FRANKFURT — The European Union’s markets watchdog said on Wednesday that it was reviewing Germany’s financial reporting set-up in the wake of Wirecard’s collapse as Germany widened its own investigation into the failed company.

The assessment by the European Securities and Markets Authority (ESMA) will focus on Germany’s financial supervisor BaFin and the accounting watchdog—the privately owned Financial Reporting Enforcement Panel (FREP).

BaFin and FREP have come under scrutiny for their oversight of Wirecard, which filed for insolvency last month owing creditors 4 billion euros ($4.58 billion) after disclosing a 1.9 billion euro hole in its accounts that its auditor EY said was the result of a sophisticated global fraud.

“High quality financial reporting is core to investor trust in capital markets and Wirecard’s collapse has undermined this trust,” ESMA said.

“Therefore, it is necessary to assess these events to help in restoring investor confidence,” it added.

ESMA said that it would complete the review by Oct. 30.

FREP, asked to comment on ESMA’s investigation, noted that a 2017 review of its work by ESMA found “highly positive results.”

BaFin didn’t respond to a request for comment, but a spokeswoman separately disclosed that the watchdog had widened its own examination into possible insider trading of Wirecard shares.

It is looking at trades of any individuals who sat on the company’s management and supervisory boards in 2020, the spokeswoman said, adding that all Wirecard trades over the past few months were being scrutinised for irregularities.

Earlier this week, BaFin said that it had filed a complaint of alleged insider trading with Munich prosecutors for shares controlled by Wirecard’s former chief executive, Markus Braun. — Reuters