The Hungarian government has finally signed off on a deal to buy a 15% stake in the local unit of Erste Group, with the European Bank for Reconstruction and Development (EBRD) buying another 15%, the trio announced on June 20.

The acquisition, which prices the 30% stake in Erste Bank Hungary Zrt. at HUF77.78bn (€124.24mn), is seen as the final seal on the banking "peace deal" announced by the three in February 2015. As part of the treaty, the EBRD and Hungary each agreed to buy 15% in the unit, while the Austrian-owned bank agreed to pump €550mn into lending in the country. However, it has taken a year to push the acquisitions of the stakes through.

Hungary, represented by state-owned entity Corvinus, and the EBRD will each pay HUF38.9bn. Before the completion of the transaction – which is expected by autumn - “Erste Group will strengthen the capital base of Erste Bank Hungary in order to sustainably enable the bank to provide additional lending to the Hungarian economy,” Ertse Group said in a statement. The amount of the planned capital injection, however, remains unclear.

Under the peace deal Hungary promised to ease its harsh treatment of the banks in a bid to revive lending to an economy facing a slowdown. Since then, Budapest has slashed the special tax on the sector and for the most part refrained from further measures that would do further damage to the business environment.

However, a bid last year to force the banks to cover the losses of investors at three collapsed brokerages is understood to have delayed putting the final seal on the agreement. The sale of the Erste stakes was originally planned to go through in June last year. The CEO of Erste claimed in November that Hungary was breaking the deal.

Sources at the EBRD told bne IntelliNews earlier this year that Budapest had been "breaking the spirit" of the peace deal with that plan. Meanwhile, senior government officials have hinted throughout the delay that Hungary could yet walk away from the agreement.

However, having successfully suppressed the level of foreign funding in state debt, and recently persuaded one rating agency, Fitch, to return it to investment grade, Budapest has seen its borrowing costs shrinking, and it may have other reasons not to rock the boat.

Erste Bank Hungary will remain majority-owned by Erste Group. At the same time, Erste can regain its 100% stake after five years, according to a pre-determined exit mechanism agreed by the parties.

"The put and call option scheme grants Corvinus Zrt. the right to exit any time and Erste Group the right to exercise the call option five years after the sale at the earliest; in the case of EBRD, the put and call option are exercisable any time between 5-9 years after the acquisition,” the joint statement reads.