APPG Chair warns Kalifa reforms must learn the lessons of Wirecard

By Sunniva Kolostyak

The All Party Group on Challenger Banks and Building Societies (APPG) has issued a report following the publication of the Kalifa review, warning that the UK must avoid the mistakes made in Germany following the collapse of Wirecard last year.

The Wirecard: When FinTech goes rogue report explores the scandal around Wirecard, its regulatory lobbying, and how the collapse affected UK consumers. However, while describing Wirecard as ‘one of the worst accounting scandals in post-war German history’, it also warns that UK regulation might not be fit to handle a similar scandal in the UK, even if the recommendations made in the Kalifa review are implemented.

The Rt Hon Karen Bradley MP, Chair of the CBBS APPG, commented: “In publishing our interim report on Wirecard we welcome the Government’s response to the Kalifa review. However, the Treasury and the Government must learn the lessons of failures like Wirecard.

“The German Government’s Wirecard disaster has demonstrated that wishful thinking is no foundation for global financial success. We welcome UK Government support for Kalifa’s proposed FinTech ‘scale box’ which will hopefully give firms the space to grow and regulators and the market the certainty that undue risks taken.”

Bradley stated that the APPG is strongly of the view that firms need proportionate regulation matching their size, complexity and market exposure. Moreover, regulators need to be fleet of foot enough to anticipate the issues that arise as firms scale and must have the specialist knowledge to understand how these new types of institutions work.

“We are seeing the rise of increasing complexity in financial services especially with globally interconnected firms such as Wirecard. The UK regulatory system needs to be fit for purpose in being able to cope with this complexity and regulators need to have the technical understanding of the issues to be able to stay one step ahead of potential problems.”

The APPG is a cross-party group of MPs and Peers chaired by Bradley that seeks to inform parliamentarians of all parties about the challenger banks and building societies sector, the issues and challengers facing them, and to promote diversity within the sector. It has also recently published the results of an inquiry into Diversity of Financial Institutions in the UK and a survey of the impact of the COVID-19 pandemic on institutions.