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623 The traditional view on regulatory capture focuses on capture as a distortion of public purpose through a malicious relationship, corruption and possible collusion between the regulator and the industry (hard capture). This paper argues that regulatory capture can arise from political and institutional conditions which do not allow or favour the supervisory independence of authorities from both the industry and the government (soft capture). This paper’s argument is illustrated through a case-study on the German Federal Financial Supervisory Authority’s (BaFin) handlining of the Wirecard AG case. The basis for the analysis are the findings from the Committee of Inquiry of the German Bundestag and the European Securities and Markets Authority (ESMA) Fast Track Peer Review (FTPR) through three lines of inquiry: (1) lack of balance sheet control; (2) the short selling ban; and (3) Wirecard AG’s stock trading by BaFin’s employees. This paper concludes that BaFin was not hard captured in the Wirecard AG case as de facto influence cannot be proven. Instead, its de jure dependency vis-à-vis the MoF (as implicitly endorsed by German law) might have contributed to a case of soft regulatory capture – especially in the aspect of the short selling ban. The paper then analyses the reforms enacted by Germany and promoted by Europe in post-Wirecard case.

Soft Regulatory Capture and Supervisory Independence: A Case-Study on Wirecard