Moldova’s financial system demonstrated stability in 2020, and despite all the problems, the banking sector still proved good financial performance, with good profitability and solvency - the NBM stated.
This is stated in the Financial Stability Report for 2020 published by the National Bank of Moldova (NBM). It notes that in 2020, the financial system of Moldova demonstrated stability, and economic and social conditions, which were affected by the consequences of the COVID-19 pandemic, were characterized by uneven development and materialization of risks in the country's economy’s segments. The National Bank stressed that the Moldovan economy suffered from the pandemic, which caused a global recession due to the cessation of economic activity in order to slow the spread of the coronavirus. In these conditions, in addition to the internal lockdown, the recession was also influenced by many external factors, such as the conclusion of economic contracts with the EU and CIS countries, as well as the restriction of the movement of people and goods, which led to a decrease in imports as well as exports. Against the background of the measures taken by the government, the budget deficit increased and the national debt grew. At the same time, as noted by the NBM, despite all the problems of the analyzed period, the banking sector still proved satisfactory financial performance, maintained a stable position of profitability and solvency. In the context of unfavorable economic conditions and constraints associated with the COVID-19 pandemic, the banking sector's loan portfolio maintained its growth rate. The share of problem loans in the total volume of loans decreased, mainly due to an increase in the total portfolio. Credit risk continued to pose the most significant threat to the stability of the banking sector. At the same time, credit risk analysis underscores the effectiveness of prudent risk management policies by banks, which have managed to maintain sufficient capital in an unprecedented crisis environment to cover anticipated potential losses even in the most pessimistic asset quality scenarios. As noted by the NBM, although the interest rates charged by banks have developed unevenly, the interest margin of banks has increased. Banks' open foreign exchange positions were within reasonable limits and the direct impact of exchange rate volatility on the sector was mitigated. Banking sector liquidity remained well above regulatory requirements. In the conditions of restrictions applied during the year, banks were able to maintain current liquidity at the level preceding the pandemic, including further minimizing existing risks. The non-bank lending sector has slowed down the evolution of its expansion across all subcomponents. The volume of the balance sheet and the total loan portfolio in the non-bank lending sector remained practically at the same level as at the end of the previous year, and the most significant was the profitability of non-bank credit institutions, which decreased by half compared to the accumulated profit in 2019 (including the creation of reserves, in accordance with prudential requirements in force in 2020). The National Bank emphasizes that the risk of over-indebtedness of the population and the risk associated with loans pegged to foreign currency remain the main risks associated with the non-bank lending sector. Measures were taken to strengthen the supervisory and regulatory framework for this financial segment. The NBM points out that improving national legislation is essential for creating a safe, stable and transparent financial sector. In 2020, changes were made to the legislative and regulatory framework in the context of strengthening financial stability, continuing the reform of the financial system by bringing it in line with best practices and international standards in this area, and improving infrastructure. // 20.09.2021 – InfoMarket
