Publisher: EXPERT-GRUP Centrul Analitic Independent

The transparency rating of Moldovan bank shareholders

Ratingul transparenței acționarilor băncilor din Moldova

Author(s): Natan Garștea / Language(s): Romanian

Keywords: bank share-holders;

One of the main vulnerabilities of many Moldovan banks, with a strong imprint on the national economy, it depends on the transparency and low quality of the shareholders. Many times, this problem undermined the corporate governance of banking institutions, which resulted in the accumulation of toxic assets in the system and even the bankruptcy of 3 important banks in 2015 (Bank of Savings, Social Bank and Unibank). Therefore, with a view to solving the current banking crisis from the Republic of Moldova, it is absolutely necessary to increase the transparency and quality of bank shareholders. In this sense, actions are needed, both on the part of the NBM and on the part of the commercial banks. Not lastly, increasing the transparency of bank shareholders and presenting the real final beneficiaries it is also one of the recommendations and preconditions of the International Monetary Fund with a view to reform quality of the domestic banking sector and the signing of a potential memorandum. In turn, by this memorandum depends on the unlocking of external budgetary assistance from the other partners Development. We also believe that increasing the transparency of bank shareholders is, obviously, the primary prerogative of the NBM, but this will not be possible without the stronger motivation of banks for this process.

Monitoring report on the implementation of the Roadmap regarding the Agenda of Priority Reforms (March-June 2016)

Raport de monitorizare a implementării Foii de parcurs privind agenda de reforme prioritare (martie-iunie 2016)

Author(s): Author Not Specified / Language(s): Romanian

Keywords: Reform Priorities in Moldova;

At the time of writing this Report (June), the completion deadlines for 57 actions out of the 69 provided by the Roadmap have expired. Respectively, out of the total of 69 actions, 24 (35%) were carried out without deficiencies; 16 (23%) of the actions were performed with deficiencies; 19 (27%) of the total number of actions are in positive progress and, respectively, 4 (6%) are in negative progress, with serious deficiencies that may prevent the successful completion of the action. The realization of 6 (9%) actions was not initiated. // At the same time, we would like to emphasize the fact that the quantitative results regarding the number or percentage of actions carried out in the Roadmap should be considered as a secondary indicator in relation to the quality of the actions carried out. Some of the actions included in the Roadmap are duplicated1, while others are of a technical and simplistic nature2 and should not have been found in such a document. At the same time, their implementation increases the number or the rate of actions carried out without actually constituting actions that create conditions for the implementation of the necessary reforms or demonstrate the will to reform.

Assessing the Impact of recent Reforms in the Tax Administration

Assessing the Impact of recent Reforms in the Tax Administration

Author(s): Adrian Lupuşor / Language(s): English

Keywords: tax administration of Moldova,

During 2014-2015, the Main State Tax Inspectorate (STS) of Moldova, supported by SIDA, as well as other donors (World Bank, IMF, USAID/BRITE and EU), implemented a series of fundamental reforms. The interventions were primarily aimed at increasing the efficiency of tax administration and stimulating the voluntary fiscal compliance by easing the communication and interaction between fiscal authorities and taxpayers. This report aims to undertake an assessment of the net impact of these reforms. The analysis will be based on econometric, statistical, as well as qualitative methods, reflecting the evolution of the fiscal system in the last couple of years, with a primary focus on tax collections and interaction with the taxpayers.

The Bank Recovery and Resolution Law. Bank Recapitalization Regime (bail-in) and State Guarantee

The Bank Recovery and Resolution Law. Bank Recapitalization Regime (bail-in) and State Guarantee

Author(s): Dumitru Pintea / Language(s): English

Keywords: bail-in;

The bail-in procedure is a relatively new one at global level. Actually, according to Directive 2014/59/UE, up until now no European financial institution was salvaged from bankruptcy through bail-in5. Considering the complexity of the Directive, the existing contraindications between European governments regarding the bail-in procedure, as well as the extremely strong lobby from international financial groups, certain reluctance in implementing the provisions is present in several European countries. However, the recent history notes the use of bail-in in the Cyprus banking crisis, and more specifically, in the recovery of the financial situation in two financial institutions with systemic impact.

