The European Bank for Reconstruction and Development has bought a stake in Moldova’s largest commercial bank, as part of a drive by the country’s government to clean up a sector beset by corruption and fraud.

Moldova, a former Soviet republic on the edge of Europe, was pitched into political and economic crisis in 2014 after $1bn was stolen from three of its largest banks in a fraud equivalent to around one-seventh of the country’s GDP. At the same time, its banking sector was used in the so-called Russian Laundromat money-laundering scheme.

The EBRD and two private equity firms on Tuesday bought a 41.09 per cent stake in Moldova Agroindbank (MAIB), in a €23m deal that the development-focused lender hopes will restore trust in the sector and encourage other investors.

“The government showed strong political will and resolve to clean up the banking sector,” said Francis Malige, EBRD’s managing director for financial institutions. “It took a brave decision to support the sale process of MAIB, which — no doubt — will contribute to better banking services and stronger investments to the Moldovan economy as a whole.”

While the consortium will not hold a controlling stake, the London-based development bank plans to work with MAIB’s minority shareholders to steer its strategic direction.

Tucked between Ukraine and Romania, the country of 3m has found itself in a geopolitical tussle between Europe and Russia.

The $1bn fraud resulted in the collapse of the country’s government and the arrest of its prime minister, derailing efforts by the country’s pro-EU politicians to meet economic reform and anti-corruption demands made by Brussels in exchange for financial assistance.

As part of the renewed effort to clean up the country’s banking sector, the Moldovan government took control of the stake in MAIB, which has assets of around €1.1bn, after it found the previous shareholders had broken governance rules by acting in concert.

The EBRD and private equity firms AB Invalda and Horizon Capital will own the stake through a UK-based entity. The EBRD and Invalda will each hold 37.5 per cent of that holding company and Horizon will hold 25 per cent.

The purchase comes after the EBRD helped broker a deal for Romania’s Banca Transilvania to acquire a controlling stake in Victoriabank, Moldova’s third-largest lender, earlier this year.

The consortium will “bring the highest standards of corporate governance, new technologies and effective structures to strengthen the performance of Moldova’s leading bank, improve lending services for small businesses and support the economy more broadly,” the EBRD said in a statement.

The development bank is the largest institutional investor in Moldova and has invested over €1.2bn in the country through over 120 projects.

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