Mozambique’s central bank has bailed out the country’s fourth largest commercial lender in a move it said was needed to prevent the failure of its banking system.

The African country has been grappling with a liquidity crunch, exacerbated by the International Monetary Fund and foreign donors cutting off support over loans that were not approved by parliament or disclosed publicly.

Banco de Mozambique governor Rogério Lucas Zandamela said the central bank had injected 8 billion meticais ($111 million) to recapitalise Moza Banco, which is owned by Portugal’s Novo Banco, to avoid a run from depositors and creditors.

“It would have had a cost of incalculable dimensions. It is frightening when such an institution falls into bankruptcy,” Zandamela said.

The central bank has guaranteed all deposits at Moza Banco, fired its board and taken over its day-to-day operations.

Moza Banco got into difficulties this year due to a rapid expansion of its branch network and an incomplete recapitalisation from shareholders..

The central bank said that it would appoint an evaluation committee and set up a general meeting for the recapitalisation or sale of Moza Banco. ($1 = 71.8000 meticais)

Source: Reuters