NBM Introduces Amendments to Banking Regulations to Enhance Risk Management and Governance
Chisinau, Moldova - The National Bank of Moldova (NBM) has introduced a series of amendments to several banking regulations aimed at strengthening risk management and governance practices in the country’s banking sector.
Strengthening Risk Management and Governance Practices
The amendments aim to implement provisions of Law No. 202/2017 on Activity of Banks, align terminology with the Basel III framework and International Financial Reporting Standards, and eliminate deficiencies in the application and interpretation of existing regulations.
Key Changes Introduced by the NBM
- Revised List of Transactions with Affiliated Persons: The revised list aims to exclude transactions that would not be considered as such.
- Updated List of External Credit Assessment Institutions (ECAIs) and Countries with Equivalent Regulatory Regimes: The update ensures consistency in credit risk management practices.
- New Obligation for Banks to Conduct Interviews with Members of the Governing Body: This change enhances transparency in the evaluation process carried out by the NBM of persons appointed to certain management and key positions.
Secondary Regulatory Frameworks Introduced
- Excessive Leverage Risk Management: The amendments create a secondary regulatory framework for managing excessive leverage risk, an integral part of bank governance.
- Regulatory Framework for Banks’ Recovery Plans: Provisions related to the creation of a regulatory framework for banks’ recovery plans were included.
Transposition of EU Regulation
The NBM has transposed corresponding provisions of the European Union’s delegated Regulation (EU) 2016/1075, regarding regulatory technical standards specifying the content of recovery plans, resolution plans, and group resolution plans.
Enhancing Risk Management Practices
- New Requirements for Banks’ Credit Risk Management Policies: The regulations introduce new requirements to avoid excessive risk-taking in lending.
- Repayment Schedules with Repayments Only at Maturity: This change ensures that cash flow mismatches are avoided while ensuring repayment schedules are established.
- Regulatory Framework for Risks Associated with Excessive Leverage: Provisions related to the creation of a regulatory framework for managing risks associated with excessive leverage were introduced.
Changes to Regulation No. 118/2018
The amendments also include changes to Regulation No. 118/2018 on Audit of Financial Statements and Audit for other Purposes of Banks, aimed at excluding limitations on audit companies that conduct audits of banks’ annual financial statements from concluding other contracts with the bank.
Conclusion
“The aim of these amendments is to strengthen risk management and governance practices in the banking sector, ensuring a stable and resilient financial system,” said a spokesperson for the NBM. “We believe that these changes will help to enhance confidence in the banking sector and promote economic growth.”
The amended regulations come into force on April 1, 2023. Banks are required to comply with the new requirements by June 30, 2023.