Mihai Roscovan: Moldovan bank system is closed and not transparent, it needs urgent liberalisation

The lack of a coherent policy on supervision and development of banking sector and the latest evolutions related to the scandal around Victoriabank demonstrate that the sector is stagnating, the director of the Business Consulting Institute (BCI), Mihai Roscovan, doctor of economics, has stated to Info-Prim Neo. He said that the non-qualitative policies of the government and lack of structural reforms have a negative impact on economy and reduce the rise paces. According to Roscovan, this situation is the main cause why foreign experts signal shortcomings of the financial-banking sector of Moldova for the first time in the past years. Francis Delaey, resident representative of the European Bank for Reconstruction and Development in Moldova, has recently said that the deficiencies of the financial sector such as hard banking supervision, lack of transparency in the structure of properties and poor quality of corporate governance generate vulnerabilities and affect the competition and efficient allocation of credits, reducing the economic growth potential. The EBRD expert signalled the opacity of the structure of bank owners, which is often concentrated in the hands of one person or a group of persons through a high number of companies, a fact that halt the bank supervision authorities to estimate the opportunity and integrity of real owners and checking of finances used to acquire the shares. In this context, Roscovan regretted that the National Bank of Moldova (BNM) remains the institution which focuses on fuelling the government with cheap financial resources for unproductive activities and maintenance of a bearable inflation for population through administrative methods. „The re-election of Leonid Talmaci as BNM governor for the third time has maintained both the banking stability and lack of transparency in the structure of properties, as well as the weak quality of corporate governance of banks. No serious foreign bank has managed to join the Moldovan market in 15 years due to the unloyal competition on this market, as well as the unbearable interests on credits,” he noted. Taking into account that Moldova alone among other states in the region did not hold any public auction for privatisation of banks, we can assert that a closed banking sector was created to launder the money of mafia and to maintain the welfare of governors, the economist underlined. This „separatist” sector is well and it does not care of the real economy and need of population. „It’s a paradox, but BNM intends to promote the same conservative policies in 2006.” According to Roscovan, urgent measures are needed to favour the creation of a liquid market for shares of bank sector. Firstly, a regulation is needed to oblige the banks get registered as open-type joint stock societies. The government must facilitate the granting of medium- and long-term credits to businesses and of mortgage credit to population. Also, the economic mass media should publish quarter financial reports and the safety rating of banks,” the BCI director recommended. As regards the forecasts of EBRD regarding the economic rise paces for this year, Roscovan said that though the 2005 transition report of EBRD was drafted at the end of last year on basis of statistics for the first half of 2005, most of conclusions are relevant and current for the entire year. „Although Moldova registers a 6-7 percent annual rise of GDP, the report indicates the bad quality and durability of the rise. The economic growth is ensured by the rise of import and internal consumption, as well as the growth of production and export. The government has managed to fulfil the targeted macroeconomic and budgetary parameters, promoting a prudent fiscal policy and keeping the inflation under control. However, the VAT collections from imports and internal trade financed by remittances of Moldovan emigrants remain the main source of the budget,” the expert noted. Although Moldova has benefited of a favourable regional conjuncture for reformation and enhancement of economic potential starting 2000, the government policies have failed to use the provided opportunities. Moldova has failed to reach the economic potential registered in 1990 after 15 years of transition. The privatisation in Moldova has failed. The structural reforms have not been completed. The goods and service markets have not been liberalised. The human resources are used in vain, while social policies have a strong populist sign. As a result, the rise is not qualitative. These are the main causes that will affect the economic growth in future. Also, the inflationary forecasts provoked by higher prices of fuels will slow down the economic growth and will worsen the living standards, Roscovan added. According to the EBRD report, the macroeconomic performance of Moldova was good in the past years. The economy rose by 7.3 percent in real terms in 2004 and by 7.5 percent in 2005. However, this economic growth is due to the large remittances from abroad and rapid expansion of the service and agrarian sectors. EBRD experts forecast a decline of economic growth pace in Moldova for this year, down to 5-5.5 percent because of higher prices of fuels and limited access to traditional export market.