Is the introduction of meal vouchers an opening of "Pandora's box"?

Este oare introducerea tichetelor de masă o deschidere a „cutiei Pandorei”?

Author(s): Alexandru Fală / Language(s): Romanian

Keywords: meal-vouchers;

At the beginning of February 2017, the President of the Parliament proposed the introduction of meal vouchers in the Republic of Moldova. In order to popularize the initiative and clarify the technical aspects regarding the use of meal vouchers, several public discussions were organized with representatives of government institutions, employers and unions. However, the introduction of meal vouchers remains an open topic, which at the moment causes conflicting opinions. // A brief analysis of the draft "Meal Voucher Law" highlights the weak analytical component of the normative act and the weak argumentation in favor of the introduction of vouchers. A first aspect refers to the extremely vague specification of the problem to be solved. In the informative note related to the draft law, the problems to be solved by the introduction of meal vouchers are presented in an equivocal way and without going into details. The note makes a general mention that the introduction of meal vouchers will solve: (i) fiscal problems (the reduction of the informal economy will increase VAT receipts), (ii) social (increasing the purchasing power of employees and economic) and economic (development of the food trade sector).

How to Turn ”Prima Casa” Program from Dream into Reality

How to Turn ”Prima Casa” Program from Dream into Reality

Author(s): Sergiu Gaibu / Language(s): English

Keywords: housing shortage;

On 15 December 2016, the topic ”Housing for young families and diminishing the envelope wages phenomenon” was included on the agenda of the Economic Council under the Prime Minister. Continued consultations with NBM and financial and banking institutions were found to be necessary, just like the working group determined. The creation of a “Prima Casa” program with a wide national coverage is mostly prevented by the lack of cheap and long-term resources in national currency and by the interest rates volatility for national currency resources caused by crises and inflationary processes. This problem becomes even more striking in the context of the low population income, which affects the demand for such products. As long as reliable solutions to address these deficiencies are not found, any initiative of “Prima Casa” project is doomed to failure.

How to Encourage the Development of Renewable Energy in the Republic of Moldova?

How to Encourage the Development of Renewable Energy in the Republic of Moldova?

Author(s): Alexandru Fală / Language(s): English

Keywords: renewable energy in Moidova;

The Law on Promoting the Use of Energy from Renewable Sources, which transposes Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources, will enter into force at the end of March 2017. The effective application of the respective law is crucial for the Republic of Moldova, considering the limited conventional energy sources, as well as confined energy independence. Thus, Moldova greatly depends on energy import, which over the past years has become uncertain due to tense relations with the Russian Federation and armed conflict in Ukraine. Therefore, the development of renewable energy sources will allow to balance the payments and to strengthen (at least, to a certain extent) the country’s energy security. // The purpose of this document is to scan the renewable energy sector and policies in this field, and to come up with recommendations for effective application of the Law on Promoting the Use of Energy from Renewable Sources.

Ratingul transparenței acționarilor băncilor din Moldova

Ratingul transparenței acționarilor băncilor din Moldova

Author(s): Dumitru Pintea / Language(s): Romanian

Keywords: shareholders Moldavian banks; Transparency;

The purpose of this report is to provide the general public with a credible source of information on the degree of transparency of bank shareholders and, in this way, to hold banks accountable in the process of improving shareholder transparency. One of the main vulnerabilities of several Moldovan banks, which has a strong imprint on the national economy, is the transparency and low quality of many shareholders. Often, this issue undermined corporate governance and facilitated exposures to related parties, ultimately resulting in significantly riskier activity. Also, the results of the banking crisis of 2014-2015 demonstrate that the lack of transparency of shareholders and final beneficiaries was one of the key elements behind the massive frauds in the sector.

Are the Sanctions envisioned by Law enough to Deter the Bank’s improper Behaviour?

Are the Sanctions envisioned by Law enough to Deter the Bank’s improper Behaviour?

