Annual Report

2017
National Bank of Moldova
1 Grigore Vieru Avenue
MD-2005, Chis, inău
Tel.: (373 22) 822 606
Fax: (373 22) 220 591
web: http://bnm.md

ISBN 978-9975-4353-2-1
ISBN 978-9975-3211-7-4

© National Bank of Moldova, 2018

Note

The report was compiled using the latest statistical data held by the National Bank of Moldova,
the National Bureau of Statistics, the Ministry of Economy and the Ministry of Finance.

Also, were used data provided by international organizations and central banks of neighboring
countries.

Computation of some statisitcal data was conducted by the National Bank of Moldova.

All rights reserved. No part of this publication may be reproduced, and the use of data in studies
is allowed with the proper specification of the source.
Contents

Foreword by the Governor of the National Bank of Moldova (NBM) 8

1 External environment 12

1.1 Global economy, financial and commodity markets . . . . . . . . . . . . . . . . . . . . . . . 12

1.2 Evolution of important economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

1.3 Evolution of the neighbouring countries’ economies and the main trading partners . . 15

2 Economy of the Republic of Moldova 16

2.1 Real sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2.2 Evolution of inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.3 Public sector and tax policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

2.4 International accounts of the Republic of Moldova in 2017 (provisional data) . . . . . . 30

3 Monetary Policy of the National Bank of Moldova 38

3.1 Monetary policy objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

3.2 Monetary policy decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

3.3 Monetary policy achievements during 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

3.4 Monetary and foreign exchange conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

3.5 Monetary market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

3.6 Forex market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

4 Banking supervision 62

4.1 Evolution of the banking sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

4.2 The NBM supervisory activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

4.3 Banking sector risks’ assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

4.4 Fighting money laundering and terrorist financing . . . . . . . . . . . . . . . . . . . . . . . . 75

4
5 Payment System 77

5.1 Payment systems regulation and supervision . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

5.2 Licensing, regulation and supervision of payment services providers and of electronic
money issuers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

5.3 Automated interbank payment system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

5.4 State securities book-entry system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

5.5 Cashless payment tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

6 Cash operations 83

6.1 Evolution of currency (banknotes and coins in circulation) . . . . . . . . . . . . . . . . . . 83

6.2 Cash issuing, withdrawal and processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

6.3 National currency counterfeiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

6.4 Issuance of jubilee and commemorative coins and banknotes . . . . . . . . . . . . . . . . 86

7 Activity related to modification of the legal and regulatory framework 87

7.1 Prudential regulation, regulation of accounting evidence in banks . . . . . . . . . . . . . 87

7.2 Foreign Exchange Operations Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

8 External activity of the NBM 92

8.1 International Collaboration of the Republic of Moldova . . . . . . . . . . . . . . . . . . . . . 92

9 Internal activity of NBM 101

9.1 Corporate Governance of the National Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

9.2 The strategic plan of the National Bank of Moldova . . . . . . . . . . . . . . . . . . . . . . . 105

9.3 Management and organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

9.4 Internal audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

9.5 Information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

9.6 Human resources management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

10 Analysis of the financial situation for 2017 111

10.1General considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

10.2Available profit for distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

10.3Capital and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

11 External communication 115

A Statistical tables 124

List of abbreviations

AIPS Automated Interbank Payment System

ARSS Automated remote service systems
BAAM BIS Asset Management Asset Allocation Module
BES Book-Entry System of Securities
BIS Bank for International Settlements
BSCEE Group of Banking Supervisors from Central and Eastern Europe
BSTDB Black Sea Trade and Development Banlk
CBN Central Bank of Netherlands
CEFTA Central European Free Trade Agreement
CHC Construction of housing cooperatives
CIS Commonwealth of Independent States
CPI Consumer Prices Index
CSD Central Securities Depository
DNS Designated-Time Net Settlement System
DvP Delivery versus Payment
EBRD European Bank for Reconstruction and Development
ECF Extended Credit Facility
EFF Extended Fund Facility by IMF
EU European Union
EUR European Single Currency
FoP Free of Payment
FSVC Financial Sevices Volunteer Corps
GB Government bond
GDP Gross Domestic Product
HHI Herfindahl-Hirrschmann index
IAD Internal Audit Department
ICT Information and communication technology
IMF International Monetary Fund
IOSCO International Organization of Securities Commisions
IPPI Industrial production price index
LCR Liquidity Coverage Ratio
MDL Moldovan leu
NBC National Bank Certificates

6
NBM National Bank of Moldova
NBR National Bank of Romania
NBS National Bureau of Statistics of the Republic of Moldova

NSFR Net Stable Funding Ratio

OPEC Organization of the Petroleum Exporting Countries
OSCE Organization for Security and Co-operation in Europe
REER Real effective exchange rate of the national currency

RM Republic of Moldova
RTGS Real-Time Gross Settlement System
SAA Asset allocation approach

SDR Special Drawing Rights (XDR)

TRC Total Regulatory Capital
USA The United State of America
USAID United States Agency for International Development

USD U.S. dollar

7
Foreword by the Governor of the National Bank of Moldova
(NBM)

The activities carried out by the NBM in 2017 were in line with the reforming
strategy embraced by the Bank in 2016, among the main goals of which can
be listed the stabilisation of monetary conditions, the strengthening of the
banking sector and the improvement of the national legislative and regulatory
framework. These objectives aim at preventing the recurrence of law violations
that resulted in a bank fraud during 2012 -2014 and triggered the financial
crisis that followed. A catalyst to the implementation of these reforms is the
Agreement signed by the Republic of Moldova with the International Monetary
Fund (IMF) on 7 November 2016.

In 2017, the NBM, in cooperation with the country’s authorities, successfully

fulfilled its commitments made to the IMF, the latter having declared as successful the first and
the second reviews of the progresses achieved in programme implementation, the fact that was
confirmed in the IMF decisions of 1 May and 20 December 2017.

Developments that took place on the international market produced mixed effects on the Moldovan
economy and, consequently, on the monetary policy of the NBM. On the one hand, a positive
evolution of global economy (+3.7% in 2017) created favourable conditions for economic growth
in the Republic of Moldova. In the European Union – the main trading partner of our country – the
economic growth reached 2.5% and the historically high unemployment rate has decreased. In
the East, after two consecutive years of recession, the economy of the Russian Federation grew
by 1.5% in 2017. On the other hand, the increase in global demand was the main cause of the
rise in international commodity prices, including food and energy. A faster rise in oil prices was
partially driven by the cut in extraction quota approved under the agreement of the Organisation
of Petroleum Exporting Countries (OPEC).

Against this background, the Republic of Moldova recorded a robust economic growth as well as a
temporary increase in domestic consumer prices.

• Thus, in 2017, the gross domestic product (GDP) grew by 4.5%, being driven by the increase
in domestic consumption and agricultural production output. The economic growth, recorded
in the main countries of emigration of Moldovan citizens, increased the volume of remittances,
which in turn contributed to the increase in the purchasing power of local consumers. In the
second half of the year, a revival of industrial activity and a strong growth of exports were
also recorded.
• In 2017, the average annual growth rate of consumer price index (CPI) recorded 6.6%, 0.2
p.p. higher than in the previous year. Annual inflation of consumer prices rose from 3% in
January to 7.3% in December 2017, being driven by the rises in energy prices, food prices
and tariffs for regulated services. However, annual core inflation continued to fluctuate within
the inflation target range, recording an average level of 4.8%. At the time of drafting this
report, the annual consumer price inflation fell to 3.7%, according to April 2018 statistics.

In 2017, as forecasts suggested a steady decline of the inflation rate, the NBM maintained its
policy of lowering the base interest rate, yet at a slower pace than in 2016: from 9.0% in early
2017 to 6.5% at the end of the year. At the same time, in order to absorb the liquidity surplus
and improve the transmission mechanism of monetary policy, the NBM increased the minimum
level of required reserves held in Moldovan lei from 35% to 40%. The minimum level of required
reserves held in freely convertible currencies (FCC) was maintained at the same level of 14%. The
NBM’s monetary policy, the decline of inflation projections as well as the favourable conditions
existing on the money market led to a significant improvement in the level of borrowing by the

8
Ministry of Finance on the domestic capital market. Thus, in 2017, the average interest rate on
government securities (GS) recorded 6.7% compared to 15.8% in 2016.

The liquidity surplus, recorded in the system, was largely the result of the increased inflow of
foreign currency remittances to Moldovan individuals, totalling 1.2 billion U.S. dollars, which
represents a growth of 11.2%, compared to the previous year. As a result, during 2017, the
Moldovan lei strengthened by 14.4% against the US dollar and by 2.3% against the euro. The
appreciation of the Moldovan lei against the U.S. dollar was partially driven by the weakening of
the U.S. currency against the euro, which fell from 1.0454 at the beginning of the year to 1.1935
against the euro in December 2017. Therefore, in order to prevent the excessive volatility and
appreciation of the Moldovan lei, the NBM, throughout 2017, intervened on the forex market by
purchasing the equivalent of 434 million U.S. dollars. As a result, the official foreign currency
reserves reached a record level of approximately 2.8 billion U.S. dollars by the end of 2017, thus
amply ensuring the equivalent of 5.5 months of imports of goods and services.

Along with the measures aiming to stabilise monetary conditions, the NBM has taken decisive
actions for strengthening the banking sector. To this end, the NBM conducted targeted inspections
to check the quality and transparency of the banks’ shareholders, verified related party
transactions, as well as performed asset quality assessments. Full-scope on-site inspections have
been conducted and completed at seven out of the eleven licensed banks. Those inspections
uncovered and eliminated the main uncertainty sources affecting the banking sector, whereas the
applied remedial measures, including those targeting capital retention, have significantly
increased the sector’s resilience. Thus, during the reporting period, capitalisation and liquidity of
the banking sector reached 31% and 55%, respectively. The implementation of prudential
supervision measures helped to restore the stability, transparency and credibility of the banking
sector, both on the internal and the external market.

For the first time in the last ten years, a reputable foreign investor entered the Moldovan banking
market. In November 2016, Banca Transilvania (the second largest commercial bank by assets
in Romania) together with the European Bank for Reconstruction and Development (EBRD)
announced its intention to acquire 39.2% of shares in BC "VICTORIABANK" S.A. The deal was
closed in January 2018, thus clearing the way for the NBM to end the intensive supervision of one
of the three systemic banks, which operate under the special supervision regime since 2015. In
cooperation with international experts, the NBM developed a strategy for the sale of the blocked
shares of the other two banks, to ensure their stability and good governance. The Parliament of the
Republic of Moldova backed the strategy of attracting foreign investors by amending the Law on
the Administration and Privatisation of Public Property, the updated version of which entered into
force on January 1, 2018. The legislative amendments provide the possibility of State interference,
under prescribed conditions, in the purchase and sale of the shares issued by systemic banks to
reputable investors. At the time of drafting this report, an international consortium filed a formal
request with the NBM to acquire a stake of 41.09% in BC "MOLDOVA - AGROINDBANK" S.A.

On January 1, 2018, a new Law on Banking Activity, which was adopted on October 6, 2017, was
finally enacted. It has a major role for the Moldovan banking system as it aligns the national
legislation with the EU Directives and introduces the best international practices (also known
as "Basel III" standards) in the field of prudential supervision. The law has been drafted during
2015-2017 in cooperation with experts from the central banks of Romania and the Netherlands
under the European Twinning programme. In order to allow licensed banks to adapt gradually
to the new rules, the law provides for a 2-year transition period. During this time, the NBM will
issue about 30 regulatory acts to align the local regulatory framework with the new banking law.
The impact study, which was carried out by the NBM based on financial statements as of 30 June
2017, confirms that all banks comply with the new prudential requirements. In order to prevent a
possible erosion of own funds before the implementation of the new rules, the NBM recommended
to a number of banks to refrain from paying out profits for 2017.

In 2017, the aggregate profit of the banking sector recorded approximately 1.5 billion Moldovan
lei, having increased by 8.6%, compared to 2016. The balance of bank loans, expressed in MDL,
continued to decrease, though at a slower rate, having dropped to 33.5 billion lei in December
2017, thus recording a decrease in value of 3.7%, year-on-year. This apparent decrease can be
partly explained by the effect of the exchange rate difference, as approximately 40% of loans
were extended in foreign currencies, which have depreciated against the Moldovan lei. At the

9
same time, the annual volume of the newly extended loans increased by 8.9%, compared to 2016,
amounting to 24.5 billion lei. The annual growth rate of the new loans extended in domestic
currency reached approximately 20%. The positive dynamics of lending was driven by lower
average interest rates and increased demand from individuals. The evolution of the lending
activity will continue to depend on the revival of demand generated by the corporate sector. The
balance of non-performing loans recorded 18.4%. Based on the recommendation of the NBM, the
licensed banks created additional reserves and ensured an 80% coverage rate of non-performing
loans in December 2017. Banks continued to take deposits, the balance of which reached 59.9
billion lei at the end of 2017, thus having increased by 9%, year-on-year. Corporate deposits
recorded the fastest growth rate, having increased by over 18% in one year. The deposit structure,
analysed by currencies, denotes a steadily increasing confidence placed by local population and
economic agents in the domestic currency: as of December 2017, 57.2% of deposits were placed
in MDL, compared to 53.5% as of December 2016 and 42.4% as of September 2015, in the midst
of the financial crisis.

The increased confidence of the population in the Moldovan lei and the stability of the exchange
rate allowed the NBM to launch, in June 2017, the project to introduce in circulation metal coins
with denomination of 1 lei and 2 lei. After an in-depth analysis of cash circulation in the Republic
of Moldova and of existing international practices, the project was extended to include coins
with denomination of 5 lei and 10 lei. Under this project, the NBM organised public consultations
with consumers, economic agents, local and central authorities. New metal coins were put into
circulation on February 28, 2018. The introduction of metal coins will allow the NBM to generate
savings in production costs, which are estimated at approximately 300 million lei in 20 years.

Without prejudice to its fundamental objective and its core competencies, the NBM pursues to
optimise spending. The increase of the minimum level of required reserves held in Moldovan lei
from 35% to 40% had as its corollary objective the reduction of the monetary policy expenditures.
At the same time, a significant increase in the volume of certificates issued by the NBM had a
reverse effect. Revenues gained from foreign currency transactions recorded a decrease, being
driven by the appreciation of the Moldovan lei. As a result, in 2017, the NBM recorded a loss of
95.31 million lei, which decreased by 64%, compared to 2016. At the end of 2017, the NBM’s
statutory capital of 2.35 billion lei accounted for approximately 5.1% of total monetary bonds.

The year 2017 was the first fully operational year of the NBM’s Supervisory Board. It consists of
seven members, of which four members are independent advisors who do not hold executive
positions at the NBM. The Supervisory Board had an intensive year having held 10 meetings during
the year. Three independent members of the Supervisory Board form the Audit Committee, which
monitors the financial reporting process, the efficiency of the internal control system, the activity
of the Internal Audit Department, as well as performs other duties that ensure the NBM’s effective
supervision of the banks. During 2017, the Executive Board has held 77 meetings at which 369
decisions were examined and approved.

In 2017, in order to improve the decision-making process, to streamline business processes and to
eliminate potential conflicts of interest, the NBM reorganised a number of departments according
to the best international practices. Simultaneously, the NBM reduced the number of managerial
positions by 4%, compared to 2016, and launched a strategy aiming at reducing the number of
support positions as opposed to core activity functions. In cooperation with a foreign consultancy
company, the industry leader on international market, the NBM has launched a reform of the
human resources management system. The bank’s internal reform and reorganisation were meant
to strengthen the institutional and human capacities of the NBM in order to provide a proactive
and high-quality public service.

We are determined to continue strengthening the banking sector and promoting its increased
transparency, as well as to implement reforms in other areas, such as monetary policy, financial
stability, payment systems, improving the quality of the domestic currency among others.
These goals were included in the NBM’s Strategic Plan for 2018-2020. The new strategy aims
at consolidating the achievements of 2017 and focusing efforts in areas that require further
improvement. A key objective of the new strategy is to enhance external communication and
financial education of population through media, web page publications, and social networking.

10
Looking at the tasks ahead, there is still plenty to do. However, 2017 has certainly represented
a year of significant breakthrough in the consolidation of the banking sector, which today is
increasingly regarded by population as more safe and reliable.

Sergiu Cioclea

11
Chapter 1

External environment
Chart 1.1 GDP comparative evolution in selected
economies (%)

1.1 Global economy, 7

financial and
commodity markets
Global economic activity continued to improve
in 2017. According to IMF estimates, global
economic activity accelerated by 3.7%, which
represented a 0.5 p.p. improvement compared
to 2016. Economic growth was broad-based,
with significant economic recovery registered
in Europe and Asia. Advanced economies grew
by an average of 2.3%, compared to 1.7%
recorded in 2016. The acceleration of
economic growth in developed economies has
been fuelled by stimulative measures, such as
"quantitative easing policies" promoted in
recent years by many countries. Among
advanced economies, the highest growth rate
was recorded in the euro area, 2.5%. Growth in
the euro area was fuelled by higher internal
consumption and increased confidence among
consumers, producers and investors in the
ability of the European community to
overcome challenges and carry out structural
reforms. Within the euro area, economy has
grown by 2.2% in Germany, by 1.8% in France,
by 3.1% in Spain and by 1.5% in Italy. The U.S.
economy has grown by 2.3%, compared to
1.5% in 2016. A slower growth rate was
recorded in the United Kingdom (1.7%)
following diminishing capital in the economy
on the background of uncertainties generated
by Brexit (Chart 1.1).
Emerging and developing economies grew, on
average, by 4.7% in 2017. This growth rate
represented a 0.3 p.p. increase compared to
2016. China’s economy grew by 6.8% in 2017.
After two consecutive years of economic
recession, the Russian Federation’s economy
grew by 1.5%. Higher oil prices and absorption
of economic shocks generated by sanctions
imposed on Russia by the EU and the U.S.
have helped it overcome an economic
downturn. Against the background of an
improving economy of the Russian Federation,
the economy of the CIS countries grew, on
average, by 2.2% in 2017 (Chart 1.1).
6
5
4
3
2
1
0
-1
US JP GB EZ DE FR ES IT RO CN CIS RU UA
2016 2017
Source: IMF, World Economic Outlook Update – January 2018,
Bureau of statistics of the concerned countries
Overall, in 2017, the U.S. dollar depreciated
against other international currencies. In
December 2017, the U.S. dollar index (USDX)1
fell to its three-year low of 91.8%. The impact
of the presidential election in November 2016
was followed by the difficulties encountered
with the U.S. Congress’s adoption of the tax
reform and the protectionist position of the
President Donald Trump. Only in October 2017,
after a consensus was reached to adopt tax
reforms, the U.S. dollar appreciated gradually
against other international currencies.
The Federal Reserve System (the Fed)
continued tightening its monetary policy,
having increased interest rates three times
during 2017. At the same time, the Fed’s
measures did not contribute to the
appreciation of the U.S. dollar as its decisions
to raise interest rates were anticipated by the
financial markets. The Fed’s tightening of the
monetary policy still contrasts with
ultra-stimulating monetary policies promoted
by other advanced economies (Chart 1.1).
In 2017, the diverging monetary policies of the
Fed and the ECB caused the European single
currency to appreciate, on average, by 2.0%
against the U.S. dollar. The uncertainties
surrounding Brexit negotiations have
1 USDX is an index calculated using the weighted
geometric mean of the U.S. dollar against a basket of
currencies: the euro – 57.6%, the Japanese yen – 13.6%,
the pound sterling – 11.9%; the Canadian dollar – 9.1%,
the Swedish krona – 4.2%, the Swiss franc – 3.6%.

12
contributed to the depreciation of the British consecutive years of decline. The main factors
pound against the U.S. dollar, on average, by that caused the increase were the depreciation
4.7%. Also, the Canadian dollar depreciated of the U.S. dollar and the increase in
against the U.S. dollar by an average of 2.1%, international oil prices, which are used as a
due to the U.S. President’s protectionist benchmark for other price indices, as well as
messages and the intention to renegotiate the growth in global demand. Stimulative policies
NAFTA agreement (Table 1.1). promoted during the last quarters also
contributed to these developments. Thus, in
2017, the average price of Urals oil reached
Table 1.1: Apreciation (-)/depreciation (+) of currencies in 2017
(%)
53.1 U.S. dollars/barrel, this represented a
USD
26.9% increase compared to 2016. The
2017/ increase in the international prices for oil also
2016 determined a slower decline in import prices
Advanced economies for natural gas supplied from the Russian
EUR -2.0
JPY 3.1
Federation. In 2017, the average import price
GBP 4.7 of natural gas from the Russian Federation was
CHF 0.0 165.5 U.S. dollars/1000 m3 , thus having
CAD 2.1 decreased by 14.5% compared to 20162 .
SEK -0.2
BRICS economies
International prices on the main food groups
BRL -8.4 have risen, on average, by 8.1% in 2017
RUB -13.0 (Chart 1.3).
INR -3.1
CNY 1.8 Chart 1.2 USDX evolution in the context of Fed monetary
ZAR -9.5 policy
Neighbouring economies and main trading partners
MDL -7.2
UAH 4.1
1.4 104
RON -0.2 1.2 102
BYR -2.9
TRY 20.8 1.0 100
Source: websites of concerned central banks, NBM calculus 0.8 98
0.6 96
Most currencies of emerging economies 0.4 94
appreciated against the U.S. dollar. Thus, in
0.2 92
2017 the Russian rubble appreciated, on
average, by 13.0%, the South African rand – by 0.0 90
9.5%, the Brazilian real – by 8.4%, and the 1/15 1/16 1/17

Indian rupee – by 3.1%. On the other hand, the The average effective federal funds rate FRS (%)
Chinese yuan depreciated against the U.S. USDX (right scale)

dollar by 1.8% during 2017. This depreciation

Source: Fed, Bloomberg
was registered on the background of an
increase in the CNY/USD exchange rate by Chart 1.3 The annual average growth rate of world price
4.7%, recorded in December 2017, as indexes (%)
compared to December 2016. Regional
currencies recorded mixed developments, the 30 26.9

Romanian leu and the Belarusian rubble 20

appreciated against the U.S. dollar, on 10
8.1

average, by 0.2% and 2.9%, respectively,

0
while the Ukrainian hryvnia and the Turkish lira -1.5
-10
depreciated against the U.S. dollar, on
-20
average, by 4.1% and 20.8%, respectively. The -18.7 -18.4 -14.5
negative evolution of the Ukrainian hryvnia -30
-24.4
-32.1
reflected negative dynamics maintained in the -40
economy, despite a large inflow of foreign -50 -47.5
financial aid. The depreciation of the Turkish 2015 2016 2017
lira reflects, to a large extent, the increase of Oil (Urals) FAO index Natural gas
the current account deficit and the
consequences of the stimulative monetary Source: Ministry of Economy of Russian Federation, FAO, ANRE
policies promoted in the previous years (Table
1.1).
The increase in oil prices during 2017 was
The year 2017 was marked by an increase in 2 NBM, preliminary figures
international commodity prices after two

13
determined by the provisions of the agreement by 3.0% in euro area and by 3.3% in the
signed by the OPEC countries on 30 November European Union. Strong exchange rate of the
2016, as well as the agreement signed on 10 European single currency contributed to the
December 2016 with 11 non-OPEC countries, increase in imports and exports by 9.7%, and
to reduce oil production output in the first half 7.1%, respectively. The decline of
of 2017. Subsequently, at the OPEC meeting unemployment rate to 8.6%, recorded in
held on 30 November 2017, the agreement December 2017, is another indicator of the
was extended through the end of 2018. Thus, revival of European economies and the
the OPEC oil supply in 2017 remained almost effectiveness of structural reforms
unchanged (+0.1%), compared to 2016, implemented during the previous years.
having recorded 39.3 mbd. Worldwide, oil Optimistic macroeconomic data determined
supply in 2017 represented 98.0 mbd, up 0.8% the ECB to reduce its asset purchases from 60
compared to 2016. As global oil demand to 30 billion euro, starting January 2018 (Table
reached 98.5 mbd, up 1.6% compared to 2016, 1.2). Although monetary policy measures
the international oil market recorded an undertaken by the ECB over the last few years
average deficit of 0.5 mbd (Chart 1.4). have greatly contributed to improving
inflationary outlook, reaching its 2.0% inflation
Chart 1.4 Global oil supply and demand (milion barrels per target in the medium term still remains a
day)
challenge for the ECB.

