Moldovan Banking System Dominated by Two Large Banks
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The Moldovan banking system is characterized by a significant concentration of assets and deposits among its largest two banks, with the remaining nine institutions holding less than 10% each. According to recent data from the National Bank of Moldova (NBM), these two large banks account for over half of all assets and deposits in the country.
Foreign Banks Playing a Significant Role
Foreign banks are increasingly playing a significant role in the Moldovan financial sector, with their share of total bank assets growing from just over 1% in 2009 to almost 90% at the end of last year. The majority of these foreign shareholders come from European countries, including Bulgaria, Romania, and Hungary.
Savings and Credit Associations (SCAs)
Savings and credit associations (SCAs) are also gaining popularity in Moldova, with their assets growing rapidly over the past decade. At the end of December 2020, SCAs accounted for around 1% of total credit institutions’ assets, up from just 0.4% a decade earlier.
Other Financial Corporations (OFCs)
Other financial corporations (OFCs), which include microfinance and leasing companies, are also present in Moldova, although their share is relatively small. The largest OFCs are mostly foreign-owned and have diverse business models.
Macroeconomic Vulnerabilities
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The Moldovan financial sector faces several macrofinancial vulnerabilities, including:
- Real-financial linkages
- Fiscal-financial linkages
- External-financial linkages
- Intra-financial sector linkages
These linkages expose the financial sector to credit and solvency risk, despite strong capitalization among credit institutions.
Loan Concentration Risk
The sector is also characterized by a high loan concentration in commercial banks’ lending to large borrowers, which exposes banks to significant name concentration risk. Additionally, there are concerns about loan origination standards and rising credit risk from overleveraged borrowers.
Insurance Companies
Most insurance companies in Moldova are domestic, although two are part of Austrian groups. The product range and penetration rates are low by European standards.
International Monetary Fund (IMF) Recommendations
According to a recent report by the International Monetary Fund (IMF), Moldova’s financial sector is vulnerable due to its exposure to macrofinancial linkages. The IMF recommends that policymakers take steps to address these vulnerabilities and strengthen the sector’s resilience.
Table 2: The Moldovan Financial Sector
| Institution Type | Number of Institutions | Asset Size (millions of lei) | Percent of Total |
|---|---|---|---|
| National Bank of Moldova | 1 | 80,585 | 41% |
| Other deposit-taking institutions | 75 | 104,781 | 53% |
| Commercial Banks | 11 | 103,795 | 52% |
| Domestic banks | 3 | 37,046 | 19% |
| Foreign-owned banks | 8 | 66,749 | 34% |
| Category B SCAs | 64 | 986 | 0.5% |
| Non-deposit-taking institutions | 344 | 13,527 | 7% |
| Insurance companies | 11 | 3,219 | 2% |
| Investment companies (end-June 2021) | 15 | n/a | n/a |
| Category A SCAs | 164 | <0.1% | <0.1% |
| NBCOs | 154 | 10,179 | 5% |
Note: Data is as of end-December 2020, except for insurance companies and investment companies, which are as of end-March 2021.