Last year was a turning one for Moldovan baking system, when systemic weaknesses combined with large-scale fraudulent transactions have triggered an unprecedented banking crisis. As a result, the reduction of deposits attracted and the worsened quality of loan portfolios have caused additional difficulties for the financial institutions.
Despite the drastic tightening of the monetary policy, anti-inflation effects are yet to occur, due to a high level of sensitivity from population towards the exchange rate and pessimist forecast on economic growth.
The banking industry already feels the effects of the lack of trust from populations, through reduced amount of deposits attracted in national and foreign currency. This, coupled with deteriorating of the loan portfolio quality could create some liquidity shortage in the banking sector. If that is going to happen, many banks will have to purchase cash from the National Bank, which could further increase the cost of credit amid a tightened monetary policy. This scenario could be triggered by the following risks: (1) a new currency shock boosted by pessimist anticipations of the population towards Moldovan economy; (2) another disturbance in the banking sector caused by fraudulent schemes; (3) further complication of the political crisis.
The lethargic behaviour from the public institutions make the matters worse, since they failed to make any changes into their top management following the repeated upheavals in the financial market during 2011-2014.