96.7 Table 1.2: The evolution of selected indicators in neighbouring

2015 economies, main trading partners in 2017 (%)
95.4
Euro Romania Russian U-
97.2 area Federation kraine
2016 GDP 2.5 7.0 1.5 2.2
96.9 CPI, 12/17/ 1.3 3.3 2.5 13.7
12/16
98.0 CPI, average 1.5 1.3 3.7 14.4
2017
98.5 annual
Industrial 3.0 8.2 1.0 0.4
production
93.0 94.0 95.0 96.0 97.0 98.0 99.0
Constructions 2.4 -5.4 -1.4 20.9
The world oil supply The world oil demand Export* 7.1 9.1 25.8 19.0
Import* 9.7 12.2 24.1 26.4
Unemployment 9.1 4.9 5.2 9.5
Source: U.S. Energy Information Administration (EIA) Source: Eurostat, NIS of Romania, Federal Statistics Service of
Russia, State Statistics Service of Ukraine
*Data on foreign trade with goods

After the UK decided to exit the EU, economic

1.2 Evolution of important
economies
In 2017, the U.S. gross domestic product grew
by 2.3%, a 0.8 p.p. improvement compared
to 1.5% in 2016. The acceleration of the U.S.
economic growth was reflected in the data on
wage growth, acceleration of inflation growth
rate and low level of unemployment. In 2017,
unemployment rate gradually declined from
4.8% in January 2017 to 4.1% in December
2017. Against this background of increased oil
prices and domestic consumption, consumer
prices in the U.S. recorded a slight increase with
an annual average of 2.1%. These outcomes
determined the Fed to increase interest rate
three times in 2017.
In the reporting year, euro area economy grew
by 2.5%, having recorded its highest economic
growth since the 2008-2009 global financial
crisis. Industrial production grew on average,
growth continued to slow down throughout
2017. GDP grew by 1.7%, having recorded a
slower growth rate compared to 2016. Slower
growth caused by a fall in real wages affected
private consumption growth rate and
uncertainties associated with Brexit leading to
a decrease in investments. A negative trend in
labour productivity remains a concern for the
UK economy, being partly attributed to the
increase in the number of low paid jobs. In
2017, for the first time after the Brexit vote,
unemployment rate fell to 4.3%, partly driven
by the reduction of the flow of immigration.
The consumer price index (CPI) recorded an
annual growth rate of 3.0% in the fourth
quarter of 2017 and 2.7% for the year. Major
contributors to the CPI growth were the rise in
prices for clothing, food and fuel. In November
2017, the Bank of England conducted its first
increase, since Brexit, of its refinancing rate,
by 25 basis points to 0.5% (Chart 1.6). The
Bank of England kept its inflation target at
2.0%. At the same time, the Bank of England
decided to maintain the stock of corporate

14
bond purchases at 10 billion pounds and the 1.3 Evolution of the
stock of government bond purchases – at 435
billion pounds. These quantitative adjustments neighbouring
are part of a program aimed to stimulate countries’ economies
economic activity and represent the total
volume of acquisitions carried out by the Bank and the main trading
of England. partners
Chart 1.5 Profitability rates for state securities with
maturity of 2 years (%)
Romania
2.0%

1.5% In 2017, Romanian economy grew by 7.0%,

having recorded one of the highest economic
1.0%
growth in the European Union. This significant
0.5% increase was driven by the growth of industrial
0.0%
production by 8.2%, on average. Annual
inflation rate reverted to the target set by the
-0.5%
National Bank of Romania in the second half of
-1.0% 2017. The supply factors had a predominant
2/16
3/16

5/16

7/16
8/16

10/16
11/16

2/17
3/17

5/17

7/17
8/17

10/17
11/17
1/16

4/16

6/16

9/16

12/16
1/17

4/17

6/17

9/17

12/17

impact on consumer prices. Thus, in December

EUR USD GBP 2017, consumer prices rose by 3.3% compared
to December 2016, the annual average
Source: Bloomberg inflation rate having recorded 1.3% (Table 1.2).

China’s economy grew 6.8% in 2017, its
growth rate increased by 0.1 p.p. compared to
2016, thus exceeding the Chinese
government’s anticipated growth rate of 6.5%.
Economic performance has been fuelled by
exports against the background of rising global
demand, in particular for electronic equipment.
At the same time, the growth rate of
investments in fixed assets dropped to 7.2% in
2017 compared to 8.1% in 2016. The growth
of other important sectors, such as retail sales,
declined to 10.2%, whereas industrial
production recorded an increase of 6.6%. By
the end of 2017, annual inflation in China
recorded 1.8%, a slower growth of consumer
price index was mainly attributed to the fall in
food prices.
Russian Federation
In 2017, the Russian Federation economy
grew, on average, by 1.5% after two
consecutive years of economic decline. This
output was achieved due to rising oil prices
and the absorption of shocks generated by
external economic sanctions. The delay in the
implementation of internal structural reforms
has held back its economic potential. Thus,
during 2017, industrial production increased
by an average of 1.0%, retail trade – by 1.2%,
and exports and imports – by 25.8% and
24.1%, respectively. In the context of
excessive deceleration of the annual inflation
rate in 2017, the Central Bank of Russia
decreased its base rate six times from 10.0%
to 7.75% (Table 1.2).

Chart 1.6 Base rates in USA, EU and UK (%) Ukraine

2.0%
Although in 2017 Ukraine’s gross domestic
product increased by an average of 2.2%, the
1.5%
economic outlook remains challenging as the
country’s economic growth is too slow to
1.0%
return to the pre-crisis level of 2015. In 2017,
industrial production increased by 0.4%,
0.5%
agricultural production decreased by 2.7% and
construction activity grew by 20.9%. At the
0.0%
same time, exports and imports increased by
2/16
3/16

5/16
6/16
7/16
8/16
9/16
10/16
11/16

1/17
2/17
3/17
4/17
5/17
6/17
7/17
8/17
9/17
10/17
11/17
12/17
1/16

4/16

12/16

19.0% and 26.4%, respectively. In 2017,

EUR USD GBP
consumer prices rose significantly, the annual
average inflation rate recording 14.4% (Table
Source: central banks
1.2).

15
Chapter 2
Economy of the Republic of Moldova
2.1 Real sector
Gross domestic product
In 2017, GDP grew by 4.5%, registering a
similar growth rate to that of 2016. In the first
half of 2017, the economy of the Republic of
Moldova recorded a lower annual growth of
2.8%. Economic growth accelerated in the
second half of the year, with GDP growing in
the third and fourth quarters by 5.4% and
6.4%, respectively. Favourable weather
conditions, recorded in 2017, contributed to an
increase in agricultural output and a high
productivity of the agricultural sector.
Chart 2.1 Contribution of demand components (p.p.) to the
GDP growth (%)
15
10
5 -1
0
-5
-10
2014 2015 2016
Consumption of households Export
Gross fixed capital formation Import
Consumption of public administration GDP growth rate
Source: NBS, NBM calculus
On the demand side (Chart 2.1), a pickup in
economic activity in 2017 was largely
determined by an increase in exports of 12.7%,
which contributed 5.5 p.p. to the GDP growth.
This contribution was mainly attributed to a
higher output of the agricultural sector in the
second half of the year. At the same time, a
significant contribution (4.2 p.p.) to the
economic growth in 2017 was generated by an
increase in final household consumption of
4.9%, compared to 2016. In the first half of the
year, its evolution was rather moderate,
reflecting a modest domestic demand.
Subsequently, in the second half of the year,
consumption growth was generated by the
agricultural sector, as evidenced of an
increase in the "consumption of goods and
services in kind" component. At the end of the
year, there was an acceleration in the growth
rate of the "procurement of consumer goods"
component. Government final consumption
decreased by 0.1%, compared to 2016.
However, in 2017, gross fixed capital formation
increased by 5.3%, compared to 2016. At the
same time, the "inventory" component has
generated a positive contribution of 1.7 p.p. to
GDP growth. The evolution of economic
activity in 2017 was significantly diminished by
the increase in imports by 11.4%, compared to
2016. The increase in imports was caused
both by an increase in domestic demand and
appreciation of domestic currency.
Chart 2.2 Contribution of economic sectors (p.p.) to the
GDP growth (%)
6
5
4
3
2
1
0
-2
-3
2014 2015 2016 2017
Net taxes on products Other services
Transportation and comunication Construction
2017 Trade Industry
Agriculture GDP growth rate
Source: NBS, NBM calculus
If we examine the major factors that
contributed to GDP growth, we conclude that
the agricultural sector and net product taxes
had the largest positive contribution (Chart
2.2). Thus, the gross value added from
agriculture increased by 7.9%, compared to
2016. At the same time, net product taxes
grew by 8.6% in the reporting year, generating
a contribution of 1.3 p.p. to GDP growth.
Positive contributions were generated by an
increase in gross value added from trade,
industry and transport and storage by 7.0%,
3.0% and 6.2%, respectively. At the same time,
gross value added from construction and the
information and communications sectors
increased by 4.3% and 3.0%, respectively,
compared to 2016.
16
 Chart 2.4 Evolution of the household disposable income
(%, versus the same period of the previous year) and
contribution of components (p.p.)
Household consumption
12

In 2017, final household consumption rose by 10

4.9%, recording a growth rate of 1.3 p.p. 8

higher than in 2016. These dynamics were
6
mainly determined by the increase in the
consumption of consumer goods, which rose 4

by 4.9%, generating a contribution of 3.4 p.p. 2

to the annual growth rate of final household
0
consumption (Chart 2.3). At the same time,
the annual growth rate of natural consumption -2
2014 2015 2016 2017
amounted to 6.8%, resulting in a contribution Other income Social welfare benefits
of 1.1 p.p., being supported by the positive Remittances Individual non-agricultural activity
Individual agricultural activity Paid activity
evolution of the agricultural sector. In the Disposable income - total Disposable income, real terms
reference period, expenditure on services rose
Source: NBS, NBM calculus
by 1.7%, generating a contribution of 0.4 p.p.
to the annual growth rate of final household
consumption. recording a level of 13.5% or 7.0 p.p. superior
Chart 2.3 Contrubution of components (p.p.) to the
to that of 2016 (Chart 2.5).
household final consumption growth (%)
Chart 2.5 Annual rate of gross capital formation (%) and
5 components contribution (p.p.)

4 15
3
10
2
1 5
0
0
-1
-2 -5
-3
2014 2015 2016 2017 -10
Consumption in kind -15
Expenditures for services procurement 2014 2015 2016 2017
Expenditures for goods procurement
Final consumption of households Gross fixed capital formation
Stock variation
Source: NBS, NBM calculus Gross capital formation
Source: NBS, NBM calculus
The positive evolution of household
consumption in 2017 was supported by the
It should be noted that, unlike 2016, the
increase in disposable income. Thus, during
acceleration of the annual rate was supported
the reporting period, the annual growth in the
by both fixed capital investments and stock
disposable income of the population reached
change components. Thus, the increase in
9.0% or 3.7 p.p. above the 2016 level (Chart
stock change component was mainly driven by
2.4). These dynamics were largely determined
a positive agricultural output recorded in 2017,
by income obtained from salaries and social
whereas fixed capital investments were
benefits, which increased by 11.7% and 15.3%,
channelled in "construction" and "machinery
respectively, compared to 2016. At the same
and equipment" sectors.
time, income obtained from non-agricultural
individual activity decreased by 9.7% during
Analysing the evolution of investments in fixed
the reference period. The annual growth rate
assets by sources of financing, it is clear that
of the disposable income of the population, in
their return to positive values was mainly
real terms, represented 2.2%, being 3.2 p.p.
supported by the investments of public
higher than in 2016.
administration (Chart 2.6). At the same time,
in 2017, investments made by companies and
individuals generated a negative impact,
Investments
although lower than in 2016 if registered on a
net basis.
In 2017, the annual rate of gross fixed capital
formation accelerated, compared to 2016, thus The revival of the investment activity was

17
mainly driven by internal factors. Thus, the decrease in the average yield per hectare. At
stabilization of the exchange rate, the the same time, in 2017, compared to 2016, a
decrease in lending rates for new loans, record change in farmers’ preferences for higher
harvests recorded over the last two years, yielding crops (rape, sugar beet, sunflower,
combined with the public administration corn, vegetables) was noticed, thus replacing
efforts, contributed to the increase in the lower yielding crop such as wheat.
investments in 2017.
The reduction of production output in the
Chart 2.6 Investments in long-term tangible assets (%) and livestock sector (-2.1%) was determined by the
contribution of founding sources (p.p.)
negative evolution of milk production (-3.6%)
6 as well as cattle and poultry (-2.8%). At the
3 same time, the increase in the production of
0
eggs by 5.0% has offset some of the negative
effects generated by the decrease in milk and
-3
meat production.
-6
-9 Chart 2.8 Evolution of industrial production (%, versus
the same period of the previous year) and components’
-12 contribution (p.p.)
-15
2014 2015 2016 2017 8

State budget
Budgets of administrative-territorial units 6
Means of the economic agents and of the population
Foreign investors' means 4
Other sources
Investments in long term tangible assets
2
Source: NBS, NBM calculus

Chart 2.7 Global agricultural production (%, versus the -2

2014 2015 2016 2017
same period of the previous year Water supply, sewerage, waste management and remediation activities
Production and distribution of electricity and heat, gas, hot water and conditioning air
20
Manufacturing industry
15 Mining and quarrying industry
Industrial production
10
5 Source: NBS, NBM calculus

0
-5
-10
Industrial production
-15
-20
2014 2015 2016 2017 The industrial production output for all forms
Animal production of ownership increased by 3.4%, in real terms,
Plant production as compared to 2016 (Chart 2.8). This increase
Global agricultural production was mainly attributed to the growth of the
Source: NBS, NBM calculus production output in the "manufacturing"
sector by 4.5%. At the same time, a decrease
in the industrial production output was
recorded in such sectors as mining and
production and supply of electric and thermal
Agricultural production energy, gas, hot water and air conditioning by
3.7% and 1.7%, respectively.
After an increase in agricultural production, In the manufacturing industry, the most
recorded in 2016, the output of global significant increases were recorded in the
agricultural production, recorded in the following industrial sectors: manufacturing of
reporting year, increased by 8.6%, compared electrical equipment (39.4%), manufacturing
to 2016 (Graficul 2.7). of rubber and plastic products (16.4%),
manufacturing of motor vehicles, trailers and
This evolution was mainly determined by the semi-trailers (12.0%) and processing of wood,
increase in the vegetable production output by manufacturing of wood and cork products,
13.1%. It should be noted that 2017 was a except furniture; manufacturing of articles of
favourable year for all agricultural crops, straw and other plant weaving materials
except for potatoes, which recorded a 3.8% (11.4%).

18
Freight shipping Wholesale trade

In 2017, rail, road, river and air transport
companies carried 23.8% more freight,
compared to 2016 (Chart 2.9).
In 2017, out of the total volume of freight
shipped, 71.4% was shipped by road, 27.9%
by rail, 0.8% by river, and 0.01% by air. A
significant increase in freight shipping was
determined by the increase in the volume of
freight carried by rail (37.9%), by road (19.3%)
and by air (2.2-fold), in annual terms. At the
same time, the amount of fluvial cargo
shipped declined, in annual terms, by 0.6%.
In 2017, the turnover generated by wholesale
businesses as their main activity increased by
19.9% (in current prices), as compared to 2016
(Chart 2.11). At the same time, the turnover
of B2B enterprises providing services recorded
an increase of 8.8% (in current prices) over the
same period, compared to 2016. Wholesale
trade included activities of resale of goods in
large quantities. Sales intermediation activities,
both on domestic and external markets, were
also attributed to the wholesale trade.
Chart 2.10 Evolution in real terms of internal trade (%,
versus the same period of the previous year)

Chart 2.9 Evolution in real terms of transport of goods 9

(%, versus the same period of the previous year) and
components’ contribution (p.p.)
6

30
3
0
20
-3
10 -6
-9
0
2014 2015 2016 2017

-10 Retail trade Trade with services

2014 2015 2016 2017

Air freight Fluvial

Source: NBS
Auto Rail
Total transported goods
Chart 2.11 Evolution of wholesale trade (%, versus the
same period of the previous year), current prices
Source: NBS

20

Retail trade 15

In 2017, the total turnover generated by retail 10

sales businesses decreased by 4.6%, compared
to 2016. At the same time, the total turnover 5
generated by businesses providing services
as their main activity recorded a decrease of 0
0.4%, in annual terms (Chart 2.10). Retail 2014 2015 2016 2017
sales did not include sales of motor vehicles,
Wholesale trade B2B services
motorcycles and their spare parts, sales of
agricultural products by individuals, sales of
Source: NBS
grains, seeds, metals, crude oil, chemicals for
industry, iron and steel, industrial machinery
and equipment, sales of food and beverages
for consumption on the premises and sales
of packaged foods, renting of personal and
household goods to the general public.

19
Foreign trade Exports

Exports by countries (Chart 2.12) registered a

The year 2017 marked a notable revival of
positive evolution during 2017, mainly
foreign trade3 of the Republic of Moldova4 . A
attributable to an increased demand from EU
rich agricultural harvest, which has been
countries. Exports to countries classified as
recorded over the last two years, a revival of
"the rest of the world" generated a positive
the external demand as a result of the
contribution to the annual growth rate,
acceleration of economic activity in the main
however, it was well below export figures to
partner countries, which was associated with
EU countries. Exports to the Russian
the increase in the disposable income of the
Federation (RF) increased by 9.2%, however,
population (increase in wages, remittances,
as a share of total exports, they declined to a
social benefits), can be considered the main
historical low of 10.5%. Statistical data
factors that have determined the dynamics of
regarding exports to the CIS countries do not
foreign trade. As a result, in 2017 compared to
provide clear evidence of a revival of trade
2016, exports, expressed in U.S. dollars,
with the countries in the region.
increased by 18.6%, while imports by 20.2%.
Chart 2.14 Evolution of exports annual rate (%) and
Chart 2.12 Evolution of exports annual rate (%) and contribution by origins (p.p.)
contribution by categories of countries (p.p.)
30
30
25
25
20
20
15
15
10
10 5
5 0

0 -5
IV/16 I/17 II/17 III/17 IV/17
-5 Export of domestic goods
IV/16 I/17 II/17 III/17 IV/17 Reexport
EU CIS Rest of the world Exports Exports

Source: NBS, NBM calculus Source: NBS, NBM calculus

By category of goods (Chart 2.13), a notable

Chart 2.13 Evolution of exports annual rate (%) and acceleration of the annual export rate in 2017
contribution by groups of goods (p.p.)
was mainly determined by the increase in
30
exports of agricultural products. Thus, record
25
crops in agriculture, recorded in 2016 and
20 2017, coupled with an increased EU demand
15 for these products, created the prerequisites
10 for a steady export growth in 2017. Exports to
5 the EU countries increased by 19.9%,
0
compared to 2016.
-5
IV/16 I/17 II/17 III/17 IV/17 At the same time, an increase in exports of
Other goods vehicles, optical devices and sound recording
Vehicles, optical instruments, sound recorders and reproducers
Metal, stone and ceramic articles and transmission devices, driven by positive
Textiles and clothes
Chemical and wood products developments that took place in the respective
Mineral products
Foodstuff and animal products, beverages and fats
industrial sectors, especially free economic
Exports' annual growth rate zones, contributed to the positive dynamics of
Source: NBS, NBM calculus the annual export rate.

It should be mentioned that a notable increase

3 The chapter contains quarterly data on the evolution in exports during 2017 was driven by exports
of foreign trade of the Republic of Moldova, expressed in
thousands of U.S. dollars.
of local goods. Re-exports have also positively
4 The detailed analysis of the foreign trade is presented contributed to the evolution of exports, yet had
in chapter 2.4. a lower net impact.

20
Imports Labour market

During 2017, imports volume rose with most Labour force

trading partners. The major contribution (about
50%) to the evolution of Moldovan imports was Despite an increase in economic activity,
generated by the EU. Imports from the CIS which was more notable in the second half of
countries and the rest of the world recorded 2017, the annual rate of both economically
lower contributions (Chart 2.15). active and the employed population recorded
negative values. Thus, the economically active
Chart 2.15 Evolution of imports annual rate (%) and population in 2017 recorded a decrease of
contribution by categories of countries (p.p.)
1.1%, compared to 2016. A similar situation
25
can be observed in the case of the employed
20
population, which dropped by 1.0%, compared
to 2016.
15
Chart 2.17 Annual growth rate of employed population
(%, versus the same period of the prevous year) and its
10
formation by national economy sectors (p.p.)
4
5
3

0 2
IV/16 I/17 II/17 III/17 IV/17
1
Rest of the world CIS EU Imports 0

-1
Source: NBS, NBM calculus
-2

-3
2014 2015 2016 2017

Analysing imports by category of goods (Chart Other activities Social services*

Transportation and communication Trade
2.16), the increase in the annual import rate Construction Industry
during 2017 was mainly driven by the Agriculture
Active population
Employed population

evolution of imports of vehicles, optical Source: NBS, NBM calculus

devices and sound recording and transmission *Public administration, defence, education, health, social services
devices, chemicals products, wood processing
products, articles manufactured from metals, Chart 2.18 Evolution of unemployment and employment
rates (%)
stones or ceramics, and mineral products. It
should be noted that a significant growth rate 43 5.1
43
of imports, recorded lately, was determined by 42
4.9

4.7
the revival of the household consumption as a 42
4.5
result of the increase in the disposable income 41
41 4.3
of the population. 40 4.1
40
3.9
Chart 2.16 Evolution of imports annual rate (%) and 39
componets’ contribution by groups of goods (p.p.) 39 3.7

38 3.5
25
2014 2015 2016 2017

20 Employment rate (left scale)

Activity rate (left scale)
15 Unemployment rate

10 Source: NBS, NBM calculus

5

0
IV/16 I/17 II/17 III/17 IV/17
At the same time, in 2017, given the structure
Other goods of the national economy, the negative
Vehicles, optical instruments, sound recorders and reproducers
Metal, stone and ceramic articles dynamics of the employed population was
Textiles and clothes
Chemical and wood products mainly determined by a 5.0% decrease in the
Mineral products
Foodstuff and animal products, beverages and fats
number of workers employed in the
Imports' annual growth rate
agricultural sector (Chart 2.17). Negative, yet
Source: NBS, NBM calculus
smaller, contributions were generated, on the
one hand, by the fall in the population
occupied in the industrial sector, construction
and transportation and communications. On
the other hand, the negative impact generated

21
by these sectors was partly mitigated by the
growth of the population employed in trade
and public sector by 4.6% for both sectors.
Chart 2.19 Wage bill in economy and average number of
employees (%, versus the same period of the previous
year)
average salary increased by 13.5% and 11.3%,
respectively. In the reporting year, the annual
growth rate of average salary recorded 5.2%,
in real terms (Chart 2.20). The average real
salary grew by 4.4% in the real sector and by
6.5% in the public sector.

