Moldova’s $1bn bank frauds mirrored in Transnistria

Moldova’s $1bn bank frauds mirrored in Transnistria
By Iulian Ernst in Bucharest June 26, 2017

Lawmakers in the Moldovan separatist republic of Transnistria have voted to nationalise two private banks and liquidate a third, state-owned, bank. The banks’ nationalisation is reportedly connected to 900mn Transnistrian rubles ($80mn) worth of loans extended by the central bank to commercial banks in 2016. 

The developments in Transnistria appear to mirror — though on a much smaller scale — the frauds in Moldova which saw around $1bn siphoned off via three local banks. In Moldova too, the central bank extended loans (amounting to around $690mn) to the banks to cover the losses. Most of the sum was later reimbursed to the Moldova central bank by the government, which has since issued bonds to cover the losses, passing the cost on to taxpayers. 

The Transnistrian parliament approved a bill aimed at nationalising private Tiraspromstroybank and Ipotechnai and merging them with state-owned Eximbank in its first reading on June 20, deschide.md reported. The bill also covers the liquidation of the third bank. 

Following the nationalisation of Tiraspromstroybank and Ipotechnai, the only private bank in the separatist region will be Agroprombank, which is owned by Sheriff group that also controls the parliament through its political arm, Obnovlenie. President Vadim Krasnoselsky is also a member of Obnovlenie.

The banks’ nationalisation is reportedly connected to loans extended by the central bank to commercial banks last year, before Krasnoselsky was elected president, a position that also puts him in charge of the government. 

In an interview with local online TV station Alfa24, Deputy Finance Minister Tatyana Kirov mentioned the 900mn rubles extended by the central bank to commercial banks and government last year.

Meanwhile, central bank governor Vladislav Tidva recently talked of his predecessor “printing money” last year. He estimated that the monetary aggregates expanded by 50% following the supplementary money issue. 

The central bank has printed money and extended loans to the government (to finance the budget deficit) and banks (to allow them to extend loans to customers), Tidva said, without disclosing, however, the recipients of the loans. The situation was not revealed until last autumn’s elections, he added.

Tidva added that the monetary expansion was one of the reasons for the 25% devaluation of the Transnistrian ruble in mid-June.

While the details are still unclear, the mechanism employed at the banks seem to resemble those used in Moldova, though on a smaller scale. However, so far there has been no visible effort in Transnistria to trace the $80mn, in contrast to the international investigations and court trials (resulting in the sentencing of three suspects including former Prime Minister Vlad Filat) in Moldova.

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