The sale of a stake in Erste Bank Hungary to the government could be completed by the end of May, the minister for financial policy affairs told Emerging Markets on Wednesday.
“All the main terms are agreed on and we are now finalising the last bits and pieces,” said Agnes Hornung. “The share purchase agreement will be ready next week and after that it will be just a question of arranging the official signing.”
The deal was announced in February last year as part of an initiative to reboot the Hungarian government’s relationship with its banking sector after five years of hostility and heavy taxation.
The centrepiece of the agreement was a memorandum of understanding signed by prime minister Viktor Orban and the EBRD president Sir Suma Chakrabarti. The Hungarian government promised to cut bank taxes, refrain from further unilateral measures against the sector, and sell its stakes in nationalised lenders MKB Bank and Budapest Bank.
At the same time, the government and the EBRD agreed to take a 15% stake each in Erste Bank as a good faith gesture.
The purchase was due to be completed within six months but was hit by delays, reportedly due to attempts by the Hungarian government to make the country’s banks pick up a hefty bill for the failure of several local brokerages.
Doubts were also raised in April, when economy minister Mihaly Varga said funds for the deal could be used instead to reduce Hungary’s government debt.
On May 5, however, Varga announced that the deal had been approved. The EBRD’s board also approved its stake purchase last week.
The rationale for the purchase has not changed since last February, said Hornung. “It is important to complete this transaction to demonstrate to everyone, the financial institutions and the contracting parties, that the trust between the Hungarian government and the banking sector is still there,” she said.
Nick Tesseyman, managing director for financial institutions at the EBRD, agreed. “The genesis and rationale for the deal still stands, and with all sides having made the commitment to complete the transaction it makes sense to go ahead,” he said.
Hornung insisted the sale of MKB Bank, announced at the end of March, would go ahead despite controversy over the buyers. The failed lender, which was bought by the state from BayernLB in July 2014, was put up for sale at the start of the year after being restructured.
The winners of the bidding process were a pair of unknown financial investors, Hungarian private equity fund Metis and Luxembourg-based Blue Robin Investments. Local reports have repeatedly suggested the Hungarian central bank, mired in scandal over inappropriate use of public funds, is involved in the purchase.
Hornung refused to deny the claims but noted the sale of MKB was being closely monitored by the European Commission (EC), which mandated the disposal.
She said, however, that MKB was a “special case”. “This was not a real market transaction because of the resolution process,” she said.