14

11

-1

-4

-7
2014 2015 2016 2017
In nominal terms
In real terms
Average number of employees

Source: NBS, NBM calculus

Chart 2.20 Real average wage (%, versus the same period
of the previous year)

7
6
5
4
3
2
1
0
-1
2014 2015 2016 2017

Total economy Public sector Real sector

Source: NBS, NBM calculus

In 2017, the unemployment rate registered a

level of 4.1%, being slightly lower (by 0.1 p.p.)
than that recorded in 2016. At the same time,
the activity rate of economically active
population recorded 42.2%, being 0.4 p.p.
lower than in 2016, whereas the employment
rate dropped to 40.5%, having decreased 0.4
p.p., compared to 2016 (Chart 2.18).

Personal income

In 2017, the payroll fund in the economy

increased by 12.9%, compared to 2016,
whereas, deflated by CPI, it rose by 5.9%. At
the same time, the average number of
employees in the national economy has
reduced by 4.9%5 (Chart 2.19).

The average salary in the national economy

increased by 12.1%, compared to 2016. In
the public and real sectors of the economy the
5 NBM figures based on the quarterly preliminary data.

22
 its retention above the inflation target interval
in the second half of the year was mainly
determined by an increase in tariffs for a
2.2 Evolution of inflation number of regulated services and atypical
weather conditions that triggered an increase
in prices for fruits and vegetables, thus having
Consumer Price Index (CPI) generated inflationary food price pressures
(Chart 2.23).
In 2017, the annual average CPI rate amounted Chart 2.23 CPI evolution (%) and subcomponents’
to 6.6%, recording a level 0.2 p.p. higher than contribution (p.p.)
in 2016. In the first half of 2017, the annual 8
inflation rate recorded a prominent upward 7
trajectory, increasing from 2.4% in December 6
2016 to 7.4% in May 2017, thus having crossed 5
the interval of 5.0% ± 1.5 p.p. stipulated in the 4

medium-term monetary policy strategy. 3

2

Chart 2.21 Annual rate of CPI and of core inflation (%) 1

0
15 -1
14 -2

2/17

3/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17
12/16

1/17

4/17
13
12
11 Foodstuff products Regulated prices Fuel
10
9 Core inflation CPI
8
Source: NBS, NBM calculus
7
6
5
At the same time, the respective inflation
4
3 trajectory was supported by the impact of the
2 adjustment of excise duties on some product
2/16

5/16

10/16

2/17
3/17

5/17
6/17
7/17
8/17
9/17
10/17
11/17
12/17
1/16

3/16
4/16

6/16
7/16
8/16
9/16

11/16
12/16
1/17

4/17

categories as well as by the effect of a low

CPI Core inflation
Source: NBS, NBM calculus
Over the next three months, the annual
inflation rate remained at the level of 7.3%.
After having reached its maximum value of
7.9% in October, it slightly declined to 7.3%,
by the end of 2017, still recording a level
situated above the upper limit of the interval.
Chart 2.22 Annual rate of inflation subcomponents (%)
Inflation target base period in 2016. The inflationary pressures
associated with the aforementioned factors
were partially mitigated by the appreciation of
the domestic currency in 2017, but also by a
persistent low aggregate demand. As a result,
in 2017, the annual rate of core inflation
recorded a relatively stable evolution, largely
oscillating around the inflation target. In the
context of the rising international oil prices,
fuel prices have had a positive, yet minor,
impact on the annual CPI rate in 2017.

15
12 Core inflation
9
6
During 2017, core inflation recorded values
3
significantly below those of total inflation,
0
remaining close to the inflation target. It is
-3
worth noting that this inflation excludes the
-6
transient effects on the CPI and largely reflects
12/16

1/17

2/17

3/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17
4/17

the inflationary pressures associated with

Foodstuff products prices excess demand. Core inflation continued to
Regulated prices remain within the target range for more than a
Fuel prices
year.

Source: NBS However, in 2017, the annual rate of core

inflation recorded a slightly upward trajectory,
The upward trajectory of the annual inflation rising from 4.5% in December 2016 to 5.5% in
rate, recorded in the first half of the year, and December 2017.

23
Given a persistent low domestic demand, the by the increase in cigarette prices (26.8%),
above trend has been supported by a series of education and training (9.2%), clothing (ready-
sectoral shocks. Thus, core inflation pressures to-wear clothes - by 6.2%, knitwear - by 4.5%),
were building over 2017, being generated, in footwear (6.3 %).
the first part of the year, by a number of fiscal
policy decisions adopted for 20176 and were
further supported by the adoption of additional
Food prices
regulations on the minimum sales price for
cigarettes7 , which resulted in a sharp increase
in their prices. During 2017, the annual rate of food prices
recorded a significant upward dynamic, having
In 2017, the annual core inflation was mainly risen from 2.8% in December 2016 to 9.7%.
fuelled by rising prices for such The upward dynamics of the annual rate was
subcomponents as cigarettes, clothing, mainly driven by higher contributions
footwear, public catering, education and generated by subcomponents, such as fresh
training, the latter as a result of the rise in fees vegetables, potatoes, fresh fruits and meat,
for nurseries and kindergartens that could be meat products and canned meat (Chart 2.25).
attributed to the measures taken in order to
increase the level of funds allocated for Chart 2.25 Components’ contribution (p.p.) to the annual
children’s nutrition in educational institutions8 growth of food prices (%)

(Chart 2.24). 11
10
9
Chart 2.24 Components contribution (p.p.) to the annual 8
growth rate of core inflation (%) 7
6
5
6 4
3
5 2
1
4
0
3 -1
12/16

1/17

2/17

3/17

4/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17
2
Grain mill products Vegetables Potatoes
1
Fresh fruits Meat and meat products Fish and fish products
0
Milk and dairy products Eggs Sugar
2/17

5/17

10/17
12/16

1/17

3/17

4/17

6/17

7/17

8/17

9/17

11/17

12/17

Beverages Fats Others

Cigarettes
Footwear
Furniture
Daily household maintenance
Cultural services
Public alimentation
Others
Core inflation
Source: NBS, NBM calculus
At the same time, the inflationary pressures
were partly mitigated by the fall in prices for
vehicles and spare parts, this fall being caused
by the appreciation of the domestic currency.
Thus, in 2017 compared to 2016, the average
official exchange rate of the Moldovan leu
recorded an appreciation of 7.2% against the
US dollar and 5.6% against the European
single currency.
At the end of 2017, the annual dynamics of
core inflation was determined, to a large extent,
6 http://lex.justice.md/index.php?action=view&view=
doc&lang=1&id=368094
7 Article 9 of the Law on State Budget for 2017, no.
Clothing
Construction materials Statistical differences Foodstuff products prices
Household items
Transport means, auto parts
Education and learning
Source: NBS, NBM calculus
Personal use items
Statistical differences
The evolution of food prices in 2017 was
affected by the snowfalls on 20-21 April and by
the August drought, thus creating
unfavourable weather conditions for growing
fruits and vegetables. Besides, inflationary
pressures have built as a result of some
sectoral shocks that have affected the prices
for meat and a number of imported products.
The rise in fresh meat prices has been driven
by price increases implemented in some of the
importing countries from the region and by the
bans imposed on the import of meat from
Ukraine (due to outbreaks of swine fever). The
sale price increases that were recorded for
some categories of fresh vegetables and fruits
could be attributed to the increase in their
import prices. Besides, the impact of atypical
weather conditions, recorded in the spring of

279/2016 (Official Monitor of the Republic of Moldova, 2016,

2017, was felt in the second half of the year
no. 472-477, article 943) through a steady increase in prices for fresh
8 Decision on the implementation of the provisions of fruits. At the same time, the impact of the
the Parliament Decision no. 45/2017 on the Report of aforementioned inflationary factors was
the Special Committee on the Efficiency of the Legislative
Framework on Child Nutrition in Preschool and Educational
mitigated by the appreciation of the exchange
Institutions, published in the Official Monitor no. 429-433 rate, as well as by good harvests recorded for
(6352-6356) other crops.

24
At the end of the year, in December 2017, the can be partly attributed to the appreciation of
annual dynamics of food prices was largely the domestic currency against the US dollar
driven by rising prices for vegetables (39.4%), and the euro, as a large part of these prices
meat and meat products (8.1%), fresh fruits depend on the MDL/USD and MDL/EUR
(22.6%), potatoes (27.6%). exchange rates. At the same time these
developments can also be attributed to a
series of policy adjustments implemented in
this sector. In 2017, minor contributions to the
Regulated prices
annual price changes of regulated services
were generated by the dynamics of prices for
In the first nine months of 2017, the annual transportation services (Chart 2.26).
growth rate of regulated prices recorded a
strong upward trend, rising from (-1.1%) in
December 2016 to 7.5% in September 2017. Fuel prices
Subsequently, it reversed its trend, slightly
decreasing to 6.1% in December 2017
(Chart2.26). In 2017, the annual growth rate of fuel prices
was characterised by an increased volatility.
Chart 2.26 Components’ contribution (p.p.) to the annual Thus, in the first two months of the year, the
growth of regulated prices (%)
annual growth rate of fuel prices recorded a
9 strong upward trajectory, increasing from 1.6%
8
7 in December 2016 to 12.9% in February 2017,
6
5
being mainly driven by oil price developments
4 recorded during that period.
3
2
1 Chart 2.27 Components contribution (p.p.) to the annual
0 growth of fuel prices (%)
-1
-2 13
-3
-4 11
12/16 2/17 4/17 6/17 8/17 10/17 12/17
9
Rent in the state dwellings House maintenance expenses
Electricity Gas 7
Central heating Medicines
5
Ambulatory medical services Transport services
Distance communication services Insurance
3
Statistical differences Regulated prices
1
Source: NBS, NBM calculus
-1

The trajectory recorded in the first half of the -3

12/16

1/17

2/17

3/17

4/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

year was largely determined by the pressures
generated by higher tariffs on medical
services, starting with February 2017, once
with the update of the Single Registry of Tariffs
for Medical Services9 . It was last modified in
2011; as a result, the price changes
implemented in 2017 were significant. At the
same time, the upward trend of the annual
growth rate of regulated prices was supported
by the adjustment of tariffs for electricity,
central heating, hot water supply, water
supply and sewerage services10 implemented
in the first half of 2017. A relatively stable
trend of the annual growth rate of regulated
prices, recorded during the autumn, and its
slight decrease in the last two months of the
year was generated by a gradual decrease in
medicines prices as well as a lack of further
significant tariff adjustments for regulated
services. Such medicines price developments
9 http://lex.justice.md/md/341845/
10 https://monitorul.fisc.md/official_magazine_rm/
in-monitorul-oficial-de-maine-24-martie-vor-fi-publicate-\
urmatoarele-documente-oficiale.html
12/17
Gas from cylinders Earth coal Fuels
Firewood Oil fuel Fuel prices
Source: NBS, NBM calculus
In this way, in the first quarter of 2017, the
average price of Urals oil recorded values
63.2% higher than those at the beginning of
2016, thus triggering a considerable
intensification of pressures generated by fuel
prices on the domestic market (Chart 2.27).
At the same time, a smaller contribution was
generated by the adjustment of excise duties
on petroleum products in early 2017.
Subsequently, given a gradual easing of oil
price pressures on the international markets
and a steady trend towards appreciation of the
domestic currency against the US dollar, the
annual growth rate of fuel prices recorded a
downward trajectory on the local market,
falling to 5.9% in July 2017. In August, the
annual growth rate of fuel prices briefly soared

25
up to 9.8%, having reverted to its downward Chart 2.29 Annual rate of IPPI (%) and its components’
contribution (p.p.)
trend shortly after that, recording a rate of
5.1% at end of 2017. This evolution was driven 4.0
by the appreciation of the domestic currency 3.5
against the US dollar, which has mitigated the
3.0
inflationary pressures associated with oil
2.5
prices on the international markets, but also
by the easing of pressures generated by the 2.0

propane gas component. During 2017, a 1.5

positive impact on the annual growth rate of 1.0
fuel prices was also exerted by the evolution of 0.5
prices for firewood component. Coal prices
0.0
generated a minor contribution to the

12/16

1/17

2/17

3/17

4/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17
evolution of fuel prices in 2017.
Mining and quarrying industry Manufacturing industry
Energetic sector IPPI
Source: NBS, NBM calculus
Industrial prices

industries. Price developments in these

In the first half of 2017, the annual industrial industries may be attributed to a good
production price index (IPPI) recorded a slightly agricultural harvest recorded in the second
upward trajectory. Since September, however, half of 2017. At the same time, the decline in
its trajectory resumed a downward trend. In the annual growth rate of energy prices can be
December, the annual IPPI recorded 2.3%, attributed to the high base effect (the fading
being 1.7 p.p. lower than in August 2017 and of the effect created by the increase in fees for
0.5 p.p. lower than in December 2016. central heating and hot-water supply at the
end of 2016).
Thus, in the fourth quarter of 2017, it recorded
a growth rate of 2.9% or 1.0 p.p. lower than in
the third quarter of 2017. A downward trend of
the annual IPPI was driven by the evolution of
prices for products traded on both the internal
and external markets (Chart 2.28).

Chart 2.28 Annual rate of IPPI (%)

1
2/17

3/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17
12/16

1/17

4/17

Annual rate of industrial prices products

Annual rate of prices of products delivered on the domestic market
Annual rate of prices of products delivered on the foreign market

Source: NBS

The analysis of the annual IPPI evolution, by

main sectors, suggests that a significant
decline in its growth was driven by price
developments in the manufacturing and
energy sectors (Chart 2.29).

The growth of the annual IPPI slowed down,

being driven by the fading away of inflationary
pressures generated by the food and beverage

26

Construction prices
During 2017, the annual growth rate of
construction prices recorded a downward
trajectory. Thus, in the fourth quarter of 2017,
it dropped to 7.0%, having decreased by 1.9
p.p. compared to the fourth quarter of 2016
(Chart 2.30).
Chart 2.30 Evolution of construction price index (%,
compared to the similar period of the last year )
9.5
9.0
8.5
8.0
sunflower seeds (-12.5%) and rape (-4.8%). At
the same time, there was a notable increase in
prices for fruits and berries (33.6%), a
development that may be attributed to
atypical weather conditions, recorded in the
spring of 2017, which affected mainly these
product categories.
Prices for livestock products declined as a
result of a drop in prices for poultry meat
(-14.2%) and beef (-4.9%). At the same time,
the prices for pork increased by 9.1%, as a
result of the bans imposed on its import
following the outbreaks of swine fever
recorded on the territory of Ukraine. It should
be noted that the prices for eggs also recorded
a slight increase of 2.1%, whereas the price of
milk practically remained at the level of 2016
(0.1%).

7.5

7.0

6.5

6.0
IV/16 I/17 II/17 III/17 IV/17

Source: NBS

Producer prices of agricultural products

In 2017, producer prices of agricultural

products decreased by 2.1%, compared to
2016. This development was driven by the fall
in prices for both vegetable products (-1.9%)
and animal products (-3.0%) (Chart 2.31).

Chart 2.31 Producer prices of agricultural products (%,

versus de previous year )

35
30
25
20
15
10
5
0
-5
-10
2014 2015 2016 2017
Producers prices for agricultural products
Producers prices for plant products
Producers prices for animal products

Source: NBS

The evolution of prices for vegetal products

was mainly determined by the decrease in
prices of beans (-23.9%), vegetables (-21.6%),

27

2.3 Public sector and tax
policy
State budget execution
In 2017, state budget indicators confirmed the
optimization of tax administration. Following
the increase in public revenues, on the one
hand, and a slower increase of public
expenditures, on the other hand, the budget
deficit diminished and recorded a value of 1
144.7 million lei. According to the Ministry of
Finance, the revenue inflows to the state
budget amounted to 53 379.4 million lei,
recording an increase of 16.2%, compared to
2016 (Chart 2.32). In terms of GDP, in 2017,
the accrued revenues increased by 1.6 p.p.,
compared to 2016, accounting for 35.5% of
GDP.
Chart 2.32 Indicators of national public budget
% mil.lei
20
15
10
5 1 000
0 0
-1.8 -1.7 -2.2 -1.8
-5
-10
-15
-20
2013 2014 2015 2016
Deficit (right scale) Deficit/GDP
Revenues Expenditures
Sourse: Ministry of Finance, NBM calculus
The largest part of budget revenues accrued
from taxes and fees collections, accounting for
a share of 64.6% (34 476.0 million lei) in total
budget revenues. Social insurance
contributions and compulsory insurance
premiums accounted for 29.1% (15 514.0
million lei), whereas the share of other
revenues and grants recorded 4.5% (2 380.6
million lei) and 1.9% (1 008.8 million lei) of
total budget revenues.
During the reporting year, Moldova received
financial assistance for budget support in the
form of foreign grants amounting to 1 008.8
million lei, an amount 26.5% smaller than in
2016. In terms of GDP, foreign grants
accounted for 0.7%, 0.3 p.p. smaller than in
2016. The assistance provided by international
financial organizations and donor countries is
an important contribution to economic
recovery and reform initiatives. It is vital for
the process required to modernize and
relaunch the economy of the Republic of
Moldova.
In the reference year, the state budget
expenditures totalled 54 524.1 million lei,
recording an increase of 12.5%, compared to
2016 (Chart 2.32). Of the total expenditures,
the highest share was spent on social
protection (35.0%), 17.8% being allocated for
education and 13.3% – for health care. In
terms of GDP, public expenditures accounted
for 36.3% of GDP, having increased by 0.5 p.p.,
compared to 2016.
It should be mentioned that 18 086.5 million
lei (up 14.5%, compared to 2016) were
transferred, during 2017, from the state
budget to the State Social Insurance Budget
(SSIB), the Mandatory Health Insurance Fund
(MHIF) and to the local budgets (LBs). The
largest share of budget allocations was
channelled to the local budgets, around 52.8%,
followed by the allocations made to the SSIB,
4 000 around 32.8%, the MHIF having received
3 000 smaller financing accounting for 14.3% of total
2 000
allocations.
In this context, in 2017, the execution of the
-0.8
state budget resulted in a deficit of 1 144.7
-1 000 million lei. In terms of GDP, the deficit
-2 000 accounted for 0.8% of GDP, having decreased
-3 000 by 1.0 p.p. compared to the level of 2016. The
-4 000
sources of financing of the state deficit
2017 included net external loans amounting to 2
349.3 million lei, accounting for 1.6% of GDP
(down 1.0 p.p., compared to 2016), internal
debts and loans amounting to 1 071.3 million
lei, and a negative contribution of financial
assets amounting to 271.4 million lei, minus
0.2% of GDP (down 0.4 p.p., compared to
2016). At the same time, the state account
balances increased by 2 004.5 million lei,
compared to the beginning of the year.
State debt
At the end of 2017, the state debt of the
Republic of Moldova amounted to 51 660.3
million lei, accounting for 34.4% of GDP. The
state debt increased by 874.5 million lei or by
1.7% due to the increase of the internal state
debt balance by 1 058.9 million lei, whereas
the balance of the external state debt
decreased by 184.4 million lei. As a share of
GDP, state debt diminished as a result of a
28
stronger evolution of the national economy
(Chart 2.33). In 2017, the share of internal
state debt in GDP decreased by 0.9 p.p.,
whereas the share the external debt,
recalculated in lei, decreased by 2.3 p.p.
As of 31 December 2017, the state debt
constituted 56.3% of external debt and 43.7%
of internal debt.
The balance of the external debt, expressed in
foreign currency, as of 31 December 2017,
increased by 16.1%, compared to January 1,
2017, and amounted to 1 700.7 million U.S.
dollars. The external state debt, expressed in
MDL, decreased during the reporting year by
0.6%, largely due to the appreciation of the
domestic currency, totalling
29 081.8 million lei.
Chart 2.33 State debt as a share of GDP (%)
40
35
30 27.3
24.5
25 23.4
20
15 16.8 18.2 21.4
10
5
6.6 6.3 5.9
0
31/12/13 31/12/14 31/12/15
External public debt expressed in MDL
Internal public debt
Total public debt
Sourse: Ministry of Finance, NBS, NBM calculus
At the end of 2017, the state debt recorded
22 578.5 million lei, having increased by 4.9%,
compared to the end of 2016. The increase in
internal state debt by about 18.1% was the
result of additional issues of government
securities on the primary market. In October
2017, MDL 50.0 million worth of one-year
government securities were redeemed. These
securities covered payment obligations
derived from State guarantees. As a result, at
the end of 2017, the internal state debt
consisted of government securities issued for
the execution of State guarantees (58.9%),
government securities issued on the primary
market (32.0%) and government convertible
securities (9.1%).
In 2017, 1 929.0 million lei (up 10.4%,
compared to 2016) were appropriated from
the state budget for the state’s debt service.
The external debt service appropriations
amounted to 357.9 million lei (having
increased by 25.8%, compared to 2016). It
should be mentioned that in order to support
the internal state debt service there were
appropriated funds in the amount of 1 571.1
million lei (up 7.4%, compared to 2016), out of
which: 808.2 million lei were appropriated for
the payment of interest and coupons on
government securities issued on the primary
market, 618.2 million lei accounted for interest
paid on government securities issued in 2016
for the execution by the Ministry of Finance of
the payment obligations derived from state
guarantees no. 807 of 17 November 2014 and
no.101 of April 1, 2015, which amounted to
13.3 billion lei, as well as 144.7 million lei were
appropriated for the payment of interest on
government convertible securities.
Public sector debt
As of 31 December 2017, the balance of the
37.6
34.4
public sector debt decreased by 851.4 million
lei or by 1.4%, compared to the end of 2016
and recorded 58 451.7 million lei.
21.7
19.3
According to operating statistical data on GDP
in 2017, the share of public sector debt in GDP,
as on 31 December 2017, accounted for 38.9%,
15.9 15.0 recording a decrease of 4.9 p.p., compared to
the end of 2016.
31/12/16 31/12/17
The decrease of the public sector debt balance
at the end of 2017, compared to the end of
2016, was determined, in particular, by the
decrease of the NBM debt balance by 1 320.5
million lei. Also, the balance of the direct debt
of state enterprises decreased by 386.8 million
lei and the direct debt of administrative
territorial units (ATU) – by 18.6 million lei. At
the same time, the state debt balance
increased by 874.5 million lei, still accounting
for the largest share of the total public sector
debt (88.4%).
As of 31 December 2017, the external debt of
the public sector amounted to 1 998.8 million
U.S. dollars (equivalent to 34 179.2 million lei)
or 58.5% of the public sector debt balance,
whereas the internal debt of the public sector
amounted to 24 272.5 million lei (41.5%).
During 2017, the public sector debt
diminished, being mainly influenced by the
external debt of the public sector, which
recorded a downward evolution of 3.8%.
29

