News

Data about the Activity of Moldovan Commercial Banks on December 31, 2020Weird 2020: humility, depression, rebellion, accepting a new realityThe Hunger Games of the foreign exchange marketHow to tame liquidity?Veaceslav IONITA: The government killed the business, but flirted with the populationIs it possible to combine the health care of the nation and budget revenues from bad habits?People and Business: Natural and Unnatural SelectionAlexandru BURDEINII: Being ethical becomes vital in business nowadaysValeriu Lazar: The biggest stupidity one can do now is to fire peopleMarin CIOBANU: We are creating opportunities for business development in Moldova, not only in free economic zones2019: three steps forward, two steps back.Plamen MILANOV: 13 persons became millionaires in Moldova within a year due to the lotteryVictor SHUMILO: The sale of hybrid cars exceeded the sales of cars with traditional fuels in 2019."Bewitched by the "Annus Mirabilis". The main events of 2018 Trucks will be able to cross the Moldovan border much quickerAbout the "second coming" and control over the banking system of MoldovaPrivatization of Air Moldova: 2000 vs 2018. To find 10 differences!The Head of USAID Office in Moldova Karen Hilliard: "We promote the idea that winemaking and tourism are integral whole"The Secrets of the Moldovan Foreign Exchange Market - 2017 15 years of leasing business in Moldova: through diversification to expansionMoldovan Leu vs Geopolitics. How does the currency rate interplay with government, entrepreneurs and world’s processes?10 years ago construction of the Trans-Oil terminals in Giurgiulesti port startedDoes it take $200 million out of consumers' pockets to implement European Directives? Who protects the new edition of the law on internal trade?State Securities Market 2014-2016: The Ministry of Finance calculates the losses, investors - income.It will affect each and every one and you won’t find it funny.A careful attempt to pass the dead zoneT-Bills market: The Ministry of Finance is chasing for money, investors - for profitability. Both should be ready for any scenario.The money that can be washed…Phoenix with the Arab capitalMoldova’s Key Macroeconomic IndicatorsPrices at filling stations

Banking shares are no longer liquid?

Banking shares are no longer liquid?

For the last three years the active movement with the number of shares of commercial banks of Moldova - both small and large were seen.

The press has actively used such phrases as "hostile takeover" and "non-transparent shareholders".

As a result - there are changes in legislation. In particular on April 5, 2013 the law prohibiting residents of offshore zones to have shares in Moldovan banks has come into force. So companies that do not apply international standards of transparency - namely those which are in offshore, are prohibited to own banks in Moldova.

The law stipulates that companies from the offshore zones is unable directly or indirectly to have a share in equity of Moldovan banks, and will be required, either to register in Moldova, or to dispose of the relevant shares within one year from the date of entry the law into force.

The main purpose of changes is to increase the transparency of the banking activities and preventing the implementation of raider attacks using residents of the offshore zones.

More than a year has passed since entry into force of these changes in the law on financial institutions, and hence, no offshore company directly or indirectly owns any action of any Moldovan Bank. The National Bank designed to exercise control over the implementation of this law, in case of revealed violations from April 5 of this year already has the right to sue, but about this fact the situation in the banking sector on this account has not become clear.

On the other hand, if this law is observed, why the international financial institutions - such as the international Finance Corporation of the World Bank, the European Bank for reconstruction and development, the European investment Bank suspend the work with the banks and information on the shareholders became non-transparent.

The representative of EBRD in Moldova Iulia Otto: "Our decision does not apply to the banks- they are healthy and they are managed by a good team. But we do not know who owns the bank; our fears are connected with the events on the joint stock level."

If the last year the investments of the EBRD in the banking sector of Moldova exceeded 40 million euro this year, they decreased up to 20 million euros.

That is, on the one hand from international financial organizations still have questions to the shareholders of some of the banks; and the National Bank can not dispel their doubts. Hence my assumption is that the National Bank does not fully perform its functions. After all, the National Bank has the power to establish order relative to the shareholders of commercial banks, and it can performs its functions on its’ own- through the court - after all, this was reflected in amendments to the law on financial institutions, which entered into force in April of the last year.

Instead use of the existing mechanisms of control over banks and their shareholders, the National Bank again lobbying new legislative changes.

So, on June 26 of this year the Parliament is considering a package of amendments to some legislative acts which provide three main changes:

1. Lowering the threshold share of the Bank's shares, for purchase of which permission of the National Bank from the current 5% up to 1%.

2. Shares of banks may not be pledged.

3. Toughening criminal responsibility for the management of commercial banks.

If earlier for purchase of five and more percent of the Bank's shares, the buyer or investor had to get permission of the National Bank, first of all, this threshold will be reduced to 1%.

Special report of the National Bank provides the requirement to disclose information about shareholders holding one or more percent of the shares. The only difference is that for purchase of shares up to 5% permission of the national Bank is not required. It had information about 1% of the shareholders and had the opportunity to review and respond accordingly.

