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The Financial Sector of Moldova: Structure, Composition, and Vulnerabilities

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Moldova’s financial sector has undergone significant changes over the years. In this article, we will explore its structure, composition, key statistics, vulnerabilities, and emerging trends.

Structure and Composition

Dominant Players in the Banking System

  • The banking system is dominated by 11 banks that hold over half of assets and deposits.
  • Foreign banks have a growing share, representing almost 90% of total bank assets by end-2020.

Other Financial Institutions

  • Savings and credit associations (SCAs) represent a small but rapidly expanding share of credit institutions.
  • The sector of other financial corporations (OFCs), including microfinance and leasing companies, is relatively small.

Key Statistics

Here are some key statistics about the financial sector of Moldova:

Total Financial Sector Assets

  • Total financial sector assets: 198,893 million lei
  • National Bank of Moldova accounts for 41% of total assets.
  • Commercial banks account for 53% of total assets.

Foreign Ownership in Commercial Banks

  • Foreign-owned banks account for 56% of commercial bank assets.

Savings and Credit Associations (SCAs)

  • Category B SCAs have assets equal to about 1% of total credit institutions’ assets.

Vulnerabilities

The financial sector of Moldova faces several vulnerabilities that need to be addressed:

Real-Financial Linkages

  • High loan concentration and name concentration risk in commercial banks.
  • Intra-financial sector linkages, which can lead to credit and solvency risks.

Fiscal-Financial Linkages

  • Commercial banks holding significant amounts of government bonds.

External-Financial Linkages

  • Foreign ownership and potential risks associated with it.

Microfinance and Leasing

The microfinance and leasing sector has seen a strong pickup in credit growth, raising concerns about loan origination standards and credit risk:

  • The NBCO/SCA sector saw a strong pickup in credit growth before the pandemic.
  • Many microfinance and leasing companies are foreign-owned.

Insurance and Investment Services

The insurance and investment services sector has low product range and penetration rates by European standards:

  • Product range and penetration rates are low by European standards.
  • Companies licensed for investment business have relatively limited business due to underdevelopment of capital markets and investment services.