2.4 International accounts
of the Republic of
Moldova in 2017
(provisional data)
Balance of payments11
In 2017, the current account balance of the
Republic of Moldova’s balance of payments
recorded a deficit of USD 616.94 million,
having increased 2.2-fold, compared to 2016
(Table A.1). In terms of GDP, it recorded -7.6%
(-3.4 p.p. compared to 2016) (Chart 2.34). The
current account deficit can be attributed to
foreign trade in goods, the negative balance of
which grew by 23.0%, whereas other
components recorded increasing surplus
balances.
Chart 2.34 The current account – main components
mil. USD
3000
2000
1000
0 0
-1000
-4.2
-7.2
-2000
-3000
2015 2016
Secondary income (left scale)
Services (left scale)
Current account (CC)(left scale)
Source: NBM
In 2017, exports of goods and services
amounted to USD 3 110.43 million, having
increased by 19.9%, compared to 2016, as a
result of the positive impact generated by the
demand from the main trading partner
countries (both from the CIS and the EU),
which have recorded economic growth. At the
same time, a negative impact on exports had
the appreciation of the domestic currency
against the U.S. dollar and the euro, which has
affected the exports’ competitiveness on the
foreign market.
Imports of goods and services amounted to
USD 5 364.14 million, an increase of 20.2%,
11 A complete analytic presentation of the evolution of
international accounts and their indicators in dynamics
can be accessed at http: //bnm.md/en/content/conturile-
internationale-ale-republicii-moldova-
pentru-anul-2017 -Data-interim-material.
compared to 2016. Growth in imports was
mainly driven by the increase in final household
consumption due to growth in real salaries and
remittances. The resumption of imports of
electricity from Ukraine also contributed to the
increase in total imports.
In 2017, the volume of foreign trade in
goods (FOB-FOB) amounted to USD 6 284.48
million, up by 21.3%, compared to 2016. The
trade balance deficit totalled USD 2 569.00
million, an increase of 23.0%, compared to
2016, as imports growth (+21.8%) exceeded
exports growth (+20.1%).
The ratio of foreign trade deficit in goods to GDP
recorded 31.6%, having increased by 0.8 p.p.,
compared to 2016. The coverage of imports of
goods and services through exports recorded
58%.
During 2017, the total volume of goods, both
exported and imported, increased compared to
2016 figures. The prices of the exported goods
decreased in the first half of 2017 and
increased in the second half of the year,
%
20
whereas the prices of the imported goods kept
15
increasing starting with the second quarter of
10
2017 through the end of the year. The
5 exchange ratio in foreign trade in goods
recorded a slight decrease during the first
-5 three quarters of 2017, having eventually
-7.6 -10 increased in the fourth quarter.
-15
-20 The FOB-based value of exports of goods in
2017
the balance of payments recorded USD
Primary income (left scale)
1 857.74 million (+ 20.1% compared to
Goods (left scale)
Balance CC / GDP (right scale)
2016)12 .
In the reporting year, the structure of exports
of goods (excluding processed or otherwise
modified goods), by geographical region,
denotes that 58.6% of goods were shipped to
EU countries, 25.4% – to the CIS countries, and
the remaining 16.0% of exports were destined
for other countries (Chart 2.35). In 2017,
exports to the European Union continued to
grow (+25.3% compared to 2016). This
increase was mainly driven by the increase in
exports to: Romania – by 21.5%, Germany – by
37.6% and Poland – by 47.0%. Exports to the
CIS have also recorded a rising trend (+11.9%)
as a result of the increase in exports to: Russia
– by 9.3%, Ukraine – by 31.9% and Belarus –
by 6.3%. The increase in exports to other
countries (+20.7%) was driven by a 2-fold
increase in exports to Turkey (which can be
attributed both to Turkey’s economic growth
12 Unlike NBS data, statistics on foreign trade in goods
published by the NBM in the balance of payments contain
a series of adjustments.
30
and the entry into force (as of 01.11.2016) of Chart 2.36 The import of goods in 2017, by geographical
area, CIF prices (%)
the bilateral Free Trade Agreement), to Serbia –
2.9-fold, and China – by 29.7%.

Analysing exports by product category, Other

agricultural products continued to hold the countries
largest share of 59.7%, exports of alcoholic 16.3%
beverages increased by 17.3%, compared to
2016. In addition, an increase in exports of
machines and appliances was recorded (up by CIS European
Union
74.1%, mainly due to a 2.6-fold increase in 28.7%
55.0%
exports of cabling and wire), furniture (up by
13.7%), chemicals (up by 8.3%), textiles and
textile articles (rising by 5.3%) and other.

The FOB-based value of imports of goods in

the balance of payments reached USD 4 226.74
million (+21.8% compared to 2016).
Chart 2.35 The export of goods in 2017, by geographical
area (%)
Source: Developed by the NBM based on NBS data (database of
customs declarations, except for the goods for/after processing
with no change in ownership, selections on import (CIF prices) by
country of delivery)
Note: NBS show import by country of origin.

Chart 2.37 The import of energy products and electricity

(USD, million, CIF prices)

Other 800

countries 700
16.0% 600
500
European 400
CIS
Union
25.4% 300
58.6%
200
100
0
2015 2016 2017

Others Gasoline Coal

Source: Developed by NBM based on NBS data (database of
customs declarations, except for the goods for/after processing
with no change in ownership)
The structure of imports (excluding goods
imported for processing and other type of
remaking, according to the country of origin),
by geographical region, shows that the largest
share belongs to the European Union – 55.0%,
followed by the CIS countries – 28.7% and
other countries – 16.3% (Chart 2.36).
In the reporting year, the main categories of
imported goods were mineral products,
accounting for a share of 17.5% (up by 22.9%),
agricultural products (with a 16.1% increase
attributed to the rise in imports of sugar and
cigarettes), machines and appliances (up by
30.6%), chemicals (up by 14.0%), common
metals and metal articles (up by 25.7%),
transport vehicles and equipment (up by
27.0% as a result of the increase in imports of
cars and tractors).
In 2017, the import of energy products and
electricity amounted to USD 746.59 million,
increasing by 23.5% compared to 2016. This
Natural gas Diesel Electricity*
Source: Developed by the NBM based on NBS data (database of
customs declarations, except for the goods for/after processing
with no change in ownership)
* Import net
growth was largely driven by the resumption
of electricity imports from Ukraine, a 2.9-fold
increase in imports of coal and of other energy
products: gasoline – by 20.6%; diesel fuel –
by 28.4%, whereas the import of natural gas
(in gas form) have recorded a 16.5% decrease
(Chart 2.37).
The balance of services surplus grew to USD
315.29 million. It was driven by the increase in
exports by 19.7%, compared to 2016, whereas
the imports of services increased by 13.2%.
The ratio of the surplus of services to GDP
amounted to 3.9%, having increased by 0.7
p.p., compared to 2016 (Table A.2).
A significant increase was recorded in exports
of travel services (by 28.2%), in particular for
personal travel (+27.5%), transportation

31
services (by 16.9%) (driven by the increase in
the volume of foreign trade in goods), in
particular air transportation (+27.9%). Exports
of raw materials processing services have also
increased considerably (+27.8%), this increase
can be largely attributed to the new direct
investments made in the manufacturing of
wiring and accessories for the automotive
industry, as well as exports of IT services (by
55.9%).
Analysing the structure of foreign trade with
services, one can note that the largest share,
both in terms of receipts and payments made
for the services, recorded in 2017, was held by
transportation services 32.8% and 36.9%,
respectively. The exports and imports of travel
services accounted for 24.9% and 32.6%,
respectively. The services of processing raw
materials accounted for 15.1% of total service
exports in 2017.
In 2017, the surplus of primary income
increased by 10.9%, compared to 2016,
amounting to USD 510.80 million (Table A.3).
The amount of compensation paid to resident
employees for work performed for non-resident
employers increased by 17.6%, reaching USD
839.56 million. The effect of the increase was,
however, mitigated by the concurrent increase
in outflows of investment income (+36.2%), in
particular dividend income of foreign direct
investors, which increased 2.3-fold, totalling
USD 134.58 million. The ratio of the primary
income to GDP recorded 6.3%, having
decreased by 0.5 p.p., compared to 2016.
The surplus balance of secondary income
remained virtually unchanged (+0.2%),
compared to 2016, amounting to USD 1 125.97
million. Although personal transfers received
from abroad by Moldovan residents increased
by 6.6%, amounting to USD 800.10 million, the
volume of technical assistance and grants,
received by all sectors under international
cooperation programmes, decreased by 15.3%,
compared to 2016, having dropped to USD
183.73 million (Table A.4). In terms of GDP, the
balance of secondary income accounted for
13.8% of GDP, having decreased by 2.8 p.p.,
compared to 2016.
Personal remittances received by residents
of the Republic of Moldova (an indicator
calculated additionally to the balance of
payments), which reflect the value of net
employee compensation (excluding the
residents’ travel expenses and taxes paid
abroad), personal transfers and capital
transfers between households, reached USD
1 559.21 million, accounting for 19.2% of GDP
32
(having decreased as GDP share, compared to
2016, yet having increased by 13.2% in
absolute value). The growth of personal
remittances was mainly driven by the increase
in remittances from the EU countries (+24.9%
compared to 2016), as well as from other
countries.
Chart 2.38 The financial account by functional categories
(million, USD)
600
400
200
0
-200
-400 -214.56
-600 -458.05
-569.77
-800
-1,000
-1,200
2015 2016 2017
Reserve assets
Other investments
Portfolio investment and financial derivatives
Direct investment
Financial account
Source: NBM
Note: (+) net outflows, (-) net capital inflows.
Capital account recorded a negative balance
of USD 30.41 million, resulting from the net
outflows of private capital (USD 44.46 million)
and inflows of foreign assistance destined to
public administration for financing investment
projects (USD 14.05 million).
As a result of the current and capital
transactions carried out by Moldovan residents
with non-residents during 2017, the net
financing needs (representing the sum of
balances of current and capital accounts of the
balance of payments) increased 2.1-fold,
compared to 2016, amounting to USD 647.35
million, accounting for 8.0% of GDP (compared
to 4.5% in 2016).
In 2017, the financial account recorded net
capital inflows of USD 569.77 million, resulting
from the net increase in national external
liabilities by USD 622.38 million due to actual
transactions, whereas the residents’ external
financial assets increased by USD 52.61 million
(Chart 2.38, table A.5).
The increase in financial assets was
determined by the increase in the NBM’s
official reserve assets by USD 531.20 million
and the net increase in assets of the licensed
banks, held in the form of cash and deposits,
by USD 168.18 million.
At the same time, the assets of the population,
held in the form of cash and deposits, have
decreased by USD 552.96 million, as well as the
assets of resident economic agents from other
sectors, held in the form of trade credits and
advances extended to foreign trading partners,
which decreased by net amount of USD 92.77
million.
The increase in liabilities was driven, in
particular, by trade credits and advances
extended to residents by non-resident partners
in the net amount of USD 288.92 million.
Chart 2.39 The external loans (net incurrence of liabilities),
inflows and reimbursement by maturities (million, USD)
500
415.40
400
327.75
inflows
300
200 124.74
24.71
100
19.44
11.65
0
-5.98
reimbursement
-100
-200
-300
-400
-308.71
2015 2016
Long-term Short-term
Source: NBM
Liabilities in the form of external loans
amounted to a net value of USD 107.24 million
(total loans – USD 423.06 million, of which
long-term loans – USD 415.12 million,
short-term loans – USD 7.94 million; loan
repayments – USD 315.82 million, of which
long-term loans – USD 309.95 million and
short-term loans – USD 5.87 million) (Chart
2.39, Table A.6).
The external financing was received by: public
administration, including local governments –
USD 200.97 million, followed by non-financial
corporations, households and non-profit
institutions recording drawdowns of USD 89.22
million, other financial corporations – USD
68.22 million, licensed banks – USD 47.38
million, NBM – USD 17.27 million.
In 2017, creditors of the public administration,
including local governments, were: the
Government of Romania – USD 100.90 million,
the International Monetary Fund – USD 26.47
million, the International Development
Association – USD 20.70 million, the
International Bank for Reconstruction and
Development – USD 19.43 million, the
European Investment Bank – USD 17.51
million, the European Bank for Reconstruction
and Development – USD 9.53 million, the
International Fund for Agricultural
Development – USD 3.33 million, the Council
of Europe Development Bank – USD 2.90
million, and the Government of Poland – USD
0.21 million.
Chart 2.40 Direct investment: net incurrence of liabilities,
disaggregated by instruments (million, USD)
250
216.14 208.46
200
150 90.97
100
50
415.12 0
-50
2015 2016 2017
Debt instruments
Reinvestment of earnings
107.24
Equity other than reinvestment of earnings
7.94 Net incurrence of liabilities
-4.93 -5.87
Source: NBM
During 2017, the structure of external loan
-305.17 -309.95 repayments, by institutional sector, was the
2017 following: non-financial corporations,
households and non-profit institutions – USD
Net
99.08 million; public administration – USD
74.58 million (of which USD 26.31 million for
credits and loans extended by the IMF), the
NBM – USD 61.54 million (credits and loans
extended by the IMF), other financial
companies – USD 53.56 million, the
deposit-taking companies – USD 27.06 million.
Liabilities also rose, due to a net increase in
direct investment, by USD 208.46 million (net
inflows roughly doubled compared to 2016)
(Chart 2.40).
The increase in net inflows of foreign direct
investment (FDI) was less driven by the
establishment of new enterprises (the net
value of new equity holdings in the capital of
Moldovan enterprises amounted to USD 39.23
million), but rather by reinvestment of profits
by existing enterprises (USD 86.81 million) and
the accumulation of net debt to foreign direct
investors as a result of intra-group lending
(USD 82.42 million) (net debt repayments were
recorded in 2016).
In 2017, portfolio investment recorded net
inflows of USD 1 million due to a decrease in
external financial assets in the form of debt
instruments of licensed banks, whereas
financial derivatives recorded net inflows of
USD 0.43 million as a result of the foreign
exchange swap trading between the licensed
banks with non-resident banks.
33

International investment position of the
Republic of Moldova as of 31 December
2017
As of 31.12.2017, the international
investment position of the Republic of
Moldova maintained its previous trend,
recording a net debt of USD 3 954.33 million,
which increased by 30.3% compared to the
end of 2016 (Table A.7, Chart 2.41). Compared
to the end of 2016, the stock of financial
assets increased by 8.3% and the stock of
financial liabilities – by 17.0%.
Chart 2.41 International investment position in dinamics,
end of period (million, USD)
6000
4000
2000 4476.33 4608.75
0 currencies against the U.S. dollar (USD 67.67
-2000 -2963.03 -3034.13
-4000
-6000
-7439.36 -7642.88
-8000
-10000
2015 2016
Assets Liabilities Net investment position
Source: NBM
The evolution of the debit balance of the
international investment position during 2017
was determined by the fluctuation of the
exchange rates of the reference currencies
against the U.S. dollar (USD -484.95 million),
the net effective transactions with
non-residents (USD -569.77 million), price
fluctuations of financial instruments (USD
-63.43 million), whereas other changes (USD
197.95 million) pulled the debit balance of the
international investment position downwards.
All these changes resulted in a total
deterioration of the position at the end of 2017
by USD 920.20 million.
The largest share in the external financial
assets was still held by reserve assets (56.2%).
During 2017, the stock of official reserve
assets increased by 27.1%, compared to the
beginning of the year, amounting, as of
31.12.2017, to USD 2 803.26 million, thus
returning to its pre-crisis level (2013).
The stock of official reserve assets was
determined by net inflows of assets in the
balance of payments (USD 531.20 million,
Chart 2.42 The indicators of official reserve assets
adequacy of the Republic of Moldova (million, USD)
3000
2500
2000
1500
1000
500
0
2015 2016 2017
Reserve assets 3 months of goods and services imports
100% of short-term external debt 20% of M2
150% din (30%STD + 15%AAP + 5%M2 + 5%eX)
Source: NBM
Note: STD – short-term debt (by original maturity), OPC – other
portfolio commitments, M2 – broad money, eX – export of goods
and services.
calculated at the daily exchange rate), the
4990.74
exchange rate fluctuation of the reference
million) and by fluctuations in prices of
-3954.33 securities and monetary gold (USD -1.54
million).
-8945.07 The volume of official reserve assets met all
adequacy criteria:
2017
• To cover at least 3 months of imports of
goods and services (covered 6.3 months
of actual imports);
• To ensure full coverage of short-term
external debt (covered 160.4%);
• To ensure 20% coverage of M2 (covered
90.5%);
• To ensure 100-150% coverage of the
amount: 30% of short-term debt + 15%
of other portfolio commitments + 5% of
M2 + 5% of exports of goods and services
(covered 331.7%) (Chart 2.42).
In the structure of external liabilities, other
investments continue to hold the largest share
(57.4%), followed by direct investments
accounting for a share of 41.4%.
The total stock of liabilities in the form of direct
investments, accrued at the end of 2017, was
estimated at USD 3 701.74 million (up by
21.9%), the share of equity and shareholdings
(including reinvested earnings) accounting for
50.3%, debt instrument holding a share of
49.7% (Chart 2.43). The composition of debt
instruments was mixed, loans extended by
foreign direct investors amounting to USD 1
34
132.17 million, trade credit commitments to
foreign direct investors having recorded USD
137.06 million, and other debts to foreign
direct investors – USD 569.67 million.
Chart 2.43 Direct investmens, liabilities, main components,
stock* end of period (million, USD)
4000
3500
3000
2500
1781.17 1724.54
2000
1500
1000
500
1198.91 1312.97
0
2015 2016
Equity and capital participation Debt instruments
Source: NBM
*Stocks calculated using balance value
The main economic sectors that attracted
foreign investments were: financial and
insurance activities (26.1% of the direct
investments in the form of equity capital) and
manufacturing industry (25.3%).
External debt of the Republic of Moldova
as of 31 December 2017
Gross external debt of the Republic of Moldova
increased by 11.8%, compared to the
beginning of the year, and recorded, as of
December 31, 2017, USD 6 973.70 million
(Table A.8).
The ratio of gross external debt to GDP was
85.8%, decreasing by 6.3 p.p. compared to
2016 (Chart 2.44).
The public and publicly guaranteed external
debt reached USD 1 999.63 million (28.7% of
total debt), having increased by 12.4%,
compared to 31.12.2016, whereas the private
non-guaranteed external debt amounted to
USD 4 974.07 million (71.3% of total debt), up
by 11.6%.
Analysing the debt structure by institutional
sectors, statistics show that, as of 31.12.2017,
most of the external debt (36.6% of the total
debt) was accounted for by non-financial
corporations, followed by intra-group lending
under the direct investment (including debt for
the import of natural gas) – 26.4%, public
administration – 24.7%, licensed banks – 6.3%,
Chart 2.44 The external debt to GDP ratio (%)
100 93.7 92.1
85.8
80
67.6 65.8
61.2
60
40
26.1 26.3 24.6
1838.9 20
2015 2016 2017
Gross external debt, total / GDP
Public and publicly guaranteed external debt / GDP
Non-guaranteed private debt / GDP
Source: NBM
1862.84
2017
NBM – 3.8%, other financial companies – 1.8%,
households – 0.4%.
As of 31 December 2017, the direct
government debt to multilateral creditors
amounted to USD 1 345.81 million, having
increased by 10.8%, compared to 31.12.2016.
The largest share in the stock of government
debt to multilateral creditors was held by:
International Development Association –
45.4%, International Monetary Fund – 22.0%,
European Investment Bank – 14.0%,
International Bank for Reconstruction and
Development – 6.3%, The International Fund
for Agricultural Development – 4.9%, the
European Bank for Reconstruction and
Development – 4.9%, the Council of Europe
Development Bank – 2.5%. Liabilities to
bilateral creditors amounted to USD 354.86
million, having increased by 41.7%, compared
to 31.12.2015. In the structure of the
government debt to bilateral creditors, the
largest shares were held by Romania – 48.3%,
Japan – 16.4%, Russia – 13.1% and the USA –
9.3%.
Analysing the debt structure by maturity
(original maturity), most of the stock of gross
external debt was accounted for by long-term
debt (74.9%). As of 31.12.2017, the long-term
external debt totalled USD 5 226.02 million)
(+7.8% compared to 31.12.2016) (Chart 2.45).
However, in 2017, a sharp rise in the
short-term external debt (+25.9% as of
31.12.2016) was recorded. This growth was
driven by the increase in external liabilities in
the form of trade credits and advances, which
place a relatively lighter financial burden
(compared to loans), as they are to be partially
settled (the share of advances received)
through the delivery of goods or services.
35
Thus, the short-term external debt amounted
to USD 1 747.68 million and included: trade
credits and advances (consisting of advances Relations between the National Bank
on exports and deferred payments for imports, and the Government of the Republic of
for both goods and services) – 76.3%, (term and Moldova
sight) bank deposits placed by non-residents
with licensed banks of the Republic of Moldova
– 9.5%, other debt liabilities – 8.5%, intra-group Government debt to the NBM
loans – 0.6%, other short-term loans – 5.2%
(Chart 2.46). As of 31 December 2017, the government debt
to the NBM in the form of government
Chart 2.45 The external debt structure by maturities, end securities held in the NBM portfolio amounted
of period (million, USD) to 15 354.6 million lei and consisted of:
Government bonds (GB), issued and placed
7000
with the NBM on 4 October 2016 in order to
1747.68
6000
1249.59 1388.59
execute the obligations of the Ministry of
5000 Finance deriving from state guarantees no.
4000 807 of 17 November 2014 and no.101 of April
3000
1, 2015 – 13 291.2 million lei. Treasury bills
4854.62 4846.64 5226.02 (TB), held in the NBM’s portfolio following the
2000
conversion of loans previously received by the
1000 Ministry of Finance from the National Bank and
0 their subsequent reissue – 2 063.4 million lei.
2015 2016 2017

Long-term Short-term Government bonds were issued at the annual

interest (coupon) rate of 1.4% for the maturity
Source: NBM
of 2-9 years, and at the rate of 5.3% annually
for the maturity of 10-25 years.
Chart 2.46 The short-term external debt by types, as of
31.12.2017 Treasury bills, held in the NBM’s own portfolio
as a result of the reissues performed during
Intra-group loans 2017, usually had a 91-day maturity and the
0.6%
Other commitments Other loans interest rate ranging from 5.16%-7.69% per
related to debt 5.2%
8.5%
year. The weighted average interest rate on
TBs, held in the portfolio at the end of 2017,
Cash and recorded 5.82% per year against 7.27% per
deposits year recorded in 2016.
9.5%

Commercial loans and Government deposits placed with the

advances
76.3%
National Bank of Moldova

In 2017, the Ministry of Finance placed with

Source: NBM
The NBM has accumulated sufficient reserve
assets to fully cover the short-term external
debt. The coverage of the short-term external
debt with official reserve assets represented
160.4%, having increased by 1.5 p.p.,
compared to the end of 2016.
the National Bank of Moldova term deposits
in Moldovan lei with maturity ranging from 38
days to 730 days, in a total volume of 554.9
million lei.
Compared to 2016, the volume of deposits
placed with the NBM has recorded a significant
growth, having increased more than 9-fold.
It should be mentioned that, in March 2017,
the terms of placement of term deposits taken
from the Ministry of Finance were modified.
Thus, deposits are now accepted both for the
purpose of managing cash resources held in
the Treasury Single Account as well as for the
purpose of ensuring the liquidity reserve to
reduce the risk of refinancing the government
debt or to provide funds for monetary policy
implementation, at the weighted average

36
interest rate applicable on securities with
respective maturity, placed at the last auction.

