Wirecard AG’s collapse in June sparked a blame game in corporate and political circles, with much of the anger directed at German financial regulator BaFin.

The watchdog has so far struggled to dispel the perception that it was more focused on protecting the payments company than pursuing allegations of accounting irregularities. Now, as Germany seeks to limit the damage to its reputation as a place to do business, the government plans to give BaFin more power to prevent cases like Wirecard. Yet recent events suggest that a wider mandate may not be enough to shape up the country’s financial oversight.

The German parliament’s finance committee is now preparing to grill BaFin representatives and other officials on Sept. 1. A major focus will probably be why the regulator didn’t look past its narrow role overseeing banks, insurers and financial markets, which left the majority of Wirecard’s operations largely unsupervised. Here are the five main criticisms of the regulator.

Shooting the Messenger

Early last year, BaFin started to investigate not only Wirecard but also the investors and journalists who claimed that it was cooking the books. An unprecedented ban on bets against the stock gave short sellers the impression that the regulator was taking sides. BaFin rejects that criticism and says it was obliged to act after receiving indications of market manipulation from German prosecutors.

Too Slow

BaFin received a tip on irregularities at Wirecard in January 2019, yet it only asked law enforcement officials to act after KPMG auditors weighed in more than a year later. The regulator relied on a thinly staffed private-sector watchdog to probe Wirecard’s accounts and says it didn’t get the findings in time to act on them. A 2017 report by European regulators also faulted BaFin for taking a “legalistic approach” to accounting issues, rather than weighing their “economic substance.” The German government now wants to give BaFin enforcement powers, but it’s questionable whether even a beefed up regulator could conduct an investigation as detailed as the one done by KPMG.

Narrow Focus

Wirecard Bank has held a German banking license for almost two decades, putting the division under the scrutiny of BaFin. The regulator looked into whether it should supervise the whole company but decided it was more of a technology business than a financial firm. While a different call or a more assertive approach might have allowed BaFin to catch the alleged fraud at other Wirecard units, BaFin argues that going beyond its mandate would have been illegal.

Appearance of Conflicts

BaFin staff traded Wirecard shares in the months before its insolvency. There are strict controls on such transactions and the level of trading wasn’t unusually high, according to Germany’s Finance Ministry, which oversees BaFin. Still, that’s something that other supervisors aren’t allowed to do. The European Central Bank prohibits employees from trading stocks and bonds of financial companies, applying the standard broadly.

Unclear Communication

BaFin President Felix Hufeld sought to get ahead of criticism by acknowledging in June that his institution was among the parties that failed to catch the alleged fraud. Still, he was “imprecise” in testimony to German parliament members the following month, according to a BaFin spokeswoman. While Hufeld has since clarified his remarks in conversations with lawmakers, he can ill afford such slip-ups when trying to defend the regulator.

--With assistance from Birgit Jennen.