UPDATE 6-Berlin hires top Swiss regulator to lead Germany’s troubled finance watchdog


* BaFin has come under fire for handling Wirecard

* Finance Ministry reforms BaFin to give it more teeth

* Appointment of banker-turned-regulator draws mixed reactions (adds quote from academic)

By Tom Sims and John O’Donnell

FRANKFURT, March 22 (Reuters) – Mark Branson, the head of Switzerland’s financial markets regulator, will become chairman of German financial watchdog BaFin, the finance ministry announced on Monday, as part of a reshuffle of the regulator after the Wirecard fraud. .

Current BaFin chairman Felix Hufeld is leaving at the end of the month after coming under pressure for failing to detect wrongdoing before the payments company collapsed.

The implosion of a former blue chip hailed as a German success story and worth $28 billion has embarrassed the government and damaged the country’s reputation.

German Finance Minister Olaf Scholz, whose ministry oversees BaFin, responded by giving the watchdog more powers to spot and investigate wrongdoing and sought new leadership.

Branson, a banker-turned-regulator, will help give BaFin “more teeth,” Scholz said. “Confidence in the German financial center is important and BaFin is a key driver of this confidence.”

Fraser Perring, an investor who exposed wrongdoing at Wirecard only to be investigated by BaFin himself, said reform of the regulator must go beyond changing its chairman.

“It’s cultural and deep-rooted protectionism,” he said, questioning Germany’s willingness to tackle the problem.

Switzerland’s reputation has suffered in recent years. The Financial Action Task Force, a global watchdog, last year condemned the country for its shortcomings in the fight against money laundering.

Swiss law, designed largely to protect banks, does not allow FINMA to impose fines, although the regulator can recoup profits from illicit activities.

“Regulation, whether it relates to money laundering or banking, is weak in Switzerland,” said Rudolf Strahm, an academic and former Swiss lawmaker. But Branson is not to blame, he added.

“He was the toughest regulator boss we’ve seen in Switzerland,” Strahm said. “But he didn’t have the support of the country’s politicians.”

Calls for Hufeld’s resignation came to a head after BaFin reported one of its own employees to state prosecutors in January on suspicion of insider trading related to Wirecard, shortly before BaFin’s shutdown. the company.

BaFin has recently come under fire from German lawmakers and investors over the collapse of Greensill Bank.

Gerhard Schick, financial activist for the pressure group Finanzwende and former member of the German parliament, said: “Hats off!” for the appointment of an expert who also comes from outside.

“But there is also a mammoth project ahead of Mr. Branson. He must transform the oft-sleeping giant BaFin into a powerful guardian of the financial markets,” Schick said.

BaFin declined to comment.

Branson, a Swiss and British national, took over as head of FINMA in April 2014 after serving in various roles there since 2010. He previously worked at Credit Suisse, SBC Warburg and UBS.

FINMA’s activity is largely quiet and slow, fueling criticism that it lacks transparency.

He is still examining whether failures in Credit Suisse’s management control made it possible to spy on former board members, months after the scandal sparked an overhaul of the bank’s management.

FINMA said Jan Bloechliger, head of its banking division, will take over operational management of the agency from May 1 as it searches for a successor for Branson. (Reporting by John O’Donnell, Riham Alkousaa, Michael Nienaber and Christian Kraemer; Additional reporting by Oliver Hirt, Michael Shields and Rene Wagner; Writing by Maria Sheahan and Tom Sims; Editing by Kirsten Donovan and Jane Merriman)

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