Reformation of National Committee for Financial Stability is crucial, analysis

The National Committee for Financial Stability, which is responsible for the coordination of the actions of the institutions in charge of stability of the financial sector, faces serious governance-related problems caused by the powerful political affiliation and unclear powers and became thus a part of the problem in the resolution of the banking crisis. Such a conclusion was formulated by experts of the German Economic Team Moldova and the think tank “Expert-Grup”, who analyzed the Committee’s work and worked out a plan for reforming this institution, which they consider crucial for preventing financial crises, IPN reports.

The experts said the National Committee for Financial Stability needs to be reformed because almost half of its members are politically affiliated. Furthermore, the Committee functioned more like a law implementation body than a communication platform, threatening thus the independence of the National Bank of Moldova. Besides, the institution had unclear powers as many of its duties overlap with responsibilities of its members. Ultimately, this functions as a crisis management institution with limited emphasis on crisis prevention.

According to the analysis authors, the reformation of the Committee must result in a lower number of members, reduced political representation and strict relevance to financial stability. The Committee should include the chiefs of the National Bank, the National Commission for Financial Markets, the Ministry of Finance and the Loan Guarantee Fund. The post of secretary should be held by a representative of the National Bank, while the post of chairman must have a symbolic importance and should be held in annual rotation by the members.

“Expert-Grup” executive committee Adrian Lupusor, who is one of the authors of the analysis, said it is important for the National Committee for Financial Stability to have a clearly defined mandate and this should not be a decision-making body, but a platform for communication and coordination of the actions between members, which will focus on the prevention rather than combating of systemic crises.

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