Members Equity Bank says it has sought information from Wirecard’s Australian management about the status of its German parent as the accounting scandal enveloping the group escalates.
Wirecard, which has business relationships with a string of Australian financial institutions including Bendigo Bank, ME Bank and Cuscal, is under investigation by German police and regulators after it could not account for 1.9 billion Euros that was reported as a cash item on its balance sheet.
Former chief executive Markus Braun is suspected by Munich police of having inflated the company’s sales. He was arrested on Monday and later released on bail of €5 million.
German prosecutors allege in court statement that Braun may have collaborated with other executives to “portray the company as financially stronger and more attractive for investors and clients”.
The scandal has forced Wirecard directors to review the veracity of all financial accounts issued to shareholders in the last decade.
ME Bank uses a Wirecard-owned software platform known as Cadencie to manage its credit and debit card portfolios.
An ME spokesperson said the bank was “working closely” with Wirecard’s local executives to grasp the situation facing the parent company.
“We are working closely with Wirecard Australia to understand the situation at its parent company and continue to monitor the situation closely,” the ME spokesperson said.
ME and other Australian companies using Wirecard’s software could face operational risks if the company collapses.
Under such a scenario there would be no guarantee that Wirecard staff would be able to service Cadencie platforms unless that part of the company was sold to a financially stable buyer.
In the event of the company failing, a much bigger concern for regulators in Australia and overseas would be to ensure that customers are able to access value loaded on to prepaid cards by Wirecard.
Wirecard is an issuer of prepaid Visa cards in Australia and all funds loaded to those cards are required to be held in trust accounts managed by an approved deposit taking institution.
Wirecard’s financial position is likely to deteriorate further in coming months after some of its clients in other markets announced plans to sever their commercial engagements with the troubled company.
Bloomberg reported on Wednesday that French telco Orange SA and UK-based electronic money provider Revolut were seeking to replace Wirecard services by entering deals with alternative partners.
ME declined to comment on whether it was reviewing the future of its commercial arrangements with Wirecard.
However, the bank sought to assure account holders that the German company had no access to customer data under the software arrangement.
“ME uses Cadencie software for debit and credit card management only,” the spokesperson said.
“Customers are not affected as the software is stored within ME data centres.
“ME licensed this software package in 2011 from a New Zealand company that was acquired by Wirecard Australia in 2014.”
Wirecard’s German-listed scrip fell 7 per cent in early trading on Wednesday.
The company’s share price is now trading at an 85 per cent discount to its 12 month peak.