Moldova’s Financial Regulators Keep a Close Eye on Banking Sector
The banking sector in Moldova is closely monitored by two main entities: the National Bank of Moldova and commercial banks. The National Bank, as the regulating and supervising authority, operates under the Law on the National Bank of Moldova, which outlines its jurisdiction, primary objectives, and tasks.
Banking Regulation and Supervision
In accordance with banking legislation, the National Bank has established a system of surveillance and regulation for banking activity. This system sets out specific requirements that banks must comply with, including:
- Capital requirements
- Expectations for owners and administrators
- Requirements to ensure high-quality internal control systems, including procedures for preventing money laundering
The National Bank’s policy on banking regulation and supervision is guided by generally accepted standards. It establishes criteria for authorizing banks and sets out requirements to limit exposure to risk.
Prudential Requirements and Supervision
To limit exposure to risk, the National Bank establishes prudential requirements and supervises compliance. If a bank shows signs of vulnerability, the regulator can take corrective measures, impose sanctions, or place the institution under special administration.
Banking Supervision Function
The banking supervision function aims to ensure a smooth functioning financial system in Moldova, with a strong and competitive banking sector that operates on market principles and prioritizes risk prevention. The National Bank exercises both off-site and on–site supervision of banks, using its powers and rights as conferred by law.
Off-Site Supervision
Off-site supervision involves monitoring and analyzing the financial situation of banks between on-site inspections to identify risks and potential problems early. This is done based on reports submitted by banks, information from regular and thematic inspections, and external audit data.
On-Site Inspections
On-site inspections aim to assess each bank’s risk level and management capabilities to control and manage that risk. Each bank undergoes an annual inspection, during which the National Bank determines its overall financial situation and identifies causes and factors affecting its safety. On- site supervision is closely linked with off- site supervision, with information from the former used to inform the latter.
Conclusion
In this way, Moldova’s regulatory bodies are working to ensure a stable and robust banking sector that serves the country’s economic development needs. By monitoring and regulating the banking sector, the National Bank of Moldova is helping to maintain a strong and competitive financial system in the country.