Moldova’s Financial Institutions Turn to Risk Management Strategies Amid Regulatory Tightening
The Republic of Moldova’s banking sector is undergoing significant changes, leading financial institutions to adopt robust risk management strategies to ensure their stability and the overall economy.
National Bank of Moldova’s Role in Banking Regulation and Supervision
Under the National Bank of Moldova (NBM), commercial banks must adhere to a set of stringent requirements designed to:
- Ensure high-quality internal control systems
- Prevent money laundering
- Limit exposure to risk
The NBM also establishes criteria for authorizing new banks, capital requirements, and standards for bank administrators, while monitoring financial institutions’ compliance with prudential regulations.
Supervision Methods
To ensure the smooth functioning of Moldova’s financial system, the NBM performs both off-site and on-site supervision of licensed banks. Off-site supervision involves:
- Monitoring banks’ financial situations between on-site inspections
- Identifying potential risks and problems early on through regular reporting requirements, thematic inspections, and external audit information
On-site inspections are conducted annually for each bank to assess the level of risk within each institution and evaluate management’s capabilities in controlling and managing that risk.
Interconnection Between Off-Site and On-Site Supervision
The NBM uses the information gathered during off-site supervision to determine the purpose and objectives of on-site inspections, highlighting the strong interconnection between the two approaches.
Strategy for a Strong Banking Sector
The National Bank of Moldova’s efforts aim to create a strong and competitive banking sector that is oriented towards market relations and risk prevention. As part of its strategy, the regulator:
- Continues to improve and refine regulations in line with international best practices and standards set by organizations such as the Basel Committee on Banking Supervision and the European Union Directives
Benefits for Financial Institutions
By adopting these risk management strategies, Moldova’s financial institutions can better navigate the complexities of a rapidly evolving banking landscape, ensuring the continued stability and growth of the country’s economy.
- Enables institutions to mitigate potential threats to their stability
- Supports the overall economy by promoting a strong and competitive banking sector
- Encourages market-oriented relations and risk prevention practices