EBRD increases its stake in Moldova’s Victoriabank

By Olga Rosca

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EBRD increases its stake in Moldova’s Victoriabank

Move aims to restore corporate governance in the country’s third largest bank

The European Bank for Reconstruction and Development (EBRD) has increased its stake in Victoriabank, Moldova’s third-largest lender, in a move to restore effective corporate governance and to ensure Victoriabank’s continued sound financial performance.

The EBRD bought a 12.5 per cent stake in Victoriabank at 42 Moldovan lei (€1.92) per share or half the book value from Alpha Bank Romania, a subsidiary of the Greek Alpha Bank, taking its shareholding to 27.5 per cent. The EBRD paid a total of €6 million.

Henry Russell, Director of Financial Institutions for the Western Balkans, Belarus, Moldova and Ukraine at the EBRD, said: “We are pleased to announce that the EBRD has now consolidated a 27.5 per cent stake in Victoriabank in a special purpose vehicle, VB Investment Holding, located outside Moldova, owned and controlled by the EBRD. The transaction, which required the reversal of recently adopted prohibitive legislation, is an important step that underlines how crucial it is to preserve Victoriabank as an independent, commercially-oriented and profitable institution with transparent ownership that benefits the Moldovan economy.”

Victoriabank has been operating without effective corporate governance since September 2014 when its supervisory board was suspended by a court order. A new seven-member board voted in at the October 2015 extraordinary shareholder meeting initiated by the EBRD remains non-functional as three elected board members have not submitted the required documentation for approval by the National Bank.

“Large shareholders in large banks have to act responsibly. It falls on Victoriabank’s largest shareholder, Insidown, to ensure that its nominees prepare and submit their documentation. I call on the National Bank to ensure that this is done immediately and in line with good governance principles,” added Mr Russell.

The EBRD, the leading institutional investor in Moldova, invested in Victoriabank in August 1995, alongside the bank’s founders, to support a locally owned, sound commercial bank with high standards of corporate governance and integrity. This goal has been frustrated since June 2006 when the control of Victoriabank’s supervisory board passed to non-transparent shareholders, unacceptable to the EBRD and to other key shareholders.

The EBRD now aims to strengthen the position of shareholders who are transparent, sound and reputable, with the aim of restoring corporate governance.

Lack of shareholder transparency remains a major concern for the Moldovan banking sector and has negative implications for investment and the country’s financial stability.

The EBRD – previously a major lender to the Moldovan banking system – has refrained from any new business with banks owned by non-transparent shareholders. The EBRD’s finance to the sector has significantly decreased, from over €40 million in 2010 to just €12.5 million in 2015. Other international financial institutions which, together with the EBRD, represent the most important source of long-term funding for the Moldovan banking system have also halted investments in financial institutions with non-transparent ownership.

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