Moldova (bbabo.net), - The National Bank of Moldova (NBM) recognizes that, thanks to reforms in the banking sector, banks are showing good financial results. NBM President Octavian Armasu focused on the stability of the banking sector and on the fruits of the reforms, logos.press.md reports.
He said that the reforms carried out in 2018-2020 gave the banks.
"These reforms are directly related to all the changes that were made in the banking sector after the crisis of 2014-2015. First of all, these are changes related to the transparency of shareholders, positive changes in corporate governance, changes in legislation implemented in accordance with the recommendations of Bazel-III ", - said the head of the NBM.
Armash spoke about how the changes helped the system to function during a pandemic and economic crisis.
“It would be fair to admit that banks entered this crisis strong, well prepared, with sufficient reserves. The banks had normal equity capital, liquidity, and high readiness in terms of competent corporate governance of banks.
Banks go through the pandemic and economic crisis without shocks or losses. Moreover, I want to say that the banking sector during this crisis period was that reliable buffer and instrument that supported the Moldovan economy, "he stressed.
Armashu noted that during the pandemic crisis, there was no significant impact from the government in terms of the fiscal impulse.
I would say that if there was this impulse, then it can be characterized as rather moderate. And what supported the economy during this period was the banking sector
I think that the actions of the NBM on monetary policy also supported the economy. We reduced the base rate quite noticeably and significantly, added liquidity to banks by reducing the required reserve. And in this way, all of this helped the economy to recover in 2021.
I would say that the economy is recovering quite quickly this year. And even, probably, faster than predicted. But this is due to the fact that banks are actively supporting all segments of lending.
If we look at the portfolios of banks, then this eloquently confirms this hypothesis. We observe how steadily growing in 2021 and assets of banks, and deposits of the population, and loan portfolios.
In the first nine months of 2021, the loan portfolio increased to almost 55 billion lei, which is 16.9% more than the same period in 2020. It is noteworthy that the level of bad loans is declining. Its value in the banking system is 6.8%. This suggests that the banks, in addition to building up their loan portfolios, at the same time pursued a rather cautious and balanced policy.
The other side of this coin is that we are now facing rising inflation. And the growth of loan portfolios, unfortunately, is already significantly putting pressure on the consumer price index, provoking their growth. But at the same time, it should be understood that inflation is mainly due to supply shocks - the import of energy at high prices, the rise in the cost of oil products and the growing price of food on international markets, "said the President of the NBM.
He also discussed the profitability of banks.
"The profitability of banks should please their shareholders, not us. Profits have increased slightly compared to the previous year. Last year was difficult for everyone. the regulator does not have any banking activities at the moment, "said Armash.
The head of the NBM also commented on the opinion that banks are too strictly regulated by the regulator, which negatively affects lending.
“In my opinion, here it is important to determine with what period to compare strict regulation. banking system of the Republic of Moldova, it can be unambiguously argued that we no longer have to go through this.
Banks have the right to issue risky loans. They can do this with their own capital. The regulator does not prohibit them. But with a risky allocation of resources, banks must, of course, secure themselves at the expense of their own capital. And I must admit that banks are doing it. They sometimes go to provide loans with increased risk. But it is impossible to say that banks should give loans to the left and to the right. We can go back so very quickly in 2014. You know, I would not want us to go back there, and I am sure that no one else wants this either, "added the head of the National Bank.
He also spoke about the rate of return on equity capital shown by Moldovan banks."This indicator is not so much connected with the situation in the economy as with bank investors. The return on capital of banks is directly reflected in the value of shares. The higher the return on equity, the higher the value of shares, and vice versa. If the return on capital of banks is low, then their price paper will also be low.
It very much depends on how the bank structures capital, how it forms funds, how effectively it manages them. Banks can, to one degree or another, influence the rate of return, if, of course, they properly structure their capital.
If the rate of return on capital of banks in Moldova is compared with the countries of the region, then we are somewhere in the middle. But this comparison is not entirely correct. Because every country and economy has its own specifics. For this reason, it is not entirely correct to directly compare these values, "emphasized Octavian Armasu.
He said that the NBM is seriously considering introducing macroprudential indicators in order to use them in consumer lending.
"We believe that this must be done in order to prevent the risks associated with the accounts payable of the population," said Armash.
During the interview, he also discussed the fact that the NBM will soon have additional powers related to the supervision of insurance and non-bank lending.
"We proceed from the requirements of the law. And it states that the transition of the insurance market and the non-bank lending sector should take place on July 1, 2023. Recently, this work has significantly intensified, we hold meetings and conferences, within the framework of which we outline concrete steps in terms of fulfilling the requirements of the law. ", - says the head of the NBM.
He also commented on the fears of skeptics to Armash, who believe that the NBM's supervision over these segments will lead to a reduction in their portfolios.
“We at the bank firmly believe that there will be enough space for everyone on the Moldovan market. Banks and non-bank credit institutions have different risk profiles. Naturally, banks are much more conservative in terms of risks. loans from banks are cheaper, from non-bank lending organizations they are more expensive. From banks the process of obtaining loans is more complicated, while in these organizations it is simpler, and most importantly faster.
Each of these sectors of lending has its own distinct advantages. We understand that there are a number of clients, no matter whether they are business entities or individuals, who, for various reasons, are not yet ready to receive loans from banks. In other words, this category of clients is not yet served by banks. It is difficult for them to get loans from banks, but they may well receive financing from non-bank credit institutions. Yes, loans there will be a little more expensive, but they can be obtained easier and faster.
By doing this, we achieve another goal - financial coverage of the market for all categories of clients. Based on these considerations, we must understand that these institutions have their place in the Moldovan market, and they must exist and develop, albeit in an understandable, predictable and civilized framework, "he said.
Armashu thanked all colleagues in the banking sector for their good work in 2021.
“I wish every bank in 2022 to implement its business strategy in the best way, in the interests of customers, shareholders, the country and citizens.
The banking sector is very specific. Yes, it is the private sector of the economy, but it has an important public function that banks are called upon to perform as financial institutions.
I hope that all of us together will continue to fulfill this public function for the benefit of the development of Moldova and its citizens, "he added.
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