The buyer before bypassed the necessity to obtain permission from the National Bank, packages the rate less than 5% of such examples at the market. Thus the reduction of the threshold from 5% to 1% will complicate the lives of potential buyers but not as much as the hope of the authors of the law, and at the end - bank shareholdings can be divided into one hundred and one shareholder. This is done as they don't want to get permission, because this process is dragged out for months.

In fact, the National Bank already owns a number of tools to fully monitor the activities of banks - their rules and shareholders.

When subjected to new restrictions, does anybody of the officials naively believe that this is a great help? Limitations push market participants to search roundabout ways. If the restrictions would be reasonable, civilized, and then the business to bypass them it would not make sense - normal business much easier to work with reasonable laws.

Lowering the threshold from 5% to 1% kills already dead stock market. For example, an insurance company that is obliged by law to invest the reserves in liquid assets - to buy a couple of percent of the Bank's shares, only if someone will put them up for sale. It is necessary to obtain permission from the National Bank. It has 60 days for consideration of the request. By 59 days, the National Bank asked to provide additional information and again extend the period of consideration. During this period, shall the seller wait for the final result? Unless the buyer under such prohibitions will invest in the bank shares, which are a priori are highly liquid may be ceased.

Liquidity (from Latinas - liquid flowing) - an economic term for the ability of assets to be sold quickly and at a price close to market. Liquid means- we pay money.

Since now even 1% of shares cannot be promptly paid in money, one conclusion: Bank shares are no longer liquid! This is the result of the relevant changes.

The bill was debated in the Parliament on June 26 - the day before the signing of Association agreement with the EU. The European Union approval to buy shares of the Central Bank issued to customers at the amount of 10%. We have a threshold of 5% which now is offered at the rate of 1%.

Everybody knows that the main law of the Republic of Moldova is Constitution.

Article 127 of the basic law of our country says:

(1) The State shall protect the property.

(2) The State guarantees to everyone for the right of property in all forms, not conflicting with the interests of society.

Changes prohibit owners of the banks’ shares to manage their property.

In particular, the bill prohibits the transfer of the bank shares in pledge and to include in the charter capital of other enterprises. Thus, the authors of the law hope to prevent cases of change of the owner (or pressure on the owner) without the approval of the National Bank.

Wait a minute!

Now the investor - Moldovan or foreign one can buy shares of the banks, if it cannot simply to exercise their right of ownership - no quietly to sell or pledge, or to use them at its discretion.

That is, under the Constitution, the state guarantees to everyone the right of property in all forms, with one caveat - not conflicting with the interests of society.

Well, congratulations - with the adoption of the amendments to the law of your property would be contrary to the interests of society?! Or either these changes contradict the Constitution?

As the third question of principle changes - increasing criminal liability management of the banks, so ordinary discrimination.

Announcement of Dorin Dragutanu during the parliamentary hearings was as follows:

"Banks are special institutions; the Bank administrator is different from the Director of the shoe factory. The impact of losses from the activities of the Central Bank has much more impact on financial stability than the loss of the Director of another enterprise. For special institution with the special risks special requirements for accountability shall exist."

The new amendments to the law - it is unclear when the Bank Manager will undertake criminal responsibility? Who will decide this issue?

If you had the opportunity to observe the parliamentary session on June 26, you would have seen a lot of questions to the authors of the bill. Some deputies from different factions, and this is important - well versed in the subject and many spoke out against these amendments.

I liked the speech of the member of Iurie Bolbocean (min 110), which, in my opinion, have defined the main idea of the opponents of the bill, and along the hole of the bill. He appealed to the Chairman of the parliamentary Commission for budget and Finance Veaceslav Ionita:

 "We provided the national Bank of emergency functions, which today has no state authority, except for the NBM.

The function of regulation, licensing, control, supervision and sanctioning.

Everything is in the hands of the NBM. Moreover, in the use of out-of court procedures concerning the liquidation of the each bank.

The National Bank has emergency powers. But at the same time, banks fail and no one of them is responsible for it.

Veaceslav Ionita noted: "The Commission has not discussed this issue. But if you come to the Commission session we will discuss this question".

The bill was put to the vote. The hall was attended by 67 deputies, when necessary half of votes necessary for voting are 36. The law was adopted in the first reading.

I started with the fact that a year ago the National Bank insisted on coming into force of the law banning offshore companies to own shares of the banks. May be the deputies before the voting for the new changes, first ask the report on the work done on the previous changes? Only today the National Bank should have a full picture of the owners of 1% (based on the approved same instructions).

Instead, new restrictions are imposed at odds with European norms and the Constitution of Moldova, with the restriction of legitimate rights of Moldovan citizens.

But someone has to monitor and enforce effective legislation, without distracting new bills.

InfoMarket together with the joint project of the Agency with the TV channel MBC.

The program airs on channel MBC
on Fridays at 19.30.
on Mondays at 07.15; 13.20 (repeated).