commented on the German EU Council Presidency in plenary. However, from the point of view of the MPs, there were still some questions about the Wirecard balance sheet scandal and the role of financial supervision Bafin, and so the Hufeld survey was extended while Merkel was already talking in the Bundestag.

How Hufeld fared in the finance committee in just under two hours, the assessments diverge. While the government factions, especially the SPD, expressed their satisfaction with the statements, the opposition reiterated its criticism of the role of Bafin in the Wirecard scandal.

MPs in the finance committee saw a Bafin boss who confidently defended himself and his authority. Hufeld has repeatedly stressed that everything was lawful, participants in the meeting reported.

Above all, the Bafin boss pointed out that only the Wirecard Bank was supervised, but not the rest of the group. Just as one is only responsible for the VW bank at Volkswagen, but not for the car production and the diesel scandal.

According to participants, Hufeld once again pointed out that Bafin, the Bundesbank and the European Central Bank (ECB) have mutually decided not to classify Wirecard as a financial holding company. That is why the Bafin was not able to check so closely.

Bafin rejected reports from other media that Hufeld had blamed the ECB for Wirecard not being classified as a financial holding company. According to information in the Handelsblatt, however, it is correct that Wirecard itself considered in 2018 that it would merge Wirecard AG with Wirecard Bank and thus become a financial holding company. The Bafin supported this plan, but in the end it was not implemented for other reasons.

The Bafin had received early information about irregularities and problems at Wirecard. Since Wirecard was not classified as a financial holding company, according to Hufeld’s description, the Bafin could only commission the German Audit Office (DPR), also known as the “balance sheet police”, to carry out an audit. That is the sharpest sword of an audit, the Bafin boss was quoted as saying.

Hufeld reported very extensively on the details of Wirecard, said SPD MP Jens Zimmermann, who is also on the Bafin Board of Directors. The complexity had also become clear again. “I had the impression that Mr. Hufeld and the Bafin are very interested in complete clarification,” said Zimmermann.

“The opposite of education”

The opposition is more critical of Hufeld’s appearance: “The finance committee meeting brought the opposite of clarification,” said Green finance politician Danyal Bayaz. “Everyone involved sees themselves as victims of complicated circumstances.” This results in the “overall picture of a dilettante, collective irresponsibility,” said Bayaz.

The Greens politician also criticized the fact that the Bafin reported journalists to the Financial Times, who reported early on about irregularities at Wirecard. Hufeld, however, defended the procedure in the finance committee. There were indications of criminal behavior from some investors who bet on falling prices in the run-up to the reporting.

So it was not against reporting, but against market manipulation. It was not about protecting a German flagship company. He would do the same again if there was a similar case today, Hufeld was quoted by participants.

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“We are only at the beginning of the process,” said the fiscal spokesman for the FDP parliamentary group, Florian Toncar. “Mr. Hufeld took on his part of the responsibility today and faced the discussion and criticism.” The Federal Minister of Finance has yet to do that and explain what role his house has played in the Wirecard cause in the past few months. “It is difficult to imagine that the process did not reach the BMF until June 2020,” said Toncar.

In addition, one also had to talk in detail about the role of auditors, especially EY, it said from financial politicians. Their failure is at least as great as that of the financial regulator Bafin.

Good reputation in the industry

So far, the federal government has been behind Hufeld. And he does not see himself confronted with demands for resignation from the opposition either. However, the matter is far from over for him. “It was certainly not Mr Hufeld’s last hearing in the Finance Committee,” said one MP. A committee of inquiry is still considered an option, even if the opposition groups have so far been reluctant to do so.

Finance managers and other supervisors hope that Hufeld can remain Bafin boss despite the Wirecard scandal. Because the 59-year-old lawyer enjoys a good reputation in the industry. Hufeld knows the financial sector very well and, with his experience in the private financial sector, is a great asset for the Bonn authorities, says a person who has to do with Hufeld on a regular basis. “If he had to go, it would be a huge loss for the Bafin.”

Hufeld studied in Mainz, Freiburg and Harvard and worked for BCG, the Dresdner Bank and the insurance broker Marsh. In 2015, the federal government made him Bafin chief because he was supposed to breathe new life into the agency.

Hufeld took this order seriously and in many cases acted more decisively than his predecessor Elke König. In 2015, he was instrumental in the fact that Anshu Jain had to resign as Deutsche Bank’s co-boss after a series of scandals. The Bafin boss also had his fingers in the early departure of Deutsche Börse boss Carsten Kengeter at the end of 2017.

In interviews and at conferences, Hufeld is also not squeamish when it comes to financial groups. He repeatedly urged German financial institutions not to complain about low interest rates, but instead to change their business models more resolutely. “Banks have to make tough cuts, become less complex and cut costs,” he said in an interview with the Handelsblatt in March.

Talk to the financial regulator no worse than it is

So Hufeld is no friend of the banks – but still enjoys a lot of support in the industry. At the Bafin board meeting on Monday, representatives of the financial sector, according to insiders, stood behind Hufeld and expressly praised the work of the Bafin.

Hufeld is a competent interlocutor who does not withdraw from his position of power as a supervisor, but seeks content-wise discussion with the industry, bankers report. He also did an excellent job with his agency in negotiations with banks that want to move business from London to Frankfurt as part of the Brexit.

Nobody in the financial sector denies that the Bafin has not given a good picture in the Wirecard scandal. However, some bankers find that the Bafin is currently being publicly beaten more than she should have deserved.

After all, the authority was only directly responsible for Wirecard Bank. Some bankers believe that one has to stop talking about financial supervision worse than it actually is. Otherwise you would damage the financial center Germany even more – and that would be fatal from the perspective of bankers, especially against the backdrop of Brexit.

More: The public prosecutor came to the insolvent payment service provider Wirecard on Wednesday.

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