Author(s): Dumitru Pintea / Language(s): English

Keywords: Banking Sector Moldova;

To protect the interests of depositors and to maintain the stability of financial system, the central banks or other assigned institutions have the duty to ensure the regulation and prudential supervision of commercial banks. These objectives can’t be achieved unless prudential norms and indicators are established, their compliance is monitored, and if appropriate, sanctions are imposed to prevent and limit the risks. In addition, taking into account the possibility to calibrate risks, the sanctions aim to correct the modus operandi of the bank as a whole, and individually, of key persons, who ultimately decide on the level of assumed risks. The international financial leaders have reached a consensus on the need to strengthen supervision and prudential regulation framework because of pressing negative effects and frequency of banking crises. The new Basel III Agreement is the outcome of many debates and covers a number of reference norms designed to reform and strengthen the worldwide financial industry. As regards the relevant intervention measures and sanctions, the new provisions aim to standardize both their level and implementation mode or triggering conditions. Though the new provisions fundamentally affect the bank’s profitability, a number of countries started to implement them in 2011, being aware of the need to maintain the macro-prudential balance.

What Factors Underpin Bank Disintermediation and How Can We Stimulate the Lending Activity?

What Factors Underpin Bank Disintermediation and How Can We Stimulate the Lending Activity?

Author(s): Dumitru Pintea / Language(s): English

Keywords: Banking Sector Moldova;

In order to identify the mechanisms/tools that could be used by NBM, banks and Government to overcome this lack of confidence and resume the lending activity, Expert-Grup committed to facilitate the dialogue between commercial banks, NBM, experts and other stakeholders. How we can stimulate the lending activity and bring back trust in the bank-customer relationship study was developed for this purpose1. This document focused on two subject lines. On the one hand, the study aims to identify the actual causes that fuel the bank disintermediation and the constraints that hinder the expansion of bank loans, on the other hand – to present solution how to foster this activity. In addition, in order to explore the actual situation, the Questionnaire for Assessing the Lending Activity was developed and sent to banks. This tool allowed forming a much clearer picture of the constraints affecting the demand and supply by types of loans. In the end, the results were discussed at a round table attended by representatives of commercial banks, Government, top management of NBM and other economic experts. The presence of all the stakeholders around the same table allowed to express the inside vision on this phenomenon and this note comes to synthesize and to totalise the results of the actions conducted by Expert-Grup in order to identify the factors underlying the bank disintermediation and the solutions regarding the stimulation of lending activity.

Long-term financial instruments: how to develop and why we need them?

Long-term financial instruments: how to develop and why we need them?

Author(s): Eugen Ghilețchi / Language(s): English

Keywords: Moldova Banking Sector;

Moldova, like other developing countries, faces a relatively short maturity of financial instruments. The average weighted maturity of state securities in circulation is only 6.5 months. The average weighted maturity of the portfolio of new loans granted throughout the banking sector in 2016 made up 29 months, while the average duration of loans granted to legal entities in developed countries is 58 months. Meanwhile, about 92% of the total new deposits attracted by local banks in 2016 have a term of up to 1 year. Thus, economy of the country is constrained by the lack of long-term credit instruments that would otherwise enable efficient long-term investments: real estate projects, infrastructure projects, etc. // The problem of maturity of financial instruments has two aspects: lack of the supply of instruments with long-term maturity and low demand from the population for such instruments. A basic precondition without which it is impossible to extend the maturity of financing is to ensure stable macroeconomic conditions.

KROLL Investigation: Between Expectations and Reality

KROLL Investigation: Between Expectations and Reality

Author(s): Eugen Ghilețchi / Language(s): English

Keywords: banking fraud in Moldova;

In 2014, the domestic banking system was shaken by one of the biggest internal crises in our country's history. The bank fraud that resulted in the theft accounting for 12 per cent of the GDP was the consequence of flawed corporate governance in some banks, of dysfunctions and lack of coordination among state institutions, including the ones in charge of ensuring financial stability, as well as the consequence of ill-intentioned decision-makers in state institutions and banks1. In almost 3 years after the crisis, the authorities recovered around MDL 963 million from selling the assets of the three banks, while Kroll Company, contracted to conduct an investigation and support the authorities in recovering the stolen money, detected committed crimes that together add up to around USD 600 million2. // Currently, the only solution that could actually lessen the burden on citizens is to follow the missing money and to recover it to the possible extent. Taking into account the complexity of schemes used by crooks in bank frauds, the full recovery of the assets is virtually impossible in such situations. International experts believe that retrieving even 50 per cent of the lost money in such cases is an achievement.

