The Roadmap for restoring the Moldovan banking industry

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Publishing date: Monday, 08 February 2016
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The banking crisis, which sent shockwaves in the Moldovan economy in 2015, can be solved by implementing a Roadmap that includes seven urgent measures, implemented both at the level of the regulatory authority and other relevant institutions, and at the level of commercial banks. This action plan will be able to rehabilitate the banking sector and prevent similar crises in the future.

This document follows 2 complementary purposes: (1) to share with the general public and relevant institutions the vision of Expert-Grup on how to settle the banking crisis and prevent similar crises in the future; (2) to promote a proposed Action Plan for reforming the Moldovan banking sector, and hold, thus, decision-makers accountable for its implementation.

Authors of the study propose the following seven set of measures:.

  1. Strengthen the independence of the National Bank of Moldova. The actions must focus on getting rid of the levers by which certain political or private groups could put pressure on the central bank. Besides enhancing the efficiency of the regulatory activities, it will also increase the accountability of the central bank in terms of financial and banking stability.
  2. Strengthen the tools for bank monitoring and supervision, and for the prevention of crises in the banking sector. The measures will involve decreasing the human involvement in the monitoring and regulation process by implementing IT solutions, increasing the capacity of NBM to identify and curb concerted activities, harshen criminal sanctions for market abuse and other violations committed by commercial banks, streamline communication and coordination between institutions directly and indirectly in charge of the financial stability
  3. Increase the transparency on the actual beneficiaries of bank shares. The measures include implementation and institutionalization of the fit-and-proper test (minimum integrity and transparency standards), facilitation of information exchange with the states of legal residence of the banks’ final shareholders. In addition, they include strengthening of the institutional capacities of the NBM in the field of shareholders’ transparency, as well as developing and publishing the scoring and reports on the transparency of the shareholders of every bank.
  4. Improve the corporate governance in most banks. To this end, motivational measures (development and promotion of a general Corporate Governance Code, drafting and publishing annual reports on transparent risk management and promoting ethical and professional standards among employees of banks) and coercive measures (harshening sanctions for inappropriate governance) are needed. Furthermore, it is necessary to prohibit the participation in the Boards of several banks in order to avoid a potential conflict of interests, considering the precedent involving 3 banks undergoing liquidation (BEM, BS and UB).
  5. Create mechanisms that will increase the accountability of bank managers. The accountability of shareholders and bank managers can be enhanced by developing the four-eye approach, implementing the bail-in mechanism, increasing the independence of Board members that check the activity of bank managers, harshening the sanctions for inappropriate bank management. Actually, it is necessary to develop a system, where bankers themselves pay for the bankers’ mistakes, rather than by the population.
  6. “De-offshore-ization” of the banking sector. It is necessary to prohibit any interaction between banks and companies from jurisdictions that do not comply with the transparency standards (they are often referred to as “offshore companies”), as well as to completely harmonize the local legislation with the EU provisions on money laundry.
  7. Increase the banks’ capacity to absorb losses. it is necessary to review the prudential indicators against the Basel III provisions, to delimit certain even harsher requirements for systemic banks in relation to small banks and to increase the coverage of deposit insurance

In the meantime, Expert-Grup commits to monitor the actions taken by authorities in order to stabilize the banking sector and prevent similar crises in the future.


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dutch-logo-embassy-smallThis document is with the financial support of the Netherlands Embassy in Bucharest. Opinions expressed in this document belong to the authors and do not necessarily express the opinions of the donors.


“De-offshore-ization” of the banking sector
Tags: Natalia Chitii


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