Key risks to the near-term outlook relate to serious vulnerabilities and governance issues in the banking sector. Significant weaknesses in the legal and regulatory frameworks must be urgently addressed to ensure stability and soundness of the financial sector, said the IMF mission that had been in Moldova on April 22-30, IPN reports
In a press release, the IMF says the government, the National Bank of Moldova (NBM) and the National Commission for Financial Markets (NCFM) should cooperate closely in this endeavor. The government needs to prepare draft legislation that strikes a balance between ensuring the effectiveness of the NBM and NCFM as regulators, supervisors, and resolution authority and the judicial review of their decisions.
In particular, the NBM and NCFM must be empowered to take effective regulatory and supervisory actions, without such actions being suspended by court action or staff fearing criminal prosecution for carrying out their duties. This draft legislation must be passed as a matter of urgency. The NBM and NCFM must resolutely and effectively implement the legal norms pertaining to identification and adequate fit-and-proper requirements of ultimate beneficial owners and controllers in banks, which should also help enhance the monitoring of related- party transactions and overall risk management framework of banks. The enforcement of the anti-money laundering framework needs to be strengthened.
The IMF mission considers that prompt action is required by regulators to improve banking sector fundamentals. In particular, resolute enforcement of capitalization and liquidity requirements is important to reduce vulnerabilities. Following the recapitalization of Banca de Economii (BEM) by minority shareholders, the NBM needs to maintain a very high level of scrutiny of its operations until the situation is normalized. Despite the dilution of the government’s share, the Ministry of Finance needs to ensure strong representation at the BEM’s board in order to safeguard public interest. Moreover, the NBM should abstain from regulatory forbearance and the government from providing commercial banks privileged access to additional public sector deposits.
It was the second post-program monitoring mission after that of January 2014.
