Moldova’s Banking Industry Struggles to Contain Counterparty Risk Amid Regulatory Efforts
Challenges in Moldova’s Banking Sector
Moldova’s banking industry has been facing significant challenges since the 2014 collapse of three major lenders, which wiped out around $1 billion from their assets. Despite efforts by regulators to strengthen enforcement and oversight, counterparty risk remains high, putting domestically owned banks under pressure.
Counterparty Risk Remains a Significant Concern
Industry experts say that counterparty risk is a significant concern, particularly among domestically owned banks. According to sources familiar with the matter, Sergiu Cioclea, governor of Moldova’s central bank, has vowed to prioritize enforcement and transparency in the banking sector.
Regulatory Efforts
Regulatory efforts have been praised by industry experts and international organizations such as the European Bank for Reconstruction & Development (EBRD). The EBRD has expressed faith in Governor Cioclea’s commitment to enforcing the rules of the game. However, industry experts caution that political instability makes entering into any financial deal in Moldova risky.
Regulatory Action Against Banks
BC Moldova Agroindbank SA, one of the three remaining domestically owned banks, has been placed under special supervision by regulators due to alleged lack of transparency around ownership structures and transactions with related parties. The central bank took action against a group of its shareholders in March for neglecting to seek regulatory approval before working in concert to build up a combined holding of about 40% in the lender.
- Natan Garștea, CEO of Estimator VM: “Agroindbank is the healthiest bank in Moldova in terms of capital, but has been dragged into other controversies due to its lack of transparent ownership disclosure.”
- European Bank for Reconstruction & Development (EBRD): Has expressed interest in investing in Agroindbank under certain conditions.
Moldindconbank SA
Moldindconbank SA, the country’s second-largest lender, is also looking for a buyer. However, sources with knowledge of the business told S&P Global Market Intelligence that there are questions over its asset quality due to alleged lending to parties related to shareholders. An audit by KPMG found that its insufficient ownership disclosure is in breach of regulatory guidelines.
- Veaceslav Platon: A local millionaire who has been accused of being the de facto owner of both Moldindconbank and Agroindbank, although he has denied the claims publicly multiple times.
- Natan Garștea: “Prospective buyers would have to do ‘very thorough due diligence’ on Moldindconbank.”
Victoriabank SA
Victoriabank SA, the only other sizeable active Moldovan bank, is also facing challenges. The largest shareholder, Cyprus-based Insidown Ltd., with a 39.2% stake, is engaged in a dispute with the EBRD, which is aiming to impose more transparent governance at the company.
- European Bank for Reconstruction & Development (EBRD): Increased its stake in Victoriabank SA to 27.5% by buying out the shares of Greece-based Alpha Bank AE.
Conclusion
Despite challenges, regulators and international organizations are optimistic about the future of Moldova’s banking sector. With forceful action from the authorities, they say that investors may be drawn to the country relatively quickly. However, industry experts caution that political instability makes entering into any financial deal in Moldova risky.