The German parliament is opening a full inquiry into the role the government played in the Wirecard scandal that led to the collapse of the payment company in June.

The inquiry will look into establishing why the authorities failed to prevent corporate fraud.

Remind me, what happened?

Wirecard – a leading German payment processor and financial services provider once considered a star of the growing FinTech sector – filed for insolvency on 25 June, after declaring a $2.1billion hole in its accounts.

The money was supposed to be held in trustee accounts at two banks in the Philippines to cover risks in trading carried out by third parties on Wirecard's behalf. But as the Philippines' central bank denied the cash ever entered the country's financial system, Wirecard was forced to admit the funds likely did not exist.

To this day, nobody knows if the money actually existed – and if it did, where it went.

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Who is involved?

The company's founder and CEO Markus Braun, who had led Wirecard for 20 years, resigned on 22 June and was arrested on the same day on suspicion of incorrect statements of data and market manipulation. Two other top managers were also arrested in complicity to the fraud, but they all deny any wrongdoing.

Wirecard's board member and Chief Operating Officer Jan Marsalek, who was fired by the company right after the scandal was revealed, disappeared in late June and is rumored to be hiding in Russia, according to some media sources, or possibly Belarus according to others.

The collapse of Wirecard put German authorities under fire as well, with the country's top financial watchdog, the Federal Financial Supervisory Authority (BaFin), receiving harsh criticism for failing to uncover the Wirecard scandal and ignoring red flags on the company's activity for years. BaFin's president Felix Hufeld refused to resign on Wednesday.

The investigation into the scandal has reached as high as the German government. Back in June, Germany's finance minister Olaf Scholz – whose office oversees BanFin – dismissed any notion that the country's regulators failed to monitor the bank. "I think the supervisory institutions worked very hard and they did their job, this is what we see today," Scholz told a finance conference in Frankfurt via videolink.

Why is the German parliament investigating?

The collapse of the Bavarian start-up, founded in 1999, is a source of embarrassment for the German government and a blow for the entire country, as many looked at Wirecard as the future of Germany's finance.

Many within German politics believe the government should have done more to prevent the collapse of the company and that it possibly knew more about the company's irregular activities in Asia than it let on.

Opposition parties including the Greens, the Left Party and the Free Democratic Party came together to collect enough votes to launch the parliamentary inquiry. The official parliamentary investigation will allow lawmakers to access government documents and interrogate government officials.

What does this mean for Germany?

The Bundestag's finance committee investigation is likely going to be a challenge for Chancellor Angela Merkel and her finance minister Olaf Scholz, who is running as the Social Democrat candidate to replace Merkel in next year's general election.

Merkel is being questioned for allegedly lobbying for Wirecard during an official trip to China in 2019, when the Financial Times had already started reporting the company's suspicious activities.

BaFin stands accused of allegedly not only ignoring misbehavior by Wirecard, but actively protecting the company instead of investigating its activities. Wirecard investors in Frankfurt have filed a class action lawsuit against the German regulator for "abuse of office."

BaFin's president Hufel said the body's ability to intervene was limited by the fact that Wirecard was classified as a technology company rather than a financial services provider, but admitted on Wednesday that it should have launched an investigation sooner.

The scandal is expected to be high on the German political agenda until the investigation has finished – due to be next summer, before the Bundestag election.