As of 31 December 2017, the balance of term

deposits placed by the Ministry of Finance
amounted to 508.9 million lei, being
exclusively made up of deposits destined for
the formation of the liquidity reserve. The
average weighted rate on deposits in the
balance recorded 7.56% annually, whereas the
weighted average term to maturity – 613 days.

The NBM’s role in the public sector’s

development

During 2017, the NBM supported the

Government of the Republic of Moldova in the
implementation of a series of public policies,
meant to promote the welfare of Moldovan
citizens.

In this respect, it is worth noting the NBM’s

contribution to the elaboration of a series of
documents of major importance for the
country, including the Roadmap for Improving
Competitiveness, the National Strategy for
Investment and Export Promotion for
2016-2020, the Strategy for the Development
of the Small and Medium-Sized Enterprises
Sector for 2012-2020, the Consumer Protection
Strategy for 2013-2020, the Strategy for the
Reform of the Regulatory Framework for the
Entrepreneurial Activity for 2013-2020, the
Action Plan on the Implementation of the
National Strategy for Preventing and
Combating of Money Laundering and Terrorism
Financing for 2013-2017, the Action Plan for
the Implementation of the Strategy for the
Development of the National Statistical
System for 2016-2020, and others.

At the same time, the National Bank of

Moldova constantly contributes to the
fulfilment of the commitments made by the
Moldovan authorities to international
development partners, which refer to the
NBM’s areas of competence. Given the above,
the NBM participates in the achievement of
the objectives set out in the National Action
Plan for the Implementation of Association
Agreement between the Republic of Moldova
and the European Union during 2017-2019, the
fulfilment of the commitments related to the
Economic and Financial Policy Memoranda
(MEFP, SMEFP) signed with the IMF, as well as
contributes to the implementation of structural
reforms under the Memorandum of
Understanding, singed between the Republic
of Moldova and the European Union on
macro-financial assistance to the Republic of
Moldova.

37
Chapter 3
Monetary Policy of the National Bank of Moldova
3.1 Monetary policy
objective
Pursuant to the provisions of the Law No.
548-XIII of 21 July 1995 on the National Bank
of Moldova, the NBM is the central bank of the
Republic of Moldova and an autonomous public
legal entity that establishes and promotes
monetary and foreign exchange policy in the
state. During 2017, the NBM operated in line
with the provisions of the Medium-term
monetary policy strategy, approved by the
Council of Administration of the National Bank
of Moldova on 27 December 2012.
According to the above-mentioned strategy, in
order to ensure and maintain price stability,
the NBM set the inflation target, measured by
the consumer price index, which is published
monthly by the National Bureau of Statistics
(NBS) at 5.0% level with a tolerance range of ±
1.5 p.p.
By quantifying the macroeconomic situation,
the trends and the forecasts of the
medium-term macroeconomic indicators, the
short and medium-term inflation outlook in the
conditions of the risks and uncertainties
recorded in 2017, and in order to ease the
disinflationary pressures, the National Bank of
Moldova promoted a stimulating monetary
policy compared to 2016. At the same time,
the conduct of monetary policy was affected
by the complexity of the balance of risks, both
internal and external, a gradual intensification
of inflationary risks being recorded.
Thus, during 2017, the National Bank of
Moldova has been gradually adjusting its
monetary policy in order to stimulate the
national economy through the creation of
favourable conditions for lending. These
measures were aimed at boosting domestic
demand alongside ensuring a steady
adjustment of the domestic economic
environment to the volatility and uncertainty
of the external environment. In this context,
the members of the NBM Executive Board
decided to lower the monetary policy interest
38
rate during 2017 by 2.5 p.p., having decreased
it from 9.0% to 6.5% annually.
These decisions aimed at diminishing
disinflationary expectations through
strengthening the prospects of the inflation
rate being kept within the range of ± 1.5 p.p.
from the 5.0% target for subsequent periods.
3.2 Monetary policy
decisions
The intensification of the inflationary process
at the beginning of 2017 was in line with the
National Bank’s forecasts, based on which the
annual inflation rate has had an upward
trajectory, rising above the limits of ± 1.5 p.p.
of the inflation target range, up to the third
quarter of 2017. Subsequently, the inflation
rate assumed a downward trend and
positioned itself within the inflation target
interval, being driven by disinflationary
pressures.
The decisions of the NBM’s Executive Board
adopted in January-May 2017 on the intention
to maintain the base rate at 9.0% per annum
took into account the existing inflation
forecasts, the previous monetary policy
decisions and the speed of the transmission of
the effects of these decisions in the economy.
In June 2017, the dynamics of macroeconomic
indicators denoted the prerequisites for
slowing down of economic activity and a
lowering of the medium-term inflationary
pressures in accordance with the NBM’s
forecasts. This fact, in combination with the
appreciation, in real terms, of the domestic
currency, determined the members of the
NBM’s Executive Board to reduce the base rate
applied to the main monetary policy
operations by 1.0 p.p., from 9.0 to 8.0%
annually.
Later, in August-December 2017, the NBM’s
decisions aimed at gradually implementing a
stimulating monetary policy. To this end, the
NBM has lowered the monetary policy interest
rate three times, by 0.5 p.p., eventually setting
a level of 6.5% annually.
The NBM’s Executive Board decided to
maintain the base rate at the same level of
6.5% through the end of 2017 based on the
assumption that the monetary policy
measures, implemented by the NBM at the
beginning of the year, still needed time to
spread through different transmission channels
in the national economy, including through the
level of interest rates applied on loans and
deposits extended/taken in domestic currency,
thus further acting on inflation evolution.
in 2017, including as a result of foreign
exchange interventions (foreign currency
purchases) amounting to USD 433.8 million
(7.8 billion lei), and determined an increased
sterilization effort on the NBM’s side, the
volume of these operations increasing
significantly, compared to the previous year
(Chart 3.1).
Chart 3.1 The evolution of daily balance of money market
operations (million, MDL)
2000
0

-2000
It should be mentioned that in order to sterilize
and adequately manage the liquidity surplus -4000

accumulated during 2017 and improve the -6000

mechanism of transmission of monetary policy
decisions in view of ensuring an adequate set -8000

of monetary conditions aimed at achieving the -10000

proposed inflation target rate set for the

2/16
3/16

5/16
6/16
7/16
8/16
9/16
10/16
11/16
12/16

2/17
3/17

5/17
6/17
7/17
8/17
9/17
10/17
11/17
12/17
1/16

4/16

1/17

4/17
medium-term, the NBM gradually increased
NBC daily balance Repo operations daily balance
the level of required reserves ratio of the
means attracted in Moldovan lei and
non-convertible currency by 5.0 p.p., up to the Source: NBM

level of 40.0%. At the same time, the required

reserve ratio of funds held in freely convertible
currency was decided to maintain at 14.0%
throughout 2017.
3.3 Monetary policy
achievements during
2017
Monetary market operations, standing facilities
and the required reserve mechanism
continued to play a key role in the
implementation of monetary policy. Monetary
market operations were carried out at the
NBM’s initiative, the applied interest rate being
equal to the monetary policy rate, whereas
standing facilities were used at the bank’s
discretion. At the same time, the NBM
strengthened the restrictive character of the
required reserve mechanism by increasing by
5.0 p.p. the reserve requirement set for banks’
liabilities in Moldovan lei, whereas maintaining
the reserve requirement set for banks’ foreign
currency liabilities at the level of the previous
year.
Monetary market operations
The excess liquidity, accumulated in the
banking system at the end of 2016, increased
Issuance of NBM Certificates
The NBM has issued NBC through auctions,
which were carried out twice per week in the
first four months of the year and weekly since
May. According to 2017 figures, the weighted
average rate on NBC recorded 8.11%,
compared to 11.55% of the previous year.
Reflecting a significant increase in the banks’
net positive liquidity, the volume of
liquidity-absorbing operations doubled,
compared to 2016, a condition that was also
reflected in the annual average volume of NBC
stock, which rose from 2 959.0 million lei in
2016 to 6 358.1 million lei in 2017. The
developments in daily NBC balance followed a
regular pattern characterised by its decline at
the end of the reserve maintenance period and
a subsequent return to higher levels at the
beginning of the next period. The daily NBC
balance recorded its minimum value of 3 502.9
million lei at the beginning of May as a result
of the increase in the reserve requirement
ratio set for the placements held in Moldovan
lei and non-convertible currency, as well as
due to a reduced frequency of NBC auctions
starting with May. The maximum amount of
9 207.2 million lei was recorded at the end of
the year as a result of the stronger purchases
of foreign currency conducted by the NBM in
August-October 2017.

39
Lending activity Chart 3.2 The evolution of average monthly balance of
overnight deposits and of average interest rate

As of December 31, 2017, the credit exposure

of the licensed banks to the National Bank of 1200
MDL, million %
18
Moldova amounted to 0.1 million lei, being
1000 15
entirely accounted by loans extended to banks
in 1992-2002 for lending the construction of 800 12
housing cooperatives (CHC). Compared to the 600 9
end of 2016, the balance of loans extended to
400 6
banks decreased by 0.3 million lei.
200 3
The loan portfolio’s assessment, carried out in 0 0

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December 2017, identified no write-downs for
loan losses.
Average daily balance Interest rate

Standing facilities
Source: NBM
The conditions of operation of standing
facilities (overnight deposits and loans),
periods, in April and December, by a small
established by the NBM, have ensured for
number of banks, which failed to comply with
banks an increased flexibility and efficiency of
the reserve requirement regime.
liquidity management.

During 2017, interest rates applied on standing
facilities decreased, the overnight deposit rate
dropping from 6.00% annually at the beginning
of the year to 3.50% annually at the end of the
year, whereas the overnight loan rate fell from
12.00% to 9.50% annually.
Overnight deposit facility
Banks have used the overnight deposit facility
mainly at the end of the reserve maintenance
periods. The frequency of using the deposit
facility was generally the same throughout the
maintenance periods of the required reserves
held in Moldovan lei. Thus, the average annual
balance recorded 1 058.0 million lei, having
increased by 420.1 million lei or 65.9%,
compared to 2016. At the beginning of each
maintenance period, the amount of overnight
deposits placed with the NBM was
insignificant; however, it would increase later
once the banks have fulfilled the reserve
requirement. The average monthly balance of
overnight deposits placed by banks recorded
over 1 billion lei during January-November,
whereas in December it fell to 693.1 million lei
(Chart 3.2) as a result of the change in the
liquidity management strategy implemented
by one of the banks.
However, the total amount of overnight loans
extended by the NBM during 2017 was higher
than in the previous year, amounting to 357
million lei, compared to 141.1 million lei in
2016.
Required reserves
The required reserve mechanism continued to
ensure the liquidity control and management
in the banking system.
During 2017, against the background of a
persisting excess of liquidity in MDL, recorded
in the banking sector, and the potential
pro-inflationary risks it could generate, the
NBM has increased the required reserve ratio
of funds held in Moldovan lei and
non-convertible currency by 5.0 p.p. in two
steps, as follows:
• up to 37% of the calculation base for the
required reserve maintenance period of
April 8, 2017-May 7, 2017;
• up to 40% of the calculation base starting
with the required reserve maintenance
period of May 8, 2017-June 7, 2017.

Overnight credit facility Given the above and as a result of the

As in 2016, the level of excess liquidity, which is
monitored in the banking system, determined
the banks’ decreased demand for loan facility.
In 2017, the overnight loan facility was used
mainly at the end of the reserve maintenance
increased amount of placements made with
the banks (Chart 3.3), the required reserves
held in MDL between December 8,
2017-January 7, 2018 amounted to 12 638.6
million lei, having risen by 25.6%, compared to
the end of the previous year (December 8,
2016-January 7, 2017).

40
At the same time, during the last six years, applied on the required reserves held in MDL
the NBM has not changed the foreign currency (the average rate on overnight deposit facility)
reserve requirement ratio (US dollars and euro), decreased from 6.0% to 3.56% annually.
maintaining it at the level of 14.0% of the
calculation base. Intervention on the domestic foreign
exchange market
Chart 3.3 The evolution of attracted funds in MDL, required
reserves in MDL and required reserves ratio
In 2017, the National Bank of Moldova
MDL, million %
35000 50 intervened on the domestic forex market only
as a currency buyer to consolidate the official
28000 reserve assets, as a significant surplus of
foreign currency was recorded on the
21000
intrabank market.
40
14000
During the reporting period, the volume of net
7000 transactions carried out by the National Bank
of Moldova on the interbank forex market in
0 30 Moldovan lei totalled, at value date, USD
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436.31 million, including currency conversions
Required reserves in MDL in the form of purchases, carried out with the
Attracted funds World Bank institutions, amounting to USD
Required reserves ratio in MDL
2.54 million (Chart 3.5).
Source: NBM

Chart 3.5 The evolution of the official exchange rate of

Chart 3.4 The evolution of required reserves in USD and MDL/USD and the volume of daily transactions of the NBM
EUR in 2017
units, million %
120 40
USD, million MDL/USD
24 20.5
100 35
20.0
20 19.5
80 30
16 19.0
60 25 18.5
12 18.0
40 20
17.5
8 17.0
20 15
4 16.5
0 10 16.0
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0 15.5
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Required reserves in USD
Required reserves in EUR Interbank NBM turnover Official exchange rate
Required reserves ratio in USD/EUR
Source: NBM Source: NBM

As of 31 December 2017, the required foreign

exchange reserves held by banks at the NBM
amounted to USD 70.7 million and EUR 118.5
million (Chart 3.4), recording an increase of
15.3% and 12.3%, respectively, compared to
the end of 2016.

Pursuant to article 17(3) of the Law no.

548-XIII of 21 July 1995 on the National Bank
of Moldova, for the share of required reserves
exceeding 5.0% of the liabilities, based on
which the required reserve level is calculated,
the National Bank paid to banks interest
amounting to 534.3 million lei, by 33.0% less
than in 2016. NBM’s expenditures related to
the required reserves decreased as a result of
the NBM’s measures taken to relax the
monetary policy through the base rate tool. In
this context, during 2017, the interest rate

41
 evolution, recording a growth rate of 1.1 p.p.
lower than in 2016.
3.4 Monetary and foreign At the same time, the money supply (M314 )
exchange conditions recorded an annual growth of 9.3%, its growth
rate having decreased by 0.9 p.p., compared
to 2016 (Chart 3.7).
Dynamic of monetary indicators
Chart 3.7 The dynamics of components of M3 money supply
(%, increase versus the same month of the previous year)

Throughout 2017, monetary indicators

maintained a positive trend. Thus, the average 30
25
growth rate of broad money supply recorded 20
8.7% in annual terms. Other monetary 15
aggregates recorded a similar behaviour 10
during the reference year. 5
0
-5
Money supply -10
-15
In January-December 2017, the money supply -20

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12/17
(M213 ) increased by 14.1%, recording the
annual growth rate 4.1 p.p. lower than in 2016 M3 money supply Deposits in MDL
(Chart 3.6). Starting with the second quarter of Deposits in foreign currency

2017, the M2 monetary aggregate has slowed

down its annual growth, having reverted to an Source: NBM

upward trend in the fourth quarter. Both

components of money supply M2 have
recorded positive developments. Thus,
domestic currency deposits and money in
circulation increased, compared to 2016, by
16.4% or by 4 783.4 million lei and by 10.3%
or 1 778.3 million lei, respectively.
At the end of 2017, the growth rate of foreign
currency deposits fell to -0.1%. Foreign
currency term deposits, recalculated in
Moldovan lei, decreased by 276.7 million lei or
by 1.7% per year, whereas sight deposits
increased by 263.0 million lei or by 3.3%.

Chart 3.6 The evolution of components of M2 money supply At the end of 2017, the share of domestic
(%, increase versus the same month of the previous year)
currency deposits in total deposits amounted
to 58.5%, whereas foreign currency deposits
30 accounted for 41.5%, having modified during
25 the reference year by 3.8 p.p. in favour of
20
domestic currency deposits.
15
10
5 In the structure of domestic currency deposits,
0 the share of term deposits in total deposits
-5 placed in Moldovan lei recorded 54.2%, having
-10 decreased by 8.7 p.p. at the end of December
-15 2017 compared to the same period of 2016.

M2 money supply M0 monetary aggregate Lending market

Balance of deposits in MDL
Source: NBM
The evolution of domestic currency deposits
was characterised by a gradual slowing down of
their growth rate, recording a minimum growth
rate of 9.4% at the end of the third quarter;
in the last quarter, however, their trend has
reverted to an upward one. Throughout the
year, money in circulation has had a uniform
13 Money supply M2 includes money in circulation
During the reporting year, the growth rate of
the total balance of loans in the economy,
extended by the licensed banks, recorded
negative annual dynamics. This evolution was
driven by the negative dynamics of the
balance of corporate loans, accounting for a
share of around 79.9%. At the end of 2017, the
balance of loans in the economy reduced its
negative growth rate, compared to December
2016 (-3.4% compared to -7.4%). The balance
14 Money supply M3 includes money supply M2 and

(M0), domestic currency deposits and money market foreign currency deposits placed by residents, recalculated
instruments. in Moldovan lei.

42
of corporate loans recorded a negative growth should be noted that the volume of
rate of 7.8%, which increased by 1.9 p.p. dollar-denominated foreign currency loans
compared to the end of 2016. This evolution continued to grow and recorded positive
was driven by the decrease in both domestic annual growth rates starting with October
currency loans by 8.2% and foreign currency 2017 (Chart 3.9).
loans, recalculated in domestic currency, by
7.4%. It is worth noting that the growth rate of Evolution of new granted loans
the balance of retail loans remained positive In 2017, the annual volume of new granted
throughout the year as a result of the revival loans recorded an increase, amounting to
of both consumer and real estate loans (Chart 24 457.5 million lei, having risen by 8.9%,
3.8). compared to 2016. This evolution was driven
by domestic currency loans, the volume of
Chart 3.8 The balance of credits granted to the economy
(%, increase versus the same month of the previous year) which grew by 19.7%, totalling 15 389.6
million lei (Chart 3.10).
30 Chart 3.10 The dynamics of volume and weighted average
25 interest rate of new credits granted in MDL
20
15
10 MDL, million %
5 1600 20
0 1400
-5 1200 15
-10 1000
-15 800 10
-20 600
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400 5
200
Total Legal entities Individuals
0 0

10/16
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1/17
2/17
3/17
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7/17
8/17
9/17
10/17
11/17
12/17
Source: NBM
Note: The data do not include banks in liquidation Loans in MDL Weighted average interest rate

Chart 3.9 The dynamics of balance components of credits

granted in economy (%, increase versus the same month Source: NBM
of the previous year)

Chart 3.11 The dynamics of volume and weighted average

interest rate of new credits granted in foreign currency
15

10
MDL, million %
5 1500 10
1250 8
0
1000
-5 6
750
-10 4
500
-15 250 2
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0 0
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Total In MDL
In foreign currency recalculated in MDL In foreign currency (USD)
Loans in foreign currency recalculated in MDL
Weighted average interest rate
Source: NBM

In terms of domestic currency loans, in 2017, Source: NBM

the annual growth rate has mitigated the
decline, so that the total balance of loans Domestic currency loans strengthened their
granted in the economy did not change at the growth through the rise in both retail and
end of December 2017, year-on-year (Chart corporate loans. The annual volume of
3.9). The negative annual growth rate of the corporate domestic currency loans increased
total balance of loans granted in the economy by 15.2%, reaching 9 689.3 million lei and
was driven by the evolution of foreign currency accounting for 63.0% of total domestic
loans, recalculated in Moldovan lei, as a result currency loans. The volume of retail loans,
of the appreciation of the domestic currency holding a share of 37.0% of total loans,
against the main reference currencies. It increased by 28.0%, compared to 2016,
totalling 5 700.3 million lei.

43
In 2017, compared to 2016, the volume of rate of 16.4%, by 6.4 p.p. lower than at the
foreign currency loans, recalculated in lei, end of December 2016. The overall evolution of
decreased by 5.6%, being mainly driven by the the balance of deposits was adversely affected
appreciation of the domestic currency against by the evolution of foreign currency deposits,
the main reference currencies, and recorded recalculated in Moldovan lei, which at the end
9 067.9 million lei (Chart 3.11). The largest of 2017 recorded a negative annual rate of
share in total foreign currency loans was held 0.1%. It should be mentioned that the volume
by corporate loans. In 2017, the total volume of US dollar-denominated deposits continued to
of corporate foreign currency loans, grow and recorded positive annual growth rates
recalculated in lei, decreased by 5.1% and since April 2017, reaching 16.7% per annum at
recorded 9 003.1 million lei. the end of December 2017.

