EBRD buys stake in Moldova's largest bank to boost transparency

CHISINAU (Reuters) - A consortium led by the European Bank for Reconstruction and Development on Tuesday bought a 41 percent stake in Moldova’s largest bank, aiming to bring more transparency to a financial system recovering from a $1 billion fraud.

FILE PHOTO: The headquarters of the European Bank for Reconstruction and Development (EBRD) is seen in London, Britain, November 22, Britain 2016. REUTERS/Stefan Wermuth/File Photo

The EBRD and two private equity firms bought shares in Moldova Agroindbank, which controls 30 percent of the market and whose shares had been frozen by regulators and put up for auction to strategic investors.

The sale is a further step in meeting the requirements of Moldova’s international backers, including the International Monetary Fund and the World Bank, to root out corrupt practices and make the ownership of lenders more transparent.

“For Moldova this deal is a very important event. Three years ago the banking sector was not transparent, but now it is a completely different situation,” Francis Malige, the EBRD’s Managing Director, Financial Institutions, told Reuters.

“And now the MAIB will also have transparent shareholders ready to apply the right principles for its development.”

Along with the EBRD, the consortium is made up of Vilnius-based Invalda and Horizon Capital, which manages funds which provide financing to businesses in Ukraine and Moldova. Together they paid the equivalent of 23 million euros.

Moldova plunged into economic and political crisis after the disappearance of $1 billion from three banks with opaque ownership structures, including Moldova Agroindbank, between 2012-2014.

Known locally as the “theft of the century”, the scandal triggered street protests, the International Monetary Fund and the European Union froze aid, the leu currency plunged to record lows and inflation climbed into double digits.

With the EBRD's support, earlier this year Romanian lender Banca Transilvania ROTLV.BX bought a minority stake - 39.2 percent - in Victoriabank, the second of three banks involved in the scandal.

Moldindconbank, the third, has been under the central bank’s control since October 2016 and the authorities also hope to sell 63.89 percent of its shares to a foreign investor.

Moldova Agroindbank’s assets are worth 22 billion lei ($1.3 billion). Its shares have been sold at 1,059 lei per share ($62.7).

“First of all, we want to see proper management in these banks,” Malige said. “They will have to achieve such an institutional strength to prevent the repetition of the situation that has been in the banking system of Moldova in recent years.”

Reporting by Alexander Tanas; editing by Matthias Williams; editing by Louise Heavens