Everyone, at some point, needs a bank, whether for a loan, for a deposit, a salary account or a counter payment. Nonetheless, not all of us understand how a bank works and what is its role in the financial system. Mainly its basic functions confirm the crucial role of banks in a modern society, these being the institutions that mobilise the available money and finance private affairs or public expenditures. Besides this, technological development complements the role of banks with another important function, which is payment system and money transfer – operations that we all perform almost every day.
The collapse of the Soviet Union and the transition to a new economic model based on individual entrepreneurship and private initiative created the premises for the emergence and development of commercial banks in our country. After more than 25 years, the banking sector has become the main pillar of the national financial market, accounting for about 90% of the market's assets, or MDL 75 billion. The size and importance of the sector is also reflected by its share in the national economy, with bank assets accounting for more than 55% of GDP. Besides this, commercial banks are also the largest funder of the Moldovan economy with credits amounting to approximately MDL 34 billion, much above the capacities of other institutions in the field, such as microfinance or leasing companies, which cumulate funding of about MDL 5.5 billion.
However, the Moldovan banking sector was not invulnerable, since 90s its development and potential were affected by a number of systemic problems. From faulty management and poor transparency of shareholders to suspiciously granted non-performing loans, money laundering and significant fraud – these being the most important elements that brought it to the brink of collapse in the autumn of 2014. The investigation results show that this mix of elements was permanently supported by the scourge of corruption, which affected the activity of some bank managers in tandem with that of high-ranking state officials and politically exposed persons.
Why Isn’t the Domestic Banking Sector a Success Story?
Although, theoretically, it is the so-called foreign investors that predominate, a big share of the banking sector capital is actually owned by Moldovans who have dissimulated their identity through offshore jurisdictions. Although the share of foreign investments reaches 81% of the bank share capital, the European financial groups have a market share of only 25% according to the value of the assets. This lack of clarity and transparency in shareholding was one of the key elements that caused the deterioration of the financial situation of several banks. The cause of this situation is neither new, nor random, since the country’s largest financial resources and the most important financial flows are performed through commercial banks.
Profitable, sometimes poorly supervised and safe from the point of view of the money invested, the Moldovan banking sector has always attracted the interest groups and rich people, their main objective being... to make even more money. It was this increased interest that generated a fierce struggle for bank shares, those securities that eventually determine the ownership and voting shares in a bank. The struggle was carried on several fronts and over several years, regardless of the ruling regimes and parties. The aim was the same – to control the banks and the financial resources of the population, by means of state institutions or suspicious private transactions. It reached its peak at the end of 2014, when the Moldovan banking system underwent a systemic crisis. The scale of its results puzzled even the international community. Major frauds, the collapse and liquidation of three banks, high-level corruption and, above all, the colossal amount of public money necessary to stabilize the situation, are the harshest conclusions of this sad episode in the history of the country.