Draft Law on Anti-Money Laundering and Countering Financing of Terrorism – Source of Economic Stability or Instability?

Draft Law on Anti-Money Laundering and Countering Financing of Terrorism – Source of Economic Stability or Instability?

Author(s): Sergiu Gaibu / Language(s): English

Keywords: Money Laundering;

The aim of this note is to provide recommendations on improvement of the draft law as well as of the certain elements of mechanisms present in Moldova on preventing and combating money laundering, so that to protect the fundamental rights, proper functioning of the business environment and to preserve a rational approach to prevention and combating the money laundering phenomenon. It is vitally important to understand the general context and the role of prevention and combating money laundering in such context. The primary goal of modern societies and states is to eradicate organized crime, drug trafficking, human trafficking, organ trafficking and illegal arms trafficking. In this context the international community developed services to identify and fight these crimes. Once the technologies were developed and the financial flows enhanced, it became obvious that the criminals’ ultimate goal is to bring the enormous income back into the legal ‘white’ circulation. And after realizing this fact, the combating of money laundering was organized and the money laundering activity was incriminated to attack the results of illegal activity.

Moldovan dairy: the difficult way towards the EU market

Moldovan dairy: the difficult way towards the EU market

Author(s): Valeriu Prohniţchi / Language(s): English

Keywords: dairy industry in Moldova;

As part of the EU-Republic of Moldova Association Agreement, the Republic of Moldova committed to approximate its sanitary and phytosanitary and animal welfare law to that of the European Union. However, approximating the EU legislation is not going to be an easy process. The Decision no.1/2016 of the EU-Moldova Sanitary and Phytosanitary Sub-Committee modifying Annex XXIV-B to the Association Agreement [2016/1074] adopts the full list of the EU legislation to be approximated by the Republic of Moldova and can be regarded as official Moldova SPS Strategy. The SPS Strategy refers to around 240 directives and regulations including general aspects, veterinary legislation, placing on the market of food, feed and animal by-products, food safety rules, specific rules for feed, phytosanitary legislation, genetically modified organisms and veterinary medical products. Deadlines for approximation cover the time period 2016-2020. It should be mentioned that around 10 pieces of EU legislation are directly relevant for the Moldovan dairy sector, which is the subject of this paper. Unfortunately, we do not have any evidence on the effective degree of approximation of the pieces of legislation due to be approximated in the period 2016-mid 2017.

Solutions for the mobilization of internal resources for Infrastructure Projects and the Development of the Country: State Securities Market

Soluții pentru mobilizarea resurselor interne pentru proiecte infrastructurale și dezvoltarea țării: Piața Valorilor Mobiliare de Stat

Author(s): Dumitru Pintea,Eugen Ghilețchi,Sergiu Gaibu / Language(s): Romanian

The concept of development and liberalization of the state securities market derives from the need to boost the development process of the capital market and the national financial system as a whole. As a result of the frauds registered in the banking sector, the reformation of the financial system becomes imminent, and the rehabilitation and recovery process is announced to be long and will gradually include all its components and sectors. Thus, although at the moment the reform process is focused especially on the banking environment, special attention and a sustained involvement of efforts must also be given to the capital market, or there are solid premises for this sector to become an important element of the financial intermediation mechanism, but also a factor for diluting the risks and vulnerabilities present and revealed by the banking sector.

Preventing and combating money laundering: Roadmap for adapting the regulatory framework to the context of the Republic of Moldova

Prevenirea și combaterea spălării banilor: Foaie de parcurs pentru adaptarea cadrului regulator la contextul Republicii Moldova

Author(s): Sergiu Gaibu / Language(s): Romanian

Keywords: money-laundering; criminal financing;

As a result of the analysis of the situation of the Republic of Moldova, based on the vulnerabilities of the private sector but also of the state institutions, 13 principles to be followed were developed for the realization of a balanced and rational system for preventing and combating money laundering and terrorist financing. The established principles take into account the requirements of EU Directive 2015/849, the money laundering risks specific to the environment in the Republic of Moldova, as well as the limited resources of the business environment and those of public authorities. Also, these principles focus on the critical risks of money laundering and elimination of vulnerabilities within state institutions, the risks of abusive applicability and susceptibility to corruption.

