Being the cornerstone of the national financial system and in the light of its functions, the banking sector has a particular importance for the economy. Namely the manner it operates is an essential condition for maintaining financial stability and ensuring sustainable economic development. Even if the banking crisis was stopped by granting emergency loans to three defrauded banks and this sector continued to maintain its vital functions, the effects of the crisis continue to be felt in the process of intermediation between savers and investors.
Statistical data for 2016 show a continued contraction in lending through commercial banks. In addition to the permanent factors that hinder the expansion of bank loans, the recent negative developments have generated a situation of distrust, both on the demand and supply side of bank loans. On the one hand, although the banks have accumulated liquidity surpluses, they are reluctant to lend to the real sector, on the other hand, the political instability and uncertainties about the evolution of economic activity deepen the investors distrust.
The diminishing bank intermediation generates, to some extent, the migration of loan demand to other less regulated sectors of the financial market, especially the microfinance and leasing sector. Thus, with the view of maintaining financial stability, it is important to strengthen the supervisory powers over this sector as well, especially in terms of exposures of the microfinance and leasing companies to the banking sector.
Even if commercial banking activity is a private business, the new international approach to financial stability believes that sector self-regulation and public policies must complement each other, and national authorities should monitor whether they are connected properly. Thus, the National Bank's role is to identify the key constraints hampering the development of the bank loan both at the bank and client level and adjust the regulatory and supervision framework in order to stimulate an effective dialogue between demand and supply. NBM must also "guide" to some extent banks to channel their resources towards the most viable sectors of the economy and towards those loan instruments that meet the needs and expectations of clients.
However, the image and confidence vacuum in the sector must be addressed by coordinating the actions of all institutions that form the new platform of maintaining financial stability, namely the National Financial Stability Committee (NFSC). When reformatting it, we consider it appropriate to create a working group under the auspices of the Committee, aiming at promoting a healthy and sustainable financial intermediation for both the real economy and consumer loan. Basically, this responsibility belongs to a whole range of institutions (NBM, NFSC, commercial banks) that must come up with proposals for instruments and measures to foster lending, and to the Government that must improve the legal framework for their implementation. Moreover, it is important to identify a wide consensus of macroeconomic policies resulting from commitments assumed by signing the Association Agreement with the EU and Financing Agreement with the IMF, which should be based on appropriate financial services, financial stability, sustainable economic growth, sustainable lending and consumer protection.
This publication was produced under the ”Support for structural reforms in the banking, energy and state-owned enterprises sectors from Moldova”, funded by the British Embassy in Chisinau through the Good Governance Fund. The content of this publication is the sole responsibility of the author and does not necessarily reflect the views of the British Government.