Top European bank willing to increase stake in major Moldovan bank

Chisinau, 19 January /MOLDPRES/ - The European Bank for Reconstruction and Development (EBRD) is willing to increase its stake in Victoriabank, the third largest bank of Moldova, in order to restore the bank's corporate governance and further ensure its sound financial performance.

EBRD, which currently holds a 15.06-percent-stake at Victoriabank, requested and received the approval from the regulator to increase its stake to 50 per cent. However, EBRD has not yet determined the exact size of the stake it will purchase, as this depends on market developments.

According to a press release by the institution, "the measures taken by the Bank were taken after the activity of the board of Victoriabank had been suspended under a court decision; this created a situation in which the shareholders, including the EBRD, cannot exercise influence on the management of Victoriabank".

EBRD Director for Financial Institutions Department of Moldova, Belarus, Ukraine and the Western Balkans Henry Russell said: "Our aim is to get a significantly higher stake in Victoriabank, which would allow us restoring the corporate governance in this bank of systemic importance and ensure that its activity remained independent, professional and commercial success-oriented."

EBRD invested in Victoriabank shares in 1995, along with the founders of the bank, in order to support a private bank owned by local businessmen, disciplined in terms of trade and having the highest standards of integrity and corporate governance. This goal was thwarted in 2006, when control over the board of Victoriabank switched to a group of non-transparent, unacceptable shareholders for EBRD, and other stockholders. 

"The issues related to transparency and governance in the banking sector of Moldova, along with a weak justice system, have negative implications for investment and financial sector's stability," added Russell.

"We will continue to work closely with the government and regulatory authorities of Moldova, to ensure that only transparent, respectable and trustworthy investors can hold shares in Victoriabank and banks in the country, more generally. The banking sector should serve the country's economy and not the interests of non-transparent groups", said Henry Russell.

The Moldovan government initiated steps to reform the business environment and promote good governance, including in the banking sector, in 2014. According to a memorandum of understanding signed with EBRD, the sides agreed on creating a single and absolutely transparent register of the Moldovan banks. This will allow investors, creditors, media and the general public to access information on the banks’ beneficiaries.

The EBRD press release says that, after more opaque transactions with bank shares, EBRD - previously a major creditor of the banking system of Moldova - suspended new business deals with banks owned by non-transparent shareholders. EBRD financing for the banking sector decreased four-fold from over 40 million in 2010 to just little over 10 million in 2014. Other international financial institutions – which, together with the EBRD, represent the largest long term financing sources for the banking system of Moldova - have also cut funding to local financial institutions, within which the ownership structure remains unclear.