Monitoring report on the implementation of the Priority Reform Action Roadmap (5th July – 22nd November 2017)

Monitoring report on the implementation of the Priority Reform Action Roadmap (5th July – 22nd November 2017)

Author(s): Author Not Specified / Language(s): English

Keywords: reform priorities in Moldova;

This report provides an independent evaluation of the implementation of Roadmap provisions for June - November 2017. The document covers eight policy areas, with a summary of developments for each of the actions, comments on the main achievements, and a list of relevant policy recommendations. Evaluation of the implementation of provisions of the Priority Reform Action Roadmap was based on a methodology focused both on the evaluation of the implementation in terms of the established timelines and in terms of the quality of the implemented actions. Given that timelines for several actions included in the Roadmap were rather tight, and therefore were often missed, the evaluation of progress was focused on the quality of acts adopted/measures taken and their potential impact (Annex 1).

About how public money is lost: Synthesis of the reports of the Court of Accounts, Semester I 2017

Despre cum se pierd banii publici: Sinteza rapoartelor Curții de Conturi, Semestrul I 2017

Author(s): Tatiana Savva / Language(s): Romanian

Two decisions out of the 10 published, concerned the way in which the institutions previously referred to in the audit reports implemented the recommendations submitted: the Agency for Interventions and Payments in Agriculture on the subject of the subsidies granted and the Ministry of Internal Affairs on the subject of real progress and prospects for the automation of processes in the field internal affairs. // This study, in turn, comes to present the synthesis of the main findings from the reports of the Court of Accounts on four themes: the way in which the money from the Mandatory Medical Assistance Insurance Funds is spent, how correctly the money from this fund was spent by the National House of Social Security, how the money was spent to restructure the wine sector and how well the National Food Safety Agency and its subordinate institutions manage the financial resources and assets under management.

Valorization of useful mineral resources in the Republic of Moldova: plus or minus?

Valorificarea resurselor minerale utile în Republica Moldova: pe plus sau minus?

Author(s): Dumitru Budianschi,Iurie Morcotilo,Valerian Ciobotaru,Eugen Ghilețchi / Language(s): Romanian

Keywords: mineral resources in Moldova;

The Republic of Moldova is a country with few underground resources, at least at the current level of research. Consequently, the Republic of Moldova does not have an extractive sector with an important weight in the structure of the economy. At the same time, without this sector it would be difficult to cover the needs of supplying the population and businesses with homes, buildings and other infrastructure elements. On the other hand, if we take into account the fact that for the Republic of Moldova the soil and climate traditionally represent the fundamental resources for livelihood and economy, then the way in which useful mineral resources are exploited is very important. The object of this analysis is only the widespread useful mineral resources (sand, clay, building stone, loamy sand and sandy clay, etc.). Respectively, oil, natural gas, solid fuels were not included in this study.

Testing Policy Options to FightTax Evasion using Behavioural Insights

Testing Policy Options to FightTax Evasion using Behavioural Insights

Author(s): Adrian Lupuşor,Rustam Romaniuc,Vadim Gumene / Language(s): English

Keywords: fighting tax evasion;

The shadow economy in Moldova has reached the point where it has a very strong and persistent negative impact on the tax revenues, but especially on the economic growth. It placed Moldova among the countries with the highest level of shadow economy in the region. In recent years, the shadow economy in Moldova has been steadily growing and spreading, affecting increasingly the development of the economy. The immediate effects of tax evasion are related to forgone losses to the state budget (fiscal discrepancy). The large size of the shadow economy is mainly due to weak institutions, characterized by limited administrative abilities in the public sector to coordinate and manage the economic system and the relationships that characterize it. In addition, it is caused by perceptions about high fiscal pressure, complexity and instability of fiscal regulations, weakness of the tax administration, moral hazards and contagion (when some individuals observe the behaviour of other individuals and try to replicate for financial gains). In order to properly address this issue in a sustainable way, the policies, so far did not take into account the behavioral insights – the social norms and psychological factors that explain tax evasion in Moldova. This study comes to fill this gap by providing the necessary analytical framework that explains the tax evasion from the behavioral point of view and provides policy recommendations in this regard.