After over three years of the banking crisis, the financial system of the Republic of Moldova continues to be subject to a broad reform process that covers not only the banks, but also non-banking institutions, experts of the independent think “Expert-Grup” say in the seventh edition of the publication “Financial Monitor”. Fueled by the pressure of the commitments assumed under the memorandum with the IMF and the Association Agreement with the EU, the reforms done so far helped remedy the situation of banks. But the banks’ inability to adjust to the new requirements, in particular as regards lending, remains the main constraint, IPN reports.
“Even if it is ambitious and very necessary, the process of implementing the new standards, of Basel III, is a challenge for the commercial banks and their clients and also for the National Bank as the regulator. For banks and business entities that look for funding, the financing rules become much stricter, with significant implications for the business model and even for the profitability of the business. For the regulator, the scope of this process reveals the importance of strengthening the operational, technical and human capacities in order to efficiently implement the new banking legislation,” said economic researcher Dumitru Pintea.
Besides the reform actions, the monitoring that covered the period between October 2017 and July 2018 centered on the tendencies seen in the financial intermediation process. Amid tougher lending standards, the intermediation function of the banks remains stagnant. Bank lending in 2015 represented 24% of the GDP and declined to 14% at present.
The situation left room for the competitors from the non-banking financial sector, such as microcredit organizations, savings and loan associations and leasing companies. In such conditions, the demand for loans migrates to other less regulated sectors with rather non-transparent lending practices that are in parts abusive and that do not appropriately guarantee consumer protection.
The lack of tangible results in the process of investigating the banking frauds diminishes the impact of reforms. “To step up the investigation process and to increase the credibility of the taken actions, the central bank, as the primary source of information and with relations with regulators from jurisdictions to which the money was transferred, should become an active party in this process,” stated the author of the publication.
National Bank vice governor Cristina Harea said the banks do not have a really dynamic intermediation activity because the sector was subject to extraordinary stress from which it is recovering with difficulty. The banks became more attentive in lending, as did the clients. After a continuous decline during the past two years and a half, the bank loans provided in the second quarter of the year rose by 790 million lei compared with the first quarter. It is now important to clean the sector and to eliminate the non-transparent shareholders so as to achieve good results in the future and increase the volume of loans released to the national economy and the population.
