The National Committee for Financial Stability, the office in charge with coordinating the institutions responsible with ensuring financial sector’s stability, currently faces serious problems of governance, caused by strong political affiliation and unclear mandate, thus turning it into part of the problem in solving the banking crisis.
Recent international experience reveals that a key ingredient in safeguarding financial stability consists in closer communication and coordination among relevant agencies. With that purpose, countries all over the world resorted to the creation of financial stability committees.
Why to reform the NCFS. In Moldova, the National Committee on Financial Stability (NCFS) was created in 2010. However, for many reasons, it proved to be inefficient in preventing and managing the current banking crisis. One main reason relates to its strong political flavour, since at least half of its members have strong political affiliations. Furthermore, the NCFS acted - de facto - as a law enforcement body rather than a communication platform, thus threatening the independence of the National Bank. On top, the body has an unclear mandate; many of its activities overlap with the responsibilities of member agencies. Finally, it acted more as a crisis managing institution, with limited focus on crisis prevention. All these features contradict international experience in setting similar committees. Therefore, there is a clear need for reforming the NCFS, taking into account the lessons learned in Moldova, as well as the experience in other countries.
How to reform the NFCS. The new NCFS should have a smaller number of members, with low political exposure and strong relevance for the financial stability area. In our view, it should include the heads of the National Bank, the National Commission for Financial Markets, the Ministry of Finance and the Deposit Insurance Fund. The secretariat should be ensured by the NBM and its chair should have a symbolic importance, with each member serving as chair based on annual rotation. Importantly, the NCFS should have a clear mandate, without any overlapping with the responsibilities of member agencies. It should not be a decision-making body, but rather a platform for communication and coordination of actions among members, focussed on preventing rather than fighting systemic crisis. The NCFS could adopt conclusions or positions, but only based on a consensus.