The government of Hungary and the European Bank for Reconstruction and Development (EBRD) have agreed to acquire a 15% stake each in Erste Bank Hungary, the Hungarian division of Austrian lender Erste Group Bank.

EBRD and the government will pay a combined HUF77.78bn ($281.3bn) for their respective stakes in Erste Bank Hungary. The government will acquire the stake through state-owned company Corvinus.

Erste Group will boost the capital base of the Hungarian unit before the completion of the deal to sustainably enable the bank to provide additional lending to the Hungarian economy.

The buyers have also agreed to an exit mechanism, which offers Corvinus the right to exit any time, Erste Group the right to exercise the call option 5 years after the sale, and EBRD the right to exercise the put and call option between 5-9 years after the purchase.

The deal is expected to be wrapped up by the end of 2016, subject to Hungarian and European regulatory approval, and completion of the capital increase in the Hungarian unit.

EBRD first vice president Phil Bennett said: "With our investment we are strengthening and supporting a private bank which has successfully overcome the effects of the global financial crisis and is committed to the region. The stronger capital base will allow Erste Bank Hungary to implement its growth plan, including lending to local SMEs, thus contributing to improved financial intermediation and supporting the real economy."

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