The developments recorded in loans sector Evolution of new attracted deposits

during 2017 reflect the effects of a steady
decrease in interest rates applied on new In 2017, the annual volume of new deposits
domestic currency loans, being driven by placed with banks has recorded a downward
monetary policy decisions implemented by the trend, having grown by 38 997.6 million lei,
National Bank of Moldova. their volume decreasing by 17.6%, compared
to 2016. The decline was driven by a notable
Deposit market decrease in the volume of new domestic
currency deposits, the total volume of which
During 2017, the growth rate of the total declined by 23.0%, recording 24 755.7 million
balance of deposits placed with the licensed lei (Chart 3.13). The largest share in the
banks recorded positive annual dynamics. This volume of new domestic currency deposits was
evolution was driven by the positive dynamics held by retail deposits. In 2017, the total
of the balance of domestic currency deposits, volume of retail domestic currency deposits
which accounted for over 58%. At the end of decreased by 24.8%, recording 18 092.8
2017, the year-on-year change in the balance million lei, corporate deposits decreased by
of deposits decreased slightly, compared to 17.6% and totalled 6 662.9 million lei.
December 2016 (8.9% vs. 9.8%) (Chart 3.12).
Chart 3.13 The dynamics of volume and weighted average
At the end of 2017, the balance of corporate interest rate of new term deposits attracted in MDL
deposits recorded a growth rate of 23.4%,
having increased by 8.2 p.p., compared to the MDL, million %
3500 16
end of 2016. It should be mentioned that the 3250
3000 14
growth rate of the balance of retail deposits 2750
2500 12
recorded positive values throughout the year 2250 10
as a result of the evolution of sight deposits. 2000
1750 8
1500
Chart 3.12 The dynamics of balance components of 1250 6
attracted deposits (%, increase versus the same month of 1000 4
the previous year)
750
500 2
250
0 0
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30

25

20 Deposits in national currency

15 Weighted average interest rate
10
Source: NBM
5

-5 In 2017, compared to 2016, the volume of new

-10 foreign currency deposits, recalculated in
-15 Moldovan lei, decreased by 6.3%, being mainly
-20
driven by the appreciation of the domestic
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Total In MDL In foreign currency (recalculated in MDL) In foreign currency (USD)

currency against the main reference
currencies, and totalled 14 241.9 million lei
(Chart 3.14). The largest share in the volume
Source: NBM
of foreign currency deposits was held by retail
deposits. In 2017, the total volume of retail
In terms of the domestic currency deposits, foreign currency deposits, recalculated in
in 2017, their annual growth rate has slowed Moldovan lei, decreased by 5.3%, recording
down, so that the total balance of deposits, at 12 119.1 million lei; at the same time, the
the end of December 2017, recorded a growth volume of corporate foreign currency deposits

44
decreased by 11.6% and totalled 2 122.8 recorded a level of 10.33% per annum, having
million lei. decreased by 3.88 p.p., compared to 2016.
This development was driven by the evolution
Chart 3.14 The dynamics of volume and weighted average
interest rate of new term deposits attracted in foreign
of interest rates on both corporate and retail
currency loans. The weighted average interest rate on
new corporate loans, extended during 2017,
MDL, million % recorded a level of 10.40%, having dropped by
2000 3
1750
3.67 p.p., compared to 2016. The weighted
1500
average interest rate on retail loans, extended
1250 2 in 2017, decreased by 4.26 p.p., falling to
1000
10.20% per annum, compared to 2016.
750
1 A decline in the level of interest rates applied
500
250
on new foreign currency loans recorded a
0 0
slower dynamics. The weighted average
interest rate on foreign currency loans dropped
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from 5.26% per annum, recorded in January

Deposits in foreign currency recalculated in MDL
Weighted average interest rate
Source: NBM
Interest rates applied on new deposits
and loans
During 2017, the Executive Board of the
National Bank of Moldova carried out four
consecutive cuts of the base rate applied to
the main monetary policy operations.
Following a downward trend set by the NBM’s
base rate applied to the main monetary policy
operations, the monthly weighted average
interest rates on new deposits and loans
taken/extended during 2017 have also
recorded a decline (Chart 3.15). Thus, the
weighted average interest rate on new granted
loans fell from 11.55% per annum, recorded in
January 2017, to 9.58% per annum in
December 2017 (minimum value) (Chart 3.15).
Chart 3.15 The average interest rate in MDL (%)
20
18
16
14
12
10
8
6
4 recorded 6.07% per annum, having decreased
2 2.1-fold, compared to 2016.
0
5/16
2017, to 4.66% per annum in December 2017
(Chart 3.11). In 2017, the weighted average
rate on foreign currency loans recorded 5.01%
per annum, having decreased by 0.89 p.p.,
compared to 2016. The rate decline was driven
by the evolution in interest rates applied both
on new corporate loans, accounting for the
largest share of total loans, and new retail
loans, extended in foreign currency.
New deposits
Throughout 2017, following the downward
trend set by the NBM’s base rate applied to
the main monetary policy operations and as a
result of the excess liquidity condition
recorded in the banking system, the interest
rates applied on new deposits recorded
decreases both in case of domestic currency
deposits and foreign currency deposits.
Interest rates on domestic currency deposits
attracted by banking system have gradually
declined to 5.19% per annum (December
2017), recording a decrease of 1.61 p.p.,
compared to January 2017 (Chart 3.13). The
weighted average rate of domestic currency
deposits placed in 2017 recorded a level of
5.73% per annum, by 4.98 p.p. lower than in
2016. This evolution was driven by the interest
rate applied on retail deposits. The weighted
average interest rate on retail deposits in 2017

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The average interest rate on foreign currency

deposits recorded a downward trend, having
New loans New deposits NBM base rate dropped by the end of the year to 1.37% per
annum (Chart 3.14). The weighted average
Source: NBM interest rate on foreign currency deposits,
placed in 2017, recorded a level of 1.63% per
New loans annum, by 0.49 p.p. lower than in 2016.
Average weighted interest rates applied on
The weighted average interest rate on new both corporate and retail deposits recorded
loans extended in domestic currency in 2017 virtually identical levels. The average rate on

45
corporate deposits fell to 1.62% per annum,
recording a level by 0.31 p.p. lower than in
2016. The weighted average interest rate on
retail foreign currency deposits declined by
0.53 p.p.
Banking margin
In 2017, in the domestic currency segment,
following a notable decline in the interest rate
applied on deposits, the banking margin,
expressed in MDL, increased by 1.11 p.p.,
compared to 2016, recording a level of 4.60%.
In the foreign currency segment, the situation
was opposite, the decline in the interest rate
applied on loans recording a faster dynamics
than in case of deposits; as a result, the
banking margin, expressed in foreign currency,
recorded an annual decline of 0.40 p.p.,
dropping to 3.38% (Chart 3.16).
eight quarters, as well as of the excess liquidity
accumulated in the banking system.
During 2017, the interest rates on foreign
currency loans balance recorded
developments similar to those of domestic
currency loans, though recording a smaller
decline, reaching 5.15% per annum at the end
of 2017, thus having decreased by 0.59 p.p.,
compared to the end of 2016. This decrease
was also partly driven by the excess of foreign
currency recorded on the market in the
reporting period.
Following the downward trend set by the base
rate applied to the main monetary policy
operations of the National Bank of Moldova,
the weighted average interest rates on the
balance of deposits taken by the licensed
banks continued their decline.

Chart 3.16 The evolution of banking margin on new Thus, at the end of 2017, the average interest
operations in national and foreign currency (p.p.)
rate on the balance of domestic currency
deposits recorded 5.69% per annum, having
6 decreased by 2.83 p.p., compared to the end
of 2016 (Chart 3.17). This evolution was
5 mainly driven by the decrease in the average
4
interest rates on the balance of domestic
currency deposits placed by individuals,
3 whereas the decline in the corporate segment
recorded lower dynamics.
2

1 At the end of 2017, the average interest rate

2014 2015 2016
Banking margin on operations in national currency
Banking margin on operations in foreign currency
Source: NBM
Balance interest rates
During 2017, the average interest rates on the
balance of loans extended by licensed banks
continued their downward trend, having
recorded, at the end of 2017, an average level
of 9.83% per annum (Chart 3.17) for domestic
currency loans (-1.97 p.p. compared to the
end of 2016). This decrease was driven by the
average interest rate on domestic currency
2017 on the balance of foreign currency deposits
recorded a new historical low, reaching 1.34%
per annum in the reference period, having
dropped by 0.85 p.p., compared to the end of
the previous year. The annual decline was
driven by a sharp fall in average interest rates
on the balance of retail deposits, whereas
interest rates on corporate deposits recorded a
negligible decline during the year.
Chart 3.17 The average interest rate of credit and deposit
balances (%)
18
16
14
12
11.80

loans, largely as a result of the developments 9.83

10 8.52
recorded in the retail loans segment. The
8
developments were attributed to a notable 5.74 5.69
6
decrease in loan costs, which were also 5.15
4
recorded in the corporate segment, although 2.19
2 1.34
the average interest rate of the latter recorded
0
a smaller decline.
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1/16

4/16

These developments reflected the effects of the Loans in national currency Deposits in national currency
Loans in foreign currency Deposits in foreign currency
relaxation of the monetary policy, promoted
by the National Bank of Moldova in the last Source: NBM

46
 Chart 3.18 The quantitative indicators of the primary
market of SS (MDL, million)

3.5 Monetary market 20000 18701.7

18000
16233.4
16000
14000
12215.0 11821.5
Primary market of state securities 12000 10995.0 11250.4 10530.0 10292.5
9254.9
10000
8000
As a state agent responsible for the placement 6000
and administration of state securities (SS) 4000
through the Book-Entry System, the National 2000
Bank, in 2017, organised and carried out 193 0
auctions for SS placement. 2015 2016 2017
Indicative volume of issue
Volume of supply
Allocated volume
Taking into account the inflow of external
financing, mainly for budget support, coming Source: NBM
from the European Commission, the World
Bank, the Romanian Government and the IMF,
the Ministry of Finance showed consistency in In 2017, the interest rate’s evolution on the
its SS issuance policy, structure and volumes primary market of state securities was
of SS sales at the beginning of 2017 as well as determined by the persistence of excess
throughout most of the year. Thus, treasury liquidity in the banking sector, as well as by
bills of 91-, 182-, 364-days maturity were several decreases in the monetary policy rate
offered for sale in weekly volumes of 40.0, of the NBM.
60.0 and 70.0 million lei, respectively.
The monthly weighted average rate on SS with
Government bonds (GB) with 2-year maturity
maturity of up to one year has reached its
and floating interest rate were offered though
maximum value of 7.94% annually in June,
the monthly auctions during the year in
having recorded its minimum values at the
volumes similar to those of the previous year –
beginning and at the end of the year (Chart
15.0 million lei. The intention of the Ministry of
3.19).
Finance to increase the average maturity of SS
as well as an increased investors’ interest for Chart 3.19 The monthly dynamic of indicators of the
SS with a longer maturity resulted in the primary market of SS
placement of bonds with 2-year maturity and
fixed interest rates. They were put up for sale, %
MDL, million
together with 3-year maturity bonds, in 2500 7.94
9
7.84
2250 7.52
7.52
8
monthly volumes of 20.0 million lei for each 2000 6.69 6.70
7
6.37 6.36 6.26
5.94
maturity. 1750 5.69
5.89
6
1500
5
1250
In the first quarter of 2017, the Ministry of 4
1000
Finance created a cash buffer by issuing two 750 3
500 2
government bonds with 1- and 2-year maturity. 1
250
This reserve was meant to ease seasonal 0 0
pressures in order to provide the necessary
2/17

3/17

5/17

6/17

7/17

8/17

9/17

10/17

11/17

12/17
1/17

4/17

financing for the budget deficit. Also, it was to

Indicative volume of issue Volume of supply
contribute to the decrease of the refinancing Allocated volume Interest rate
and liquidity risks, thus increasing the
efficiency of government debt management. Source: NBM

The decrease in the interest rate on SS placed
on the primary market affected the
attractiveness of these investments. The ratio
between the volume of bids submitted and the
offered supply, recorded throughout 2017,
decreased, having dropped to 1.5 (compared
with 1.7 in 2016). The Ministry of Finance
managed to attract 10 293.0 million lei from
the market, slightly below the projected
amount of 10 530.0 million lei (Chart 3.18).
Non-bank investors remained active on SS
market due to the attractiveness of SS interest
rates; however, volumes purchased by them
during 2017 (1 833.5 million lei) diminished,
both as an absolute value (-312.3 million lei)
and as a share in the total volume traded
(from 19.1% to 17.8%) as compared to 2016.
The balance of SS purchased by non-residents
amounted to 15.0 million lei at the end of
2017, having slightly increased compared to
the end of 2016.

47
These developments were accompanied by Chart 3.22 The dynamic of nominal interest rates on SS
with the maturity up to one year (%)
positive changes applied to the structure of
the newly issued SS: the share of 91-day SS
has been significantly decreased in favour of 27
GB with a 2- and 3-year maturity (Charts 3.20 24
and 3.21). Under these conditions, the 21
average maturity of issued SS recorded a 18
considerable increase (from 234 to 287 days). 15
12
Chart 3.20 The structure of SS issues by maturity in 2016 9
6
3
364 days T-

2/16

8/16
10/16
11/16

3/17
5/17
7/17
9/17
10/17
12/17
2/15
4/15
6/15
8/15
9/15
11/15
12/15
12/14

4/16
6/16

1/17
2 years GB 3 years GB
bills 1.07% 0.27% 91 days T-
40.42% bills 21 days T-bills 91 days T-bills 182 days T-bills 364 days T-bills
27.44%

Source: NBM

The average annual interest rate on SS with

a maturity of up to one year, traded in 2017,
182 days T- recorded 6.69% annually, compared to 15.81%
bills annually recorded in 2016.
30.80%

The annual weighted average nominal interest

Source: NBM
rates on SS, traded over the last two years
Chart 3.21 The structure of SS issues by maturity in 2017
through primary market auctions, in the
maturity profile, are presented in the table 3.1.

2 years GB
3 years GB
365 days GB 6.50% Table 3.1: The annual weighted average nominal interest rates of
1.54% 91 days T-bills
1.59% the state securities by maturities (%)
19.82%

2016 2017
91 days T-bills 16.14 6.45
182 days T-bills 15.55 6.71
364 days T-bills 15.54 6.80
SS with maturity up to 1 year 15.81 6.69
364 days T- 182 days T- 365 days SB - 7.28
bills bills
39.00% 31.55% 2 years SB 13.72 7.57
3 years SB 7.75 7.47
Source: NBM
Source: NBM

Analysed by yields recorded on the financial

In 2017, SS interest rates recorded values
market, SS interest rates, during the first two
located mainly at the lower part of the rate
months of 2017, were lower than interest rates
corridor set by the NBM. The analysis of the
applied on deposits taken by banks. Given the
evolution of these rates in the maturity profile
low investors’ interest in these investments,
shows a reduced volatility, compared to 2016,
SS interest rates recorded a leap in March,
associated with a subunit difference invariably
positioning themselves and hence oscillating
recorded between them throughout the year
within the corridor formed by interest rates
(Chart 3.22). At the last SS auction held in
on loans extended and deposits placed in the
2017, the average SS nominal interest rate for
economy, through the end of the year. The gap
91-day maturity recorded a similar level of
between the interest rates on loans extended
5.16% as at the end of the previous year.
and deposits taken, specific for 2016, remained
Interest rates for SS with 182- and 364-day
unchanged almost throughout the entire 2017
maturity reached 5.93% and 5.98%, having
(Chart 3.23).
increased by 0.34 p.p. and 0.51 p.p.,
respectively, compared to interest rates
The SS volume, placed on the primary market
applied on SS with similar maturity, issued at
through auctions, which were in circulation on
the end of 2016.
31.12.2017, amounted to 7 544.7 million lei at

48
nominal value (Chart 3.24). At the on the secondary market of SS, as opposed to
sale/purchase price, their value reached the previous year, when a reverse
7 223.9 million lei, recording an increase of development took place. Thus, in January, the
1 108.9 million lei at the end of the reporting weighted average rate recorded 5.63%, having
year compared to the end of the previous year risen by the end of the year in December to
(of which 508.9 million lei as liquidity reserve). 5.65% (Chart 3.25).
Of SS in circulation on 31.12.2017, SS with a
residual maturity of up to three months Chart 3.25 The dynamic of SS indicators traded on the
secondary market
accounted for 32.8%, from 3 to 6 months –
24.9%, from 6 to 12 months – 31.0%, over 1
year – 11.3%. 12 30

Weighted average interest rate (%)

Volume of traded SS (MDL, million)
10 25
Chart 3.23 The evolution of interest rates on financial
market (%) 8 20

27 6 15

24 4 10
21
2 5
18
0 0
15 1 2 3 4 5 6 7 8 9 10 11 12
Month of the year
12
2016 Volume 2017 Volume
9 2016 Interest rate 2017 Interest rate

6
Source: NBM
3
7/15

1/16
2/16
3/16
5/16
6/16
7/16
8/16
9/16
10/16
11/16
1/17
2/17
3/17
4/17
5/17
6/17
7/17
8/17
9/17
10/17
11/17
12/17
1/15
2/15
3/15
4/15
5/15
6/15
8/15
9/15
10/15
11/15
12/15

4/16

12/16

Analysed by maturity structure of SS traded

Interbank credits/deposits Granted loans on the secondary market, the highest share,
State securities Attracted deposits
in terms of the frequency of transactions, was
Source: NBM held by SS with maturity ranging from 28 days
up to 91 days, whereas, in terms of the volume
Chart 3.24 The dynamic of SS in circulation at the end of of transactions, the highest share was held by
period (MDL, million)
SS with maturity ranging from 91 days up to
182 days (Charts 3.26 and 3.27).
8000 7544.7
6804.8 Chart 3.26 The structure of SS traded on secondary market
7000
by maturity in 2016
5916.5
6000
5000 5.0%
4000 21.5%
46.8%

3000
2000
1000
0
2015 2016 2017

26.7%
Source: NBM

Up to 28 days From 28 up to 91 days

From 91 up to 182 days From 182 up to 364 days

Secondary market of state securities

Source: NBM

In the reporting year, the turnover of the

secondary market of SS recorded 43.3 million
lei (in 2016 – 30.2 million lei), up 43.4%
compared to the previous year, the bank-client
transactions accounting for the highest share
(62.9%) in total SS transactions, as in the
previous years.
Over 2017, a slight modification in the
weighted average interest rate was recorded
Activity of primary dealers on the state
securities market
During 2017, 9 primary dealers operated on
the SS market, which, in accordance with the
agreements on the operation as primary
dealers on the SS market, signed with the

49
NBM, ensured SS placement on the primary Chart 3.28 The structure of SS procurements on the
primary market by category of participants
market and secured SS liquidity on the
secondary market. 3.4 3.9
100 3.1

The value of bids submitted for SS auctions 19.8 19.1 17.8

80
by the primary dealers, in 2017, amounted to
15 595.4 million lei, down by 1 895.6 million lei
60
compared to 2016.

Chart 3.27 The structure of SS traded on secondary market 40 76.8 77.0 79.1
by maturity in 2017
20
6.4%
22.8%
0
18.5% 2015 2016 2017
Primary dealers Non-bank investors Participating banks

Source: NBM

Chart 3.29 The selling-buying transactions performed

by the primary dealers on the secondary market (MDL,
million)

52.3%
120 117.9
Up to 28 days From 28 up to 91 days
From 91 up to 182 days From 182 up to 364 days 100

80
Source: NBM
60
The volume of SS purchased by primary
40
dealers on the primary market diminished as 26.7
21.9
27.2
an absolute value, having recorded 9 825.7 20 16.1
7.0
million lei; however, as a share in the total 1.3
0
volume of traded SS, it slightly increased
2015 2016 2017
compared to the previous year, amounting to
Bank-bank Bank-customer Customer-customer
96.9%.
Source: NBM
The SS procurement, operated by primary
dealers on their own behalf and account, grew
to 79.1% of the total volume of traded SS, • operations related to the issuer (primary
compared with 77.1% recorded in 2016 (Chart market, interest payment, redemption);
3.28).
• operations on the secondary market (sale-
The volume of transactions concluded by purchase, REPO, portfolio transfer);
primary dealers on the SS secondary market in • monetary market operations conducted
2017 increased, both in the bank-bank by the NBM (final sale-purchase, REPO).
segment and in the bank-client segment
(Chart 3.29).
At the end of 2017, 14 participants were
Keeping record of securities through the registered in the BES, including 11 banks, the
Book-Entry System (BES) of the NBM National Bank of Moldova, the Ministry of
Finance, and the Deposit Guarantee Fund of
The Book-Entry System (BES) of securities is a the banking system.
system destined for the storage and settlement
of state securities and certificates issued by the As of 31 December 2017, BES records
NBM. reflected securities in the total amount of
32 159.5 million lei (at nominal value), which
The system ensures the processing of: could be classified, by the issuer, as follows:

I. Ministry of Finance – SS in the total amount

• transfer orders, as well as the final and of 22 929.3 million lei, including:
irrevocable settlement of securities
transactions in this system;

50
 • 7 544.8 million lei or 32.9% representing Chart 3.30 The structure of SS in circulation in the holders’
profile as of 31.12.2016
SS issued on the primary market through
auctions;
National Bank

• 2 093.3 million lei or 9.1% representing 69.4%

SS transferred to the National Bank as a

result of the conversion of loans, initially
contracted from the NBM and
subsequently re-issued;
• 13 291.2 million lei or 58.0% representing
SS issued and delivered to the NBM under
the Law no. 235 of 03.10.2016 on the
government bonds issued for the
Banks
execution by the Ministry of Finance of Other investors
24.0%
6.6%
the payment obligations derived from
state guarantees no. 807 of November
Source: NBM
17, 2014 and no. 101 of 1 April 2015.
Chart 3.31 The structure of SS in circulation in the holders’
profile as of 31.12.2017
II. The National Bank of Moldova – the NBM
Certificates (NBC) issued through auctions for
a total amount of 9 230.2 million lei.
National Bank
67.0%
Total amount of SS, recorded in the BES at
nominal value, is classified by holders, as
follows:

Banks:

• As of 31.12.2016 – 5 341.4 million lei Other investors Banks

6.0% 27.0%
• As of 31.12.2017 – 6 191.4 million lei

Non-bank investors (including the Deposit Source: NBM

Guarantee Fund of the banking system):

• Operations on the primary market (new
• As of 31.12.2016 – 1 463.5 million lei issues) – 186 883.6 million lei;

• As of 31.12.2017 – 1 353.4 million lei • Redemption and interest payment by the

The National Bank of Moldova:
• As of 31.12.2016 – 15 446.5 million lei
• As of 31.12.2017 – 15 384.5 million lei
Thus, as of 31 December 2017, the share held
by the National Bank is still higher than that of
other investors (Charts 3.30 and 3.31).
The NBM certificates in the amount of 5 821.3
million lei were recorded in commercial bank
portfolios and 104.7 million lei in the portfolios
of other investors.
In 2017, the aggregate amount of 7 647
transactions settled in the BES amounted to
373 744.7 million lei, of which:
Ministry of Finance for state securities at
maturity – 18 666.0 million lei;
• Redemption of the NBM certificates at
maturity by the National Bank –
164 900.6 million lei;
• Operations on the secondary market (sale-
purchase of SS) – 43.3 million lei;
• Pledging operations – 3 251.2 million lei.
Of total transfers made in the reporting year,
99.1% accounted for DvP transfers (Delivery
versus Payment) and 0.9% – for FoP transfers
(Free of Payment), the latter representing
transfers carried out between banks and the
NBM when pledging securities as collateral to
secure intraday/overnight loans, as well as
transfers performed between banks and their

51
clients in case of SS selling operations carried Interbank loan/deposit market
out on the secondary market. (transactions in MDL)

Evolution of interbank market indicators In 2017, like in the previous year, banks were
(in Moldovan lei) passive on the interbank loan/deposit market
due to excess liquidity in the banking system.
Reference interest rates applied on
interbank market Thus, in the reporting year, transactions were
recorded only in March and April, which were
The evolution of the curve of CHIBOR/CHIBID performed by a small number of participants
reference interest rates (calculated on the (3 banks) and for overnight maturity only. The
basis of the indicative interest rates applied on volume of transactions amounted to 60.0
the funds placed/taken on the domestic million lei, compared to 272.0 million lei
currency interbank market) was determined by recorded in 2016.
the developments recorded in the base rate
and the required reserves ratio (Chart 3.32). The average annual interest rate, following
the downward trend set by the NBM monetary
Chart 3.32 The evolution of reference rates on the policy rates, decreased by 7.29 p.p. compared
interbank market and of NBM base rate (%)
to the previous year, having recorded 9.00%
per year.
24
22
20
18
16
14
12
10
8
6
4
2
0
1/16
2/16
3/16

5/16
6/16
7/16
8/16
9/16
10/16
11/16
12/16
1/15
2/15
3/15
4/15
5/15
6/15
7/15
8/15
9/15
10/15
11/15
12/15

1/17
2/17
3/17
4/17
5/17
6/17
7/17
8/17
9/17
10/17
11/17
12/17
4/16

CHIBID2W CHIBOR2W NBM base rate

Source: NBM

The CHIBOR yield curve recorded a significant

decline in January, having returned, after a
long period of time, within the limits of the
NBM rate corridor. Over the following months,
the CHIBOR yield curve was broadly stable.
However, the banks’ reaction to the monetary
policy decision adopted at the end of April
regarding the increase in the ratio of required
reserves held in Moldovan Lei and in
non-convertible currency was a firm one, the
CHIBOR interest rates recording an increase.
Following the decrease in the NBM base rate at
the end of June, interest rates assumed a
slightly downward trend, which have followed
through the end of the year. Overall, reference
rates have fallen by about 4 p.p. compared to
the end of the previous year.

