September 21, 2015 / 11:47 AM / 4 years ago

UPDATE 2-Head of Moldova's central bank quits amid street protests over banking swindle

* Bank chief is first head to roll in $1 billion fraud

* He denies any link, says he scapegoat for politicians

* Street protesters have set up tents in Chisinau centre

* IMF team due in Chisinau on Tuesday (Adds background)

By Alexander Tanas

CHISINAU, Sept 21 (Reuters) - The head of Moldova’s central bank announced on Monday he was resigning, bowing to calls by angry street protesters but denying responsibility for a swindle in which $1 billion has disappeared from the banking system of the poor, ex-Soviet state.

Bank Governor Dorin Dragutanu told journalists he and his first deputy, Marin Molosag, had tendered their resignations to parliament though they would stay on in a caretaker role and take part in sensitive talks with an incoming team from the International Monetary Fund which arrives on Tuesday.

But he presented himself as a scapegoat for the misdeeds of politicians in the banking scandal which has led to political turmoil and increased hardship in the small, largely rural state bordering Ukraine and Romania.

“The politicians are bringing direct pressure to bear on the National Bank from all sides, trying to point to a connection between the bank and the theft of cash from the banks ... I have the impression that the National Bank has become the target for single-minded attacks from politicians,” he said.

Tens of thousands of protesters converged on the capital Chisinau on Sept. 6 in protest over the fraud, demanding accountability from politicians, though Dragutanu is the first head to roll in the affair.

Protesters have set up a tent city of about 300 tents in the city centre, vowing to stay there until their demands are met.

$1 billion is roughly the equivalent of one eighth of gross domestic product and its disappearance over months has caused a sharp depreciation in the national currency, the leu, fuelled inflation and driven down living standards in what is already one of Europe’s poorest countries.

The scandal has also seriously damaged the image of pro-Europe leaders who have ruled since 2009 but have done little to halt gross economic mismanagement or shake off accusations of high-level graft.

It has also held up disbursement of valuable budget support from the European Union and World Bank as well as holding up an IMF visit from which Moldova expects fresh financial assistance to emerge.

Dragutanu implied he was the target of other politicians who had had direct links with Banca de Economii, one of three banks driven to insolvency in the fraud which he said had got under way before 2009 but only emerged earlier this year when a report by the Kroll corporate investigative company was made public.

He did not name any names. But he was critical of new Prime Minister Valeriu Strelet for trying to put pressure on him to support the leu before the arrival of an IMF mission in Chisinau.

Dragutanu said he was happy for the IMF to pass judgment on his performance at the helm of the national bank over the time when large sums of money left the banking system in unsupported loans. [ID:nL5N11M3U3}

Strelet, in a statement, said that Dragutanu bore “full responsibility” for the situation in the banking sector.

“His desire to step down does not remove his responsibility for the situation in the banking sector. Why his resignation has come a day before the arrival of the IMF mission in Chisinau is another question. But it should not weigh on our negotiations with the Fund.”

The crisis has helped push the leu down around 60 percent against the dollar since this time last year. It has kept weakening, from 19.58 lei to the dollar last Wednesday to Monday’s official rate of 20.04. (Writing by Richard Balmforth and Alessandra Prentice; Editing by Toby Chopra)

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