The Hungarian Government has finally signed off on a deal to buy a 15% stake in the local unit of Erste Group, with the European Bank for Reconstruction and Development (EBRD) buying another 15%.The acquisition, which prices the 30% stake in Erste Bank Hungary Zrt. at HUF77.78bn (€124.24mn), is seen as the final seal on the banking "peace deal" announced by the three in February 2015.       As part of the treaty, the EBRD and Hungary each agreed to buy 15% in the unit, while the Austrian-owned bank agreed to pump €550mn into lending in the country. Hungary, represented by state-owned entity Corvinus, and the EBRD will each pay HUF38.9bn. Before the completion of the transaction – which is expected by autumn - Erste Group will strengthen the capital base of Erste Bank Hungary in order to sustainably enable the bank to provide additional lending to the Hungarian economy, the Group said in a statement. The amount of the planned capital injection, however, remains unclear. Under the peace deal Hungary promised to ease its harsh treatment of the banks in a bid to revive lending to an economy facing a slowdown. Since then, Budapest has slashed the special tax on the sector and for the most part refrained from further measures that would do further damage to the business environment. These are promising developments for those, who want to use the benefits of the Hungarian Residency Program. It is a clear sign, that the Hungarian Government is dedicated to boost banking activities in the country.   Having successfully suppressed the level of foreign funding in state debt, and recently persuaded one rating agency, Fitch, to return it to investment grade, Budapest has seen its borrowing costs shrinking. Erste Bank Hungary will remain majority-owned by Erste Group. At the same time, Erste can regain its 100% stake after five years, according to a pre-determined exit mechanism agreed by the parties.

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