At the end of 2017, the CHIBOR 2W15 interest

rate recorded 9.45% compared to 13.28% at
the end of 2016.

15 Reference rate calculated based on the quotes of

contributing banks for 2-week term deposits in Moldovan

lei placed with other banks.

52
 Chart 3.34 Currency structure of the total turnover of
foreign exchange transactions carried out against MDL on
the domestic forex market in 2016 (%)
3.6 Forex market
4.6

Evolution of forex market in the Republic

of Moldova
45.2
In 2017, the turnover of transactions carried 48.3
out against Moldovan lei (MDL)16 on the
domestic forex market recorded increases,
both in total volume and in the volume of each
counterpart.
USD EUR RUB Other currencies
The total turnover of traded currencies against
Sourse: NBM
Moldovan lei amounted to USD 12 007.6
million, increasing by 12.5%, compared to the
Chart 3.35 Currency structure of the total turnover of
previous year (Table A.9). Foreign currency foreign exchange transactions carried out against MDL on
purchases increased at a faster pace, the domestic forex market in 2017 (%)
amounting to USD 6 061.7 million (+13.1%),
whereas foreign currency sales totalled USD
4.7
5 945.9 million, rising by 11.9%, compared to
2016.
Chart 3.33 The turnover of foreign exchange transactions
against MDL carried out on the domestic forex market, by 48.2
the settlement method (bank transfer or cash)
44.6
100%
90%
26.2 31.0 31.8
80%
70%
60% USD EUR RUB Other currencies
50%
40% Sourse: NBM
73.8 69.0 68.2
30%
20%
10% domestic forex market kept increasing,
0% eventually recording 31.8% (Chart 3.33).
2015 2016 2017
Foreign exchange market cash turnover
Foreign exchange market transfer turnover
As before, individuals preferred to apply to
Sourse: NBM
foreign exchange bureaux of licensed banks
for foreign exchange services. In 2017, the
volume of transactions carried out through
The total volume of foreign exchange
licensed banks recorded an increase of 7.1%,
transactions increased, mainly driven by bank
accounting for a share of 64.8% in the total
transfer transactions, which rose by 11.1% to
turnover of the cash forex market. Similarly, a
USD 8 189.1 million. Among them, it is worth
significant increase (35.2%) was recorded in
mentioning a 13.1% increase in the turnover of
the volume of transactions carried out through
currency exchange transactions carried out by
foreign exchange offices.
legal entities, amid the revival of the foreign
trade of the Republic of Moldova.
An upturn in the trade with the EU countries as
Besides, the increase in the volume of well as remittances from these countries
remittances to Moldovan individuals has determined the growth of the euro share in the
caused an increase in the turnover of the cash total turnover of the forex market by 3.0 pp.,
forex market by 15.6%. to 48.2% (Chart 3.35). Thus, for the first time,
the single European currency surpassed the
Thus, in 2017, the share of the cash forex US dollar (44.6%), becoming the most traded
market’s turnover in the total turnover of the currency on the local market. Analysing the
16 The amount does not include purchases/sales against
cash forex market by currency structure, one
MDL carried out between the NBM and the Ministry of can note that the largest share was also
Finance. accounted for by the euro (Table A.10).

53
Alongside the increase in the volume of
transactions carried out in the euro, a
significant increase in the number of these
transactions was also recorded. Thus, the
number of EUR/MDL currency exchange
transactions carried out by legal entities rose
by about 21.0%, compared to the previous
Chart 3.37 The number of transactions carried out against
euros and US dollars on the intra-bank forex market
through bank transfer, by the amount traded (showing the
equivalent of amounts ranging from 10 000 to 100 000 US
dollars)
60 000

year, their share amounting to 64.0% (Chart 50 000

3.36).
40 000
Chart 3.36 Total number of currency exchange transactions
carried out by legal entities, by currency 30 000

20 000
2016 2017
300 000
10 000-100 000
250 000
USD EUR
200 000
Sourse: NBM
150 000

100 000 Chart 3.38 The number of transactions carried out against
euros and US dollars on the intra-bank forex market
50 000 through bank transfer, by the amount traded (showing the
equivalent of amounts exceeding 100 000 US dollars)
0
2016 2017
EUR USD Other currencies
5000
Sourse: NBM 4500
4000
3500
Besides, the single European currency 3000
2500
prevailed in the low-volume currency exchange 2000
transactions (less than the equivalent of USD 1500
1000
100 thousand). At the same time, in 2017, the 500
number of euro-denominated transactions 0
2016 2017 2016 2017 2016 2017
increased, recording volumes of up to the
100 000-500 000 500 000-1 000 000 >1 000 000
equivalent of USD 500 000 and a similar USD EUR
number of transactions to that carried out
against the US dollar (Chart 3.38). Sourse: NBM

During the reporting period, as in 2016, the

main source of currency supply for licensed
banks represented legal entities, closely
followed by the cash supply from individuals.
The foreign currency purchases from economic
agents, carried out against Moldovan lei
through bank transfers, recorded an annual
increase of 16.1%, whereas the cash
purchases from individuals (including through
foreign exchange offices17 ) increased in
smaller proportions - by 5.5%. Besides, the
volume of currency exchange transactions
carried out on the interbank market also
increased; however, these transactions
continued to account for a negligible share in
the total turnover.
All the above-mentioned factors contributed to
the increase in purchases of foreign currency
against Moldovan lei, carried out by licensed
banks in 2017, to USD 5 341.8 million, rising
by 10.2%, compared to the previous year.
17 Purchases carried out by banks from foreign exchange
offices accounted for USD 55.9 million
The foreign currency sales of licensed banks
recorded similar dynamics to these of
purchases, reaching the equivalent of USD
5 321.5 million in 2017. The foreign currency
demand came mainly from legal entities
(76.4% of total sales), the volume of sales to
corporate clients increasing by 11.4%,
compared to 2016. However, a significant
increase was also recorded in the sales to
individuals, both in cash (including through
currency exchange offices) and by bank
transfer.
Given the above, in 2017, local banks recorded
net sales of foreign currency to legal entities
in the amount of USD 1 657.5 million, which
were amply covered by net purchases of foreign
currency from individuals (including through
foreign exchange offices), totalling USD 1 887.2
million.
The foreign currency surplus, including from
other sources, was absorbed through the

54
NBM’s purchase interventions amounting to Chart 3.40 Currency structure of foreign currency assets,
at the effective exchange rate (%)
USD 433.8 million (Table A.11).

100%
90%
Evolution of foreign currency assets and 80% 30.9
37.8
liabilities of licensed banks 70%
60%
50%
During 2017, the balance of foreign currency 40%
liabilities on the balance sheet of licensed 67.8
30% 60.9
banks increased as a result of the rise in 20%
placements made in personal foreign currency 10%
0%
accounts as well as in the volume of external
31/12/16 31/12/17
loans received by local banks. As a result, the EUR USD Other currencies
balance sheet assets also increased, especially
the liquid assets (Chart 3.39). Sourse: NBM

Chart 3.39 Balance sheet assets, by asset type, at the

effective exchange rate (in USD million) During 2017, the licensed banks’ foreign
currency lending recorded a moderate rise.
The share of the balance of foreign currency
1900
loans did not exceed 53.1% in foreign currency
1650
1400
assets, recording at the end of the reporting
1150
year a share of 46.9%, down by 6.7 pp.,
900 compared to 2016.
650
400 A 5.8% growth of the balance of foreign
150 currency loans extended by local banks,
-100
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17
amounting to USD 803.0 million, can be solely
Other assets (including adjustments and impairment losses) attributed to exchange differences resulting
Loans attached
Currency required reserves placed with NBM from the appreciation of the euro against the
Loans in foreign currency
Foreign availabilities US dollar on foreign markets. By excluding
Sourse: NBM exchange differences, one can note that the
evolution of the balance of foreign currency
As of December 31, 2017, the balance of loans resulted in a 2.8% decline in the banks’
foreign currency assets18 on the balance sheet foreign currency lending, the balance of loans
of licensed banks (extended loans, available extended in the US dollars, in particular,
funds, required reserves, other foreign decreasing by 10.0% (Table A.12). At the same
currency assets and currency-linked assets) time, the balance of loans extended in euros
amounted to USD 1 712.5 million, increasing slightly increased, by 0.9%. In the currency
by 20.9%, compared to the end of 2016. By structure of the balance of loans, a share of
excluding the exchange rate differences slightly above two-thirds of total loans was
resulting from the appreciation of the euro held by loans extended in euros, the rest of
against the US dollar on foreign markets loans being extended in the US dollars.
(henceforth - exchange differences), a lower
growth of 11.2% was recorded. At the end of the reporting year, the portfolio
of currency-linked loans (USD 68.5 million)
Analysing foreign currency assets on the accounted for 4.0% of total foreign currency
balance sheet by currency type, one can note assets of licensed banks. The balance of these
that the single European currency loans increased by 12.9%, compared to
strengthened its position by 6.9 pp., December 31, 2016, the increase being
accounting for 67.8% (Chart 3.40). supported by the euro-linked loans.

Although the balance of foreign currency assets During 2017, banks tended to accumulate
on the balance sheet increased, their share in excessive foreign currency liquidity in order to
the total assets of licensed banks decreased ensure that their customers benefit from
by 2.0 pp., to 35.5%, whereas foreign currency smooth current settlements. At the end of the
liabilities on the balance sheet fell by 2.7 pp., reporting year, the available foreign currency
to 44.1% in total debts of the banking system. funds accounted for 40.7% of total foreign
18 Excluding the adjustment position of assets in foreign currency assets, occasionally recording even
currency. higher shares (43.3%) over the year. As of

55
December 31, 2017, the foreign currency Chart 3.41 Foreign currency liabilities on the balance
sheet, at the effective exchange rate, by liability type (in
balance of local banks totalled USD 697.6 USD million)
million, increasing by 40.4%, year-on-year, or,
by excluding exchange differences, by 29.8%.
The balances of all types of liquidity recorded 1800
increases, in particular, the balance of funds 1500
held in "Nostro" accounts opened in foreign 1200
banks (Table A.13). 900

600
At the end of 2017, the foreign currency
300
balance of licensed banks had the following
0
structure: "Nostro" accounts opened abroad - 1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17
66.5%, foreign currency cash - 17.9%, Other liabilities
The means of foreign banks (loro and term deposits)
placements abroad - 8.9%, overnight deposits - Credits received
Deposits of individuals
6.5 % and foreign currency securities - 0.2%. Deposits of legal entities

Sourse: NBM
Regarding the currency structure of available
foreign currency funds held by local banks, as Chart 3.42 Currency structure of foreign currency
of December 31, 2017, the largest share was liabilities, at the effective exchange rate (%)
held by the euro - 66.5%, followed by the US
dollar - 30.2%, the Russian rubble - 1.6% and
100%
other currencies - 1.7%. 90%
80% 35.5 31.8
Following a steady increase in the volume of 70%
foreign currency deposits placed with the 60%
banks, the balance of foreign currency 50%
40%
required reserves, as of December 31, 2017, 63.9 67.6
30%
totalled USD 212.1 million, increasing by 20%
23.5%, compared to the end of 2016, and 10%
accounting for 12.4% of total foreign currency 0%
assets on balance sheet. 31/12/16 31/12/17
EUR USD Other currencies

At the end of the reference year, the balance Sourse: NBM

of foreign currency liabilities on the balance
sheet of licensed banks amounted to USD
1 699.4 million, increasing by 20.5% or,
excluding exchange differences, by 10.4%,
compared to the end of 2016 (Chart 3.41).
This increase was mainly fuelled by
placements in euros, which grew by 27.3%, of
which 15.8 pp. were accounted for by positive
exchange differences resulting from the
appreciation of the euro against the US dollar
on foreign markets. In terms of the currency
structure of foreign currency liabilities, as of 31
December 2017, the single European currency
strengthened its position by 3.7 pp.,
accounting for 67.6% (Chart 3.42).
Such basic liabilities as term deposits, various
deposits and current accounts of non-bank
clients (hereinafter – foreign currency accounts
of non-bank clients) continued to hold a
significant share of 87.9% in the portfolio of
foreign currency liabilities of licensed banks
(Table A.14). By the end of 2017, the balance
of foreign currency accounts of non-bank
clients totalled USD 1 493.4 million, increasing
by 17.7%, or, excluding exchange differences,
by 7.8%, compared to the end of 2016.
In terms of currency structure, foreign
currency accounts of non-bank clients of local
banks continued to be mainly
euro-denominated. As of December 31, 2017,
compared to the end of 2016, the share of
euro-denominated accounts increased by 2.7
pp., reaching 66.9%, to the detriment of US
dollar-denominated accounts, the share of
which decreased almost in the same
proportion, dropping to 32.3% (Table A.15).
In 2017, an increase was recorded mainly in
the placements on personal foreign currency
accounts, which grew by 20.7%, or, excluding
exchange differences, by 10.1%, thus
amounting to USD 1 057.1 million. The
strongest growth was recorded for
euro-denominated personal deposits. In 2017,
individuals showed no preference for a
particular type of account, therefore
placements on personal term deposits and
other types of accounts (current accounts and
various deposits) increased almost equally. As
of December 31, 2017, the banks’ foreign
currency debts against individuals accounted
for 62.2% of their total foreign currency

56
liabilities on the balance sheet.

At the end of the reporting year, the balance of
foreign currency accounts of non-bank
corporate clients (USD 436.3 million) recorded
a share of 25.7% in total foreign currency
liabilities on the balance sheet of licensed
banks, thus marking an increase of 10.9%, or,
by excluding exchange differences, of 2.7%,
compared to the end of 2016, due to net
inflows of the US dollars.
In 2017, foreign currency term deposits placed
by non-bank clients (particularly individuals)
continued to be the main source of financing
Evolution of nominal and real effective
exchange rates
During 2017, the domestic currency
appreciated by 14.4% against the US dollar
and by 2.3% against the euro, compared to
the end of 2016 (Chart 3.43).
Chart 3.43 Fluctuations in the official exchange rate of the
domestic currency against the US dollar and the euro
25.0
MDL

for the banks’ foreign currency lending activity. 24.0

23.0
As of December 31, 2017, the balance of term 22.0
21.0
deposits recorded a share of 47.1% in total 20.0
19.0
foreign currency liabilities on the balance 18.0
17.0
sheet and covered almost entirely (99.6%) the 16.0
balance of foreign currency loans extended by 15.0
14.0
licensed banks. 13.0
12.0

5/16
1/15
3/15
5/15
7/15
9/15
11/15
1/16
3/16

7/16
9/16
11/16
1/17
3/17
5/17
7/17
9/17
11/17
In 2017, raising loans by licensed banks The official exchange rate of MDL against USD
exceeded loan repayments and, after three The official exchange rate of MDL against EUR
consecutive year of decline, the balance of the
Sourse: NBM
loans raised increased by 26.6% (exchange
differences excluded), amounting to USD Chart 3.44 Evolution of currencies of the main trading
158.6 million. However, the number of raised partners of the Republic of Moldova and other countries
from the region against the US dollar, 31 December
foreign currency loans remains low, especially 2017/31 December 2016 (%)
in the case of loans raised from abroad, the
balance of which at the end of 2017 recorded
a level equal to 1/3 of the balance of loans PLN 17.0%
CZK 16.9%
raised in 2016. MDL 14.4%
EUR 12.4%
BGN 12.4%
At the end of the reporting year, the licensed HUF 12.3%
banks’ foreign currency liabilities on the RON 10.2%
balance sheet against non-residents GBP 8.8%
CNY 6.0%
accounted for 11.0%, compared to 9.6%, as of RUB 4.4%
31 December 2016. CHF 4.3%
BYN -0.9%
UAH -2.9%
The balance of contingent assets and liabilities TRY-7.8%
held in foreign currency by licensed banks -10% 0% 10% 20%
recorded, at the end of 2017, a decrease of
Sourse: NBM
USD 55.4 million or 46.9%, compared to 31
December 2016 (Table A.16). At the end of
On average, the Moldovan leu appreciated
2017, contingent assets and liabilities in
against the US dollar and the single European
foreign currency recorded roughly the same
currency by 7.2% and 5.6%, respectively,
values, reflecting the local banks’ commitment
compared to 2016.
to carry out mainly currency-to-currency
conversion operations.
In 2017, the currencies of most major trading
partner countries, accounting for significant
The value of the total open (long / short)
shares in the Moldovan foreign trade,
foreign exchange position recorded by licensed
strengthened their positions against the US
banks at the end of 2017 increased by USD 8.3
dollar. According to the quotations at the end
million, reaching a level of 2.21% in the total
of the year, the Polish zloty and the Czech
regulatory capital TRC. Compared to
crown appreciated more strongly against the
December 31, 2016, foreign currency positions
US dollar than the Moldovan leu, their price
increased in all currencies, yet mostly in the
rising by 17.0% and 16.9%, respectively (Chart
US dollar and the euro.
3.44).

57
At the same time, the real effective exchange
rate19 (REER) of the domestic currency
appreciated by 13.4%. The following countries
particularly contributed to the strengthening,
in real terms, of the Moldovan leu: Romania -
by 3.0 pp., Russia - by 2.3 pp. and Ukraine - by
1.5 pp. (Charts 3.45 and 3.46).
In 2017, the exchange rate assumed a steady
appreciation trend, as the situation in the forex
market was similar to that of 2016, when
economy recorded a significant surplus of
coming from producers of cereal and oil
products, nuts and dried fruit, sugar, etc. At
the same time, economic agents that were
primarily involved in imports purchased 11.4%
more currency than in 2016. Foreign currency
demand from energy importers increased by
8.2%, only due to an increased demand from
importers of oil / fuel products.
Chart 3.46 The evolution of the REER of the domestic
currency, calculated on the basis of shares held by
currencies of the main trading partner countries, during
12/2014 - 12/2017

foreign currency.
150%
Chart 3.45 Contribution of Moldova’s main trading partner
countries to fluctuations of the REER in 2017
140%

Depreciation (-)/ Appreciation (+) 130%

Romania
Russian Federation 120%
Ukraine
Turkey
Italy 110%
Belarus
Germany
China 100%
United Kingdom
Switzerland
Bulgaria 90%
Austria 12/14 4/15 8/15 12/15 4/16 8/16 12/16 4/17 8/17 12/17
France
Netherlands NEER REER
Poland
Hungary
Czech Republic
Sourse: NBM
-0.6 0.0 0.6 1.1 1.7 2.2 2.8
p. p.
Contribution, bilateral exchange rate MDL / foreign currency Chart 3.47 The currency structure of the net foreign
Contribution, inflation differential currency supply from individuals (recalculated at a
Contribution, real course
constant exchange rate)
Sourse: NBM

100%
Economic growth in the host countries of
Moldovan labour migrants had positive 80%
implications for foreign currency remittances
from abroad, which, after two years of decline, 60%
returned to positive values, increasing by
11.2%. As a result, the net foreign currency 40%

supply from individuals, mainly of euros, grew

20%
by 4.8%, compared to 2016, amounting to
USD 1 982.6 million (Chart 3.47). 0%
II/15

I/16

II/16

III/16

IV/16

I/17

II/17

III/17

IV/17
I/15

III/15

IV/15

In 2017, foreign trade operations also recorded

Other currencies RUB EUR USD
an upturn, the growth rate of imports of goods
(20.2%20 ) exceeding that of exports of goods Sourse: NBM

(18.6%20 ). Given that the trade balance deficit

is not covered only through sources available Under these circumstances, the net foreign
in the market (such as foreign currency currency supply from individuals exceeded
purchases), but also through commercial loans, (119.6%), for the second consecutive year and
foreign loans, etc., its deterioration by 21.8% in similar proportions, the net foreign currency
did not put pressures on the local forex market. demand from economic agents.
In this context, the net foreign currency
demand from economic agents increased by as Unlike in 2016, in 2017, the condition of
little as 5.2%, totalling USD 1 657.5 million. By foreign currency surplus was recorded
disaggregating this indicator, it was observed monthly, except for February (Chart 3.48). In
that economic agents that were primarily order to restore the market’s equilibrium and
involved in exports sold 16.1% more currency to avoid unsustainable appreciation of the
to banks, the supply of foreign currency mainly Moldovan leu, the NBM had to intervene on the
market, roughly monthly, adjusting the volume
19 Calculated based on the share of main trading partners
of its foreign currency purchases to the
and the average exchange rates, December 2000=100.
20 According to data published by the National Bureau of amount of surplus currency available on the
Statistics. market. In 2017, the NBM purchased USD

58
433.8 million, thus improving the resilience of Chart 3.49 Evolution of official reserve assets presented as
months of imports of goods and services (MBP6)
the foreign exchange reserves of the state.

months of
Speaking of seasonal trends, the net foreign USD, million
import 6.0
3000
exchange supply from individuals retained its
previous seasonal pattern, gradually 2500
5.0

increasing up to the third quarter when it 4.0

reached its peak level ever since 2014 of USD 2000
3.0
660.1 million. Atypical developments in supply
1500
were recorded in the fourth quarter of the year, 2.0

when foreign currency surplus kept persisting 1000

1.0
on the market. This development was
500 0.0
determined, on the one hand, by stronger
purchases of foreign currency by banks from Official reserve assets (ORA)
agricultural exporters and, on the other hand, ORA in months of import of goods and services

by a lower demand from the energy importers, Sourse: NBM

taking into account that some of them have
accumulated the required amount of foreign
amounting to SDR 12.4 million, while the
currency in previous quarters.
remainder was transferred to the Ministry
Chart 3.48 The coverage of the net foreign currency
of Finance for budget support (ECF - SDR
demand by supply and the evolution of the official rate 10.4 million, EFF - SDR 8.6 million);
• The Romanian Government disbursed the
MDL/USD
200% 21 last two instalments, totalling EUR 90
180% 20
million, under the Agreement on the
160% 19
140% 18
Reimbursable Financial Assistance in the
120% 17 amount of EUR 150 million concluded
100% 16 with the Republic of Moldova in 2015;
80% 15
60% 14 • The European Commission allocated EUR
40% 13 36.3 million for budget support, destined
20% 12
to the implementation of the European
0% 11
Program for Agriculture and Rural
3/17
5/17
7/17
9/17
11/17
3/15
5/15
7/15
9/15
11/15
1/16
3/16
5/16
7/16
9/16
11/16
1/17
1/15

