World Bank warns Moldova against saving fraud-hit banks

By bne IntelliNews June 17, 2015

bne IntelliNews -

 

 

The World Bank has earmarked $45mn for Moldova’s budget deficit financing in 2015, in order to prevent a sharp contraction in public investments. But the money will only be released after the government takes the right steps to address the problems in the banking sector, WB resident representative at Chisinau Alex Kremer said in a comment published by Infotag news agency on June 16.

“We recommend authorities that the three banks under special administration […] be liquidated,” Kremer stressed. Attempts to nationalise or recapitalise Banca de Economii (BEM) would increase the cost to public budget, he explained. Furthermore, this would generate the risk that taxpayers’ money is used to cover banks’ hidden losses and future losses. It is possible that part of the money owed by the bank is actually owed to the same groups that siphoned money from the bank – and in this case the recapitalisation would actually allow those firms to siphon even more public money, he explained.

The leaders of the two parties within Moldova's minority ruling coalition, Vlad Filat (PLDM) and Marian Lupu (PD), have agreed on the nationalisation of the country’s main savings bank, Banca de Economii (BEM), Timpul daily announced on June 12. BEM is one of the three troubled banks under special administration following the disappearance of an estimated $1bn from the banks.

The WB will support Moldova’s budget when it is sustainable, Kremer explained hinting at the possible cost for the public budget of the ruling coalition’s plans to recapitalise the three troubled banks. “It would not make sense and it would be irrational transferring money through the front door, while there are still high risks that money is siphoned through the back-door,”   Kremer explained.

The WB projects Moldova’s GDP will contract by 2% this year.  Nonetheless, the country’s statistics office announced 4.8% y/y expansion in Q1 driven, surprisingly, by the financial sector. The banking system’s stability nonetheless depends on  government support – namely emergency loans extended to the three troubled banks. Thus the record profitability might reflect exactly the transfers from public funds, while the fall of the three banks would have a systemic impact. Three other large banks were placed last week under special monitoring, a procedure typically used by the central bank when irregular operations are spotted or where the financial situation is fragile.

Related Articles

Macedonia kept on hold as Balkans edges towards EU goal

Clare Nuttall in Bucharest -   Macedonia’s EU accession progress remains stalled amid the country’s worst political crisis in 14 years, while most countries in the Southeast Europe region have ... more

Mystery Latvian linked to Scottish shell companies denies role in $1bn Moldova bank fraud

Graham Stack in Berlin - A Latvian financier linked to the mass production of Scottish shell companies has denied to bne IntelliNews any involvement in the $1bn Moldovan bank fraud that has caused ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss