Moldovan central bank governor resigns over bank fraud case

By bne IntelliNews September 21, 2015

Iulian Ernst -


Moldova’s central bank governor Dorin Dragutanu resigned on September 21, accusing politicians of interfering into the investigation of a $1bn banking fraud. The governor's resignation was demanded by a recent series of demonstrations in Chisinau's main square, but his allegations of political interference will only add to the protesters' fury. 

Dragutanu told a press conference that unnamed politicians had interfered with investigations into the recent massive frauds in the country's banking system.  He also revealed that there also had been political pressure against timely intervention by the central bank into Banca de Economii – one of the banks involved in the frauds.

“Our resignation is the answer to politicians who have forced us to resign because they were unable to dismiss us in parliament based on legitimate grounds,” Dragutanu said. Vice-governor Marin Molosag also resigned.

Dragutanu refused to point to the politicians behind the pressures, but warned that time will reveal their names. Consultancy firm Kroll's investigations will reveal the authors of the frauds at Banca de Economii (BEM) and how their traces have been hidden, he said.

The central bank’s resignations are unlikely to ease pressure on the government from the civic platform Dignity and Truth (DA), which has organised mass protests since September 6. DA has issued radical requests including the resignation of all public authorities including Dragutanu. The frauds in the banking system and the slow investigations on the case were high on the protestors’ agenda.

Both the parliament and the government have put pressure on the central bank recently. Parliamentary Speaker Andrian Candu openly asked the International Monetary Fund to run an investigation into the central bank’s performance related to the frauds in the banking system. Prime Minister Valeriu Strelet also stressed last week that the activities of the central bank and Dragutanu over the past year should be reviewed. “There are grounds for the parliament to hear [governor Dragutanu] on the performance of the central bank during the past year, and to take a decision in this regard,” Strelet said.

At his press conference, Dragutanu expressed discontent with the way Kroll's report into the frauds had been leaked by Candu. He also criticised Strelet for his comments on the negotiations with Kroll for the second stage of the investigations. Strelet commented about the high price asked by Kroll for the recovery of the funds siphoned from the three troubled Moldovan banks. Kroll has asked 60% of the funds recovered, Strelet implied.

Dragutanu’s resignation will also complicate the country’s negotiations with the IMF – which is expected to send an expert team this week in Chisinau for negotiating a stand-by agreement. International financing of Moldova was suspended earlier this spring amid political turmoil.

Dragutanu had come under criticism not only for the central bank’s poor performance in the prevention and investigation of the frauds in the banking system. The monetary policy conducted over the past year by the central bank has also been severely criticised by investors and independent analysts. The central bank has hiked the monetary policy interest rate at 19.5% from only 3.5% one year ago, amid rising inflation and further inflationary expectations. The rate hike was excessive and made credit prohibitive, according to many investors.

The central bank also came also under pressure for not preventing the exchange rate from depreciating. PM Strelet pointed to the central bank as the entity that should secure exchange rate stability, even if this is not a central bank’s primary goal (which is securing price stability).

Moldova’s currency weakened by 1.1% versus the US dollar in one day on September 17, and by 2.0% versus the euro on the same day, according to the average exchange rate calculated by the central bank. Over the past month, the country’s currency has weakened by 4.6% versus the US dollar, and by 6.6% versus the euro.

The currency’s depreciation has helped Moldova’s GDP growth and also helped the BoP adjustment, but it has also created problems for the central bank. The monetary tightening might offset in the medium term the benefits of a weaker currency. Credit became particularly expensive for companies after the central bank hiked the monetary policy interest rate to 19.5% in August, thus virtually blocking corporate lending.

By law, Dragutanu has to serve as interim governor for three months unless another governor is nominated by the parliament. Given the fragile majority of the ruling pro-European coalition, of only 51 of 101 votes, such a nomination is not likely soon. 

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