BaFin’s ban on the short selling of Wirecard shares in 2019 was based on poor and insufficient analysis, Germany’s finance ministry said in a rare public rebuke of the country’s top financial watchdog.

“In hindsight, further analysis and investigations into the validity of the information available to BaFin would have been necessary,” Sarah Ryglewski, parliamentary state secretary at the ministry of finance, wrote in response to a written inquiry by Green MP Danyal Bayaz.

The German payments company last summer collapsed into insolvency in one of Europe’s biggest postwar accounting frauds which continues to send shockwaves through Germany’s financial and political establishment.

BaFin for years did little to investigate whistleblower allegations of misconduct at the company, but instead targeted journalists and short sellers who criticised Wirecard. In 2019 it banned betting against Wirecard’s share price for two months.

Finance minister Olaf Scholz last month pushed out BaFin president Felix Hufeld and his deputy Elisabeth Roegele for their handling of the affair.

The finance ministry has now taken BaFin to task for failing to offer an adequate justification for the short selling ban. The government argued that the watchdog should have employed statistical tools to assess potential correlations between Wirecard’s share price and other stocks.

BaFin should have also assessed how short selling positions in Wirecard before and after the publication of critical articles changed, the government said.

“The federal government is of the opinion that the bar for imposing a short selling ban should be high,” Ryglewski wrote, adding that the government would strengthen BaFin’s analytical capabilities as part of an imminent and thoroughgoing overhaul of the watchdog.

BaFin declined to comment.

Ryglewski acknowledged that the finance ministry was briefed about BaFin’s plans to impose the short selling ban in advance. However, she pointed out that the government did not interfere with the move as the financial regulator took such decisions independently.

“BaFin enlarged the damage that was inflicted on investors and creditors,” Bayaz told the Financial Times, adding that BaFin’s move gave a false sense of security to Wirecard investors. “The ministry of finance did not stop it.”

The Financial Times reported last week that BaFin briefed the European Securities and Markets Authority selectively and incompletely about the ban, omitting to mention that the German Bundesbank had found no evidence that Wirecard’s falling share price could spill over to other stocks.

The central bank concluded that a short selling ban could not be justified on the grounds that it would mitigate risks to financial stability. After Bundesbank staff informally informed BaFin employees about their findings, the watchdog decided against asking the central bank for a formal assessment on the matter.