Coverage ratio, demand by offer

Development, the support of the police
Average exchange rate MDL/USD reform and the reform of public finance
Sourse: NBM policy, as well as the implementation of
the visa liberalization with the European
Official reserve assets Union and the Agreement on the Deep
and Comprehensive Free Trade Area.
At the end of 2017, the amount of official
• The World Bank, through its institutions
reserve assets approached the record level of
(IDA and IBRD), allocated funds in the
2013, having reached USD 2 803.3 million,
amount of USD 31.1 million, most of
thus increasing by 27.1%, compared to 2016
which represented loans destined to
(Chart 3.49).
support such projects as: “Improving the
efficiency of the energy sector”,
The amount of official reserves increased
“Improving Competitiveness II”,
following the NBM’s purchases of foreign
“Rehabilitation of local roads”,
currency as well as the financial assistance,
“Competitive agriculture”, etc. At the
equivalent to USD 202.9 million, received from
same time, the World Bank disbursed
the main development partners of the
budget support to support reforms in the
Republic of Moldova as a result of the
education and health sectors as well as
successful implementation in Moldova of the
for the implementation of the
IMF-funded economic and financial policy
“Strengthening the effectiveness of the
program. In this context:
social assistance network” project;
• The European Investment Bank extended
• The IMF disbursed the second and the loans totalling EUR 12.1 million to support
third instalments totalling SDR 31.4 the implementation of such projects as:
million, of which the NBM received EFF21 “Livada Moldovei” (Moldova’s orchard),
21 EFF - Extended Fund Facility, ECF – Extended Credit “Rehabilitation of streets and
Facility. modernization of public lighting in

59
 Chisinau municipality”, “Restructuring the reserves), according to their specific objectives
viticulture and wine sectors”; and regulations, making this approach more
effective in achieving the established goal.
• IFAD continued to finance the “Inclusive
rural economic and climate resilience The foreign reserves’ management is
programme” (IFAD VI) through loans and conditioned by the evolution of global
grants totalling USD 5.5 million. economy, the decisions of the major central
banks of the world, especially of the monetary
authorities of the US, the Eurozone and the UK,
At the end of 2017, official reserve assets as well as by the shares held by the currencies
ensured a sufficient coverage of imports of of these countries in the structure of official
goods and services (around 5.5 months of reserve assets.
imports22 ).
For the foreign exchange reserves’
management the NBM chooses safe
The management of foreign exchange instruments, employed by other central banks,
reserves such as: placements on correspondent
accounts (usually with other central banks),
foreign currency term deposits and
In accordance with art. 5, 16 and 53 of the Law placements in three classes of securities:
on the National Bank of Moldova, the NBM supranational securities (issued by
keeps and manages foreign exchange reserves supranational institutions), government
of the state, carries out foreign exchange securities (issued by the US government,
transactions by using foreign exchange governments of the EU Member States, other
reserves, and maintains them at a level which high-rated state-guaranteed government
is appropriate for the implementation of the issuers) and non-governmental securities
monetary and foreign exchange policy of the (issued by high-rated agencies).
state. The role of foreign exchange reserves is
Chart 3.50 The structure of foreign exchange reserves,
to ensure the credibility and financial stability by investment instruments, at the end of 2015-2017 (USD
of the country, to honour payments related to million)
the external liabilities of the state, and to cope
with unpredictable exogenous shocks. 3000

12.3%
2500
When managing foreign exchange reserves,
6.6%
the NBM ensures the high level of security and 2000

the required level of liquidity of investments. 7.2% 47.9%

1500 54.3%
The NBM’s investment policy is characterised 56.4%
by prudence and aims to optimise profitability, 1000

provided that the investments’ liquidity and 500 39.1%

39.8%
36.4%
security requirements are met. An essential
0
element of the foreign reserves’ management 12/15 12/16 12/17

is the investment risk’s management, which Cash and placements on the correspondent account (including overnight)
Securities
is carried out through constraints and limits Term placements

imposed on investments. Sourse: NBM

Table A.17 lists the main risks associated with
the management of foreign exchange reserves
and the methods used to mitigate them.
Starting with July 2013, the NBM, under the
cooperation with the World Bank, began
applying the strategic asset allocation
approach (SAA). The strategic asset allocation
involves a long-term plan of action for asset
management aimed at achieving optimal
levels of profitability and risk. In the SAA
context, international reserves are divided into
three classes (current, liquidity and investment
22 Calculated based on the latest forecasts available at
the time of writing this report on the import of goods and
services in 2018.
A part of the foreign exchange reserves is
managed externally by the World Bank. In
accordance with the agreement on advisory
and investment management services, signed
between the International Bank for
Reconstruction and Development (IBRD) and
the National Bank of Moldova on December 8,
2010 (extended by the decision no.168 of
December 30, 2015 of the Executive Board,
IBRD became the NBM’s consultant and
mandatary for the management of a part of
foreign assets accounting for 20% of the total
foreign exchange reserves. As of 31 December
2017, the share of the externally managed
assets accounted for 7.58% of total foreign
exchange reserves.

60
In 2017, the portfolio of securities held to
maturity remained unchanged. As of 31
December 2017, the value of this portfolio
amounted to USD 411.53 million, accounting
for 14.70% of total foreign exchange reserves.
According to the decision no. 286 of December
23, 2014 of the Council of Administration of
the NBM, with effect from January 1, 2015, the
share of the held-to-maturity securities shall
not exceed 20% of total foreign exchange
reserves.
Chart 3.51 The composition of foreign exchange reserves,
as of 31 December 2017
At the same time, the currency composition of
the official reserves falls within the established
deviation allowance of +/- 10% from the
regulatory currency composition (Chart 3.52).
In spite of the negative investment return
rates on the short- and medium-term
euro-denominated investment instruments,
the foreign exchange management decisions
taken by the NBM led, in 2017, to a profit of
USD 28.11 million, an average profit rate
recording a level of 1.14%.

Other
GBP currencies
12.19% 0.01%
EUR
14.20%

USD
73.6 %

Sourse: NBM

Chart 3.52 The regulatory currency composition, as of 31

December 2017

Other
currencies
GBP 5%
20%

EUR
10%
USD
65%

Sourse: NBM

According to the data collected at the end of

the reporting year, 47.9% of the reserves were
invested in securities, 39.8% represent term
deposits, and 12.3% are kept as cash and funds
in corresponding accounts (Chart 3.50 ).
Return on investment depends on market
conditions, the exchange rate fluctuations and
the prices of investment instruments. The
evolution of the global economic environment
and the prospects for the development of
financial markets influenced the investment
decisions and the currency composition of the
reserves. In this context, the largest share in
the foreign currency reserves structure was
allocated to the US dollar - 73.6% (Chart 3.51).

61
Chapter 4

Banking supervision
respectively, being at the same level as at the
end of the previous year.
4.1 Evolution of the At the same time, the loan portfolio decreased
banking sector by MDL 1 288.0 million (3.7%) during the year,
amounting to MDL 33 473.3 million. The
reduction of the portfolio was influenced by
Banking sector, including core indicators the current challenging economic
developments that led to lower demand for
credit as well as to a more risk-averse
As of 31 December 2017, 11 banks licensed by approach by banks to potential borrowers.
the National Bank of Moldova were operating
in the Republic of Moldova, including 4 We note that, following the creation of the
subsidiaries of foreign banks and foreign Credit Risk Register, the NBM daily monitors
financial groups. the quality of the loan portfolio, including
applications for loans etc., the banks being
The total number of subdivisions of licensed motivated to be more cautious in accepting
banks in the Republic of Moldova by the transactions and adequately assessing the
31.12.2017 constituted 794, of which 294 risks.
branches and 500 agencies.
Chart 4.1 Dynamics of main indicators for 31.12.2016 –
31.12.2017
The number of workers employed in the
80000
banking sector, as of 31 December 2017, 31.0
34
30.7
represented 7 873 individuals. On average, 70000 29.8 29.7
29.1 31

assets under management per each employee 60000 28

in the banking sector represented an amount 50000 25

of MDL 10.1 million, recording an increase of 22

40000
MDL 0.8 million (9.1%), compared to the end 17.6 17.4
18.4
19
16.4 16.2
of 2016. 30000
16
20000
13
The financial situation of the banking sector 10000 10
by the 31.12.2017 was satisfactory. The banks
0 7
are sufficiently capitalized, capital constituting 12/16 3/17 6/17 9/17 12/17

MDL 10 106.7 million, and the risk-weighted Total assets (MDL, million)
Total loans (MDL, million)
capital adequacy indicator reached a high level Risk weighted capital adequacy (%)
TRC (MDL, million)
Total deposits (MDL, million)
Total cnon-performing loans/ Total loans (%)

of 31.0% and is maintained by all banks. Both Source: NBM

indicators have been on the rise compared to
the end of 201623 . Dynamics of main indicators
is shown in the chart 4.1.
The profit for the financial year ending on
31.12.2017 for the banking sector constituted
MDL 1 480 million, recording an increase of
MDL 116.7 million (8.6%), compared to the
previous year. For the year 2017, the return on
assets24 and the return on capital25 , of the
licensed banks amounted to 1.8% and 11.1%,
23 The data by 31.12.2016 throughout the text are
adjusted according to the results of the external audit.
24 Return on assets = annualized net income / average
assets
25 Return on capital = annualized net income / average
share capital
A negative trend was also registered by
non-performing loans, which grew by MDL
448.8 million (7.9%), compared to the end of
the previous year, and amounted to
MDL 6 151.5 million. The growth was
conditioned both by the situation in the real
economy as well as by the requirements
imposed by the NBM on adequate coverage of
risks related to assets in banks’ balance sheets.
Banks continued to comply with prudential
liquidity requirements imposed by the NBM,
which reveal the existence of adequate
sources of funding for covering potential needs
in both the short and the long term.
The balance of deposits grew by MDL 5 058.3

62
million (9.2%) during the year 2017 up to MDL amount of MDL 354.5 million. At the same
59 896.9 million. time, the following factors influenced
negatively the capital: the increase of the
calculated but unrecorded amount for asset
losses and conditional commitments by MDL
Capital
132.9 million, the establishment by one of the
banks of provisions for a litigation amounting
Tier I capital is the basic component of the total to MDL 191.9 million, following external audit
regulatory capital against which the minimal and the NBM inspections.
size required to conduct financial activities is
As of 31.12.2017, banks reported the Tier I
established.
capital corresponding to the minimum required
Chart 4.2 Dynamic of capital and risk weighted capital capital (minimum required level ≥ MDL 200
adequacy for 31.12.2016 -31.12.2017 million).

The total regulatory capital includes Tier I

10000 30.7 34
9000 29.1 31.0 capital and Tier II capital (Tier II capital is
29.8 32
8000 29.7 limited to a maximum of 100% of Tier I capital)
7000 30
6000 minus participation quotas in the capital of
28
5000 other banks, which hold the license of the
4000 26
3000
National Bank of Moldova.
24
2000
22
1000 The total regulatory capital compared to the
0 20
12/16 03/17 06/17 09/17 12/17 end of 2016 increased by MDL 860.4 million
TRC (MDL mil.) 9294.1 9864.2 9563.8 10205.5 10106.7 (8.9%). The dynamics of the Tier I capital and of
Tier I capital (MDL the total regulatory capital during the reporting
9648.8 10234.1 9932.3 10590.6 10509.2
mil.)
Risk Weighted Capital period is represented in the chart 4.2.
29.8 29.7 29.1 30.7 31.0
Adequacy (%)
The average of the risk-weighted capital
Source: NBM adequacy ratio per sector amounted to 31.0%,
recording an increase of 1.2 p.p. compared to
the end of the previous year (Chart 4.2). By
Tier I capital for the banking sector reached the the 31.12.2017, banks have met the
value of MDL 10 106.7 million, increasing by risk-weighted capital adequacy ratio (the limit
MDL 812.5 million (8.7%) compared to the end for each bank ≥ 16%).
of 2016.
Modification of the capital structure of the
Chart 4.3 Dynamics of Tier I capital concentration in the banking sector based on its concentration on
banking system of the Republic of Moldova by groups of groups of banks is presented in the chart 4.3.
banks for 31.12.2016 – 31.12.2017 (%)

The quota of Tier I capital of large banks in the

total Tier I capital of the banking sector
constituted 69.8%, increasing, compared to
100% 9.4% 9.2% the end of the previous year, by 1.6 p.p.
22.4%
80% 21.0% Respectively, the share of Tier I capital of
60% medium banks and of small banks decreased
68.2%
accordingly by 1.4 p.p. and 0.2 p.p.
40% 69.8%

20% Of the total number of banks, four banks have

0% capital formed entirely from foreign
12/16 12/17 investments (of which two subsidiaries of
Small banks ( Assets < MDL 2000 mil.) foreign banks: BC “EXIMBANK-Gruppo Veneto
Medium banks (MDL 2000 mil. =<Aseets <MDL 7000 mil.) Banca” SA and BCR Chisinau S.A.) and seven
Large banks ( Assets >=MDL 7000 mil.)
banks – have capital formed from foreign and
Source: NBM
domestic investments.

In 2017, negotiations were initiated to acquire

The increase of the Tier I capital was the share package issued by B.C.
determined by obtaining profit during the year “VICTORIABANK” S.A. On January 16, 2018,
2017 in the amount of MDL 1 480.7 million. Banca Transilvania together with the European
The majority of banks have fully capitalized Bank for Reconstruction and Development
their retained earnings, with the exception of purchased 39.2% of shares in the B.C.
three banks that paid dividends in a total “VICTORIABANK” S.A.

63
 It should be noted that the limit on the
maximum size of assets by banks in the sector
Assets and their quality is respected. The largest share of total assets
of a bank in proportion to total assets in the
banking sector belonged to B.C. "MOLDOVA -
Total assets of the banking sector amounted to AGROINDBANK" S.A., constituting 27.9% (limit
MDL 79 541.7 million, increasing ≤ 35%), followed by B.C. "Moldindconbank"
byMDL 6 711.3 million (9.2%) compared to the S.A. - 19.1% (Chart 4.5).
end of the previous year. The primary source
of financing assets are liabilities, which Chart 4.5 Assets concentration of the banking sector as at
31.12.2017 (%)
increased by MDL 5 722.2 million (9.5%),
mainly due to the increase of deposits
BC „MOLDOVA - AGROINDBANK”
attracted by MDL 5 015.4 million (9.1%) and S.A.
1.8%1.8% BC „Moldindconbank” S.A.
of other borrowings by MDL 382.8 million 3.4%
1.0%

B.C. „VICTORIABANK” S.A.

(65.0%). Another source for financing assets 3.7%
27.9%
4.3% BC „MOBIASBANCĂ - Groupe
was capital, which grew by MDL 989.1 million Societe Generale” S.A.
B.C. “EXIMBANK - Gruppo Veneto
(7.8%) as a result of realizing a net profit 6.1%
Banca” S.A.
during the analysed period. B.C. „ProCredit Bank” S.A.

„FinComBank” S.A.

B.C. „ENERGBANK” S.A.

During the reference period, the share of assets 12.7%
BCR Chişinău S.A.
in GDP decreased from 54.0% to 53.5% (Chart
B.C. „COMERŢBANK” S.A.
4.6). 19.1%
BC „EuroCreditBank” S.A.
18.2%
Concentration of banking sector assets is
reflected in the chart 4.4.
Source: NBM
Chart 4.4 Dynamics of assets concentration of the banking
system of the Republic of Moldova by groups of banks as
of 31.12.2016 – 31.12.2017 (%)
To evaluate the banking sector concentration
in the Republic of Moldova, the
Herfindahl-Hirschmann index was calculated26 .
4.7% 4.6%
The HH index is used as a possible indicator of
100%
18.7% 17.5% market power or of competition between
80% companies (the value of which does not
60%
exceed 10 000), based on the bank’s share of
assets in total assets in the banking sector.
40% 76.6% 77.9%
This indicator is calculated as the sum of
20% squares of market quotas of all banks in the
sector. In international practice, the following
0%
12/16 12/17
division is used:
Small banks ( Assets < MDL 2000 mil.)
Medium banks (MDL 2000 mil. =<Aseets <MDL 7000 mil.)
Large banks ( Assets >=MDL 7000 mil.) • HHI under 100 indicates a market with
perfect competition;
Source: NBM
• HHI between 100 and 1 500 indicates an
unconcentrated market;
The assets of the banking sector are primarily • HHI between 1 500 and 2 500 indicates a
concentrated in the group of large banks. At moderate concentration;
the end of 2017, 4 banks entered the group of
large banks (B.C. "MOLDOVA-AGROINDBANK" • HHI over 2 500 indicates a high
SA, BC "Moldindconbank" S.A., BC concentration.
"VICTORIABANK" SA, BC "MOBIASBANCĂ -
Groupe Société Générale" S.A.). The share of
banks’ assets in this group constituted 77.9% Thus, based on calculations performed and
by 31.12.2017, increasing by 1.3 p.p. obtaining HHI = 1 723.7, we conclude that
compared to the end of 2016. At the end of the banking sector of the Republic of Moldova
the reporting year, the composition of the represents a moderate concentration.
group remained unchanged compared to the 26 Market concentration index, i.e. the extent to which a
end of 2016. small number of enterprises represent a large part of the
market.

64
The structure of the banking sector assets by Chart 4.6 Dynamics of assets, loans and deposits to GDP
(%)
main components is shown in Table A.18.
90
The structure of assets during the year 2017
increased (in descending order): 80 72.8
66.1 66.0
70 62.1 60.2
50.8 58.8 53.5
60 56.1
54.0
• cash and cash equivalents27 (mainly as a 47.6
50.8
49.6 53.5
50 45.1
result of increase of banks’ investments 41.5 38.5 43.3 43.2 43.7 40.039.8 41.0 40.6 40.3
36.5 37.3
in National Bank certificates and in state 40
29.7 38.9 39.4 37.2 39.7 31.2
securities, as well as of the increase in 30 35.5 40.3 25.8
30.9 37.1 32.6
26.8
“Nostro” deposits at the NBM and banks) – 20
24.0 22.5

by MDL 6 683.2 million (23.7%); 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17
Total assets/GDP Total portfolio of loans/GDP

• available for sale financial assets - by MDL Total deposits/GDP

1 266.9 million (213.1%);

Source: NBM
• other assets - by MDL 150.2 million
(24.5%) Chart 4.7 Distribution of the loan portfolio according to the
sector in which the borrower operates as at 31.12.2017 (%)
• intangible assets - by 3.3 million lei
(1.3%). Loans granted to commerce

Consumer loans

2.2% 1.8%
2.3% Loans to the food industry
3.9%

At the same time, there have diminished: 4.7%

29.1%
Loans granted to the purchase/construction of
buildings
5.1% Loans granted to agriculture

Loans granted to manufacturing industry

• loans and receivables - by MDL 1 050.2 5.8%

Loans for service sector

million (3.0%); Other loans

6.9%

• held-to-maturity investments - by MDL

Loans granted to transport, telecommunications and
network development
Loans granted to non-bank financial sector
208.4 million (4.4%); 7.4%
12.4%

Loans granted to energy industry

• tangible assets - by MDL 71.7 million

7.9% 10.5%
Loans granted to individuals performing an activity

(3.1%); Loans granted to construction sector

• fixed assets and disposal groups classified Source: NBM

as held for sale - by MDL 46.0 million
(8.8%);
• tax receivables - by MDL 15.9 million
(26.1%);
The main share in total assets is held by cash
and cash equivalents, accounting for 43.8%
and is by 5.1 p.p. higher than at the end of
2016 as a result of assets redirection. Loans
and receivables amounted to - 43.4%,
decreasing by 5.4 p.p. Investments held to
maturity had a weight of 5.6%, decreasing by
0.8 p.p. and tangible assets - 2.9%, decreasing
by 0.3 p.p. compared to the end of the
previous year. The share of other items in total
assets was insignificant.
27 Cash and cash equivalents - include cash, interbank
credits granted for a period of less than 3 months, including
bank funds owed by banks, cash funds owed by the
National Bank of Moldova, placements and overnight
credits , as well as the corresponding part of increased
interest rate, state securities and securities issued by the
National Bank of Moldova, purchased with a maturity of
less than 3 months, including unpledged ones, as well as
the required reserves in Moldovan lei.
The gross loan portfolio (in accordance with
the prudential reports) as of 31.12.2017
constituted MDL 33 473.3 million, decreasing
by MDL 1 288.0 million (3.7%) during the year,
mainly due to the lack of demand for loans
and of the more prudent approach applied by
banks to potential borrowers. At the same
time, the gross loan portfolio as share of GDP
decreased from 25.8% at 31.12.2016 to 22.5%
at 31.12.2017 (Chart 4.6). It is worth
mentioning that the decline in GDP ratios of
banking indicators was based on GDP growth,
in real terms, by 4.6%, according to semi-final
data.
In the context of risk distribution, the largest
share in the total loan portfolio was held by
commercial loans - 29.1%.
The detailed structure of the loan portfolio of
the banking sector of the Republic of Moldova
according to the sector in which the borrower
operates is shown in the chart 4.7.
During 2017, non-performing loans

65
(substandard, doubtful and compromised) in
absolute value increased by MDL 448.8 million
(7.9%), constituting MDL 6 151.9 million, while
the share of non-performing loans in total
credits increased by 2.0 p.p. compared to the
end of 2016, constituting 18.4% by
31.12.2017. The share of net non-performing
loans in total regulatory capital decreased by
1.0 p.p., constituting 17.9% by 31.12.2017.
The share of write-downs calculated for loan
losses in total loans by 31.12.2017 constituted
14.8%, increasing compared to the end of 2016
by 1.4 p.p.
Chart 4.8 Dynamics of the structure of loan portfolio of the
banking sector of the Republic of Moldova according to the
level of investment operations risk as of 31.12.2016 (%)
2.9% 7.5%
6.0%
32.5%
51.1%
Source: NBM
Chart 4.9 Dynamics of the structure of loan portfolio of the
banking sector of the Republic of Moldova according to the
level of investment operations risk as of 31.12.2017 (%)
Standard
8.4%
Supervised 4.3%
5.7%
Substandard
Doubtful
Compromised
26.7% 54.9%
Source: NBM
It is worth mentioning that the write-downs
calculated for all assets and contingent
liabilities as of 31.12.2017 constituted
MDL 6 600.6 million and the write-downs for
impairment losses amounted to MDL 3 978.7
million, the difference registered being of MDL
2 621.9 million.
The amount of write-downs for losses as a
66
result of write-downs calculated for loans in the
banking sector amounted to 64.0%, fluctuated
between 20.0% and 88.0%.
Exposures of banks to related parties account
for insignificant share in total loans - 1.9%
(average of the banking sector). The indicator
calculated as a ratio between exposures to
related parties and Tier I capital (the limit for
each bank ≤ 20.0% of Tier I capital) by the
31.12.2017 was respected by all banks
(average for the banking sector was 6.3%).
The ratio between the sum of all “large”
exposures and the Total Regulatory Capital
(TRC) limit for each bank ≤ 5 times of TRC)
was respected by all banks (average for the
banking sector - 0.3).
By the 31.12.2017, the indicator measuring
the proportion of the largest ten net debts in
the total loan portