Moldova fires regulators as parliament probes massive bank fraud

By bne IntelliNews March 25, 2015

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The Moldovan government is to dismiss deputy central bank governor Emma Tabirta as well as Artur Gherman, head of the National Financial Market Commission (CNFP) regulator, amid ongoing banking fraud investigations.

Vlad Filat, the leader of Moldova’s senior ruling party, the Liberal Democratic Party of Moldova, announced the decision on March 24 after a meeting of a parliamentary committee set up to investigate the alleged bank frauds. The committee also decided to make public the government’s decision, made in December, to guarantee emergency loans to three troubled banks currently under special administration.

Moldova’s third largest bank, Banca de Economii a Moldovei (BEM), and the smaller Banca Sociala were both placed under special administration on November 29. A month later, the central bank took similar measures at the country’s fifth largest bank Unibank. 

The central bank cited unusually large deals involving the three banks. The size of the resources transferred was around MDL17.8bn (€937mn) - more than 10% of the country's GDP. The three banks account for a combined total of around 30% of Moldova’s total banking sector assets.

Moldovan news portal revealed on March 24 what it claims to be a leaked report on the bank frauds, which was either drafted by the parliament committee or submitted to the committee by the central bank. The committee’s debates and the report are officially classified at the moment.

The document quoted by appears to explain how frauds were carried out in a three-stage process by BEM, Banca Sociala and Unibank.

According to the document, in the first stage, the three banks borrowed large amounts of money amongst themselves and from other Moldovan banks in October and November. The inter-bank placements were not guaranteed. In the second stage, the three banks placed large amounts of money at four Russian banks - ZAO Metrobank, ZAO Alef Bank JSC, OAO Gazprombank and ZAO Interprombank - at zero interest rates, again with no guarantees. In the third stage, the three Moldovan banks issued loans to Moldovan companies Caritas Grup, Provolirom, Voximar Com and Drucard.

These loans are guaranteed with deposits, supposedly made by the borrowers at the same four Russian banks. However the value of these deposits match the value of the money placed by the three Moldovan banks, the report reads. The loans therefore look as if they are guaranteed with the banks' own deposits rather than any collateral, and are therefore effectively unsecured. 

The deposits made by the three Moldovan banks in the Russian banks and the loans to Moldovan companies were also significantly larger than the limits set under Moldovan banking regulations for single deposits or loans. 

On March 24, the Moldovan parliament approved a proposal from the government to extend the statutory special administration regime for troubled banks from four months to one year, Moldovan news site Unimedia reported. The bill was supported by the minority ruling coalition and the Communist Party of Moldova just four days before the four-month moratorium was due to expire.

The moratorium implies postponement of creditor claims and a ban on the transfer of assets. Banks are also banned from deposit taking and new lending, though they are allowed to continue managing their existing loan portfolios.


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