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Moldova’s National Bank Issues Regulation on Settlement/Delivery Risk Treatment

Chisinau, June 8 - The National Bank of Moldova has issued a regulation aimed at ensuring the proper treatment of settlement/delivery risk in the country’s banking system. According to Decision No. 115 of May 24, 2018, banks operating in Moldova must comply with the new rules by July 30, 2018.

Transposition of EU Regulation

The regulation transposes Articles 378 and 379 of the European Union’s Regulation (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms. It sets out rules for calculating own funds requirements in relation to settlement/delivery risk.

Calculation of Own Funds Requirements

Under the new regulations, banks must calculate the price difference between the agreed settlement price and the current market value of unsettled debt instruments, equities, foreign currencies, and commodities. The institution’s own funds requirement will then be determined by multiplying this price difference by an appropriate factor, depending on the number of working days after the due settlement date.

Free Deliveries

The regulation also covers free deliveries, where institutions must hold own funds in certain circumstances. Institutions may apply a risk weight of 100% to these exposures, unless they are material, in which case a risk weight of 1,000% is required.

Alternative Treatment

Additionally, the regulation allows institutions to deduct the value transferred plus the current positive exposure from Common Equity Tier 1 items as an alternative to applying a risk weight of 1,000%.

Waiver of Own Funds Requirements

The National Bank of Moldova has stated that where a system-wide failure of a settlement system, clearing system or central counterparty occurs, it may waive own funds requirements calculated in accordance with the regulation until the situation is rectified.