The head of German finance watchdog Bafin is stepping down as part of an overhaul triggered by last year's spectacular collapse of payments provider Wirecard, Finance Minister Olaf Scholz said Friday.

"The Wirecard scandal revealed that the German financial regulator needs a reorganisation to fulfil its supervisory role more effectively," a ministry statement said. 

Scholz thanked Bafin chief Felix Hufeld for eight years of service and said the revamp would include "a fresh start" at the top of the agency.

Digital payments company Wirecard, once a rising star in the fintech sector, filed for bankruptcy last June after admitting that €1.9 billion was missing from its accounts.

The company's former CEO Markus Braun and several other top executives have since been arrested on fraud and money laundering charges.

The scandal has put intense scrutiny on Bafin, which has been accused of lax oversight and of missing early warning signs that allowed the accounting fraud to go on for years.

The Financial Times first raised suspicions about Wirecard's business activities in a series of articles in 2019, but these apparently did not prompt German authorities to look at Wirecard more closely. 

In a much-criticised move, Bafin instead responded by announcing a probe into FT journalists.

In the latest twist, Bafin on Thursday filed a complaint against an employee suspected of insider trading in the lead-up to Wirecard's implosion.

The Wirecard drama, which has drawn comparisons with the Enron accounting scandal in the US in the early 2000s, has been described as "unparalleled" in Germany by Scholz.

The finance minister has since pledged far-reaching reforms to beef up BaFin's oversight powers, including through tougher penalties, a lower threshold for starting investigations, and a more frequent rotation of auditors.

Bafin chief Hufeld has in the past admitted that his watchdog "had not been effective enough" at preventing the Wirecard disaster.

Friday's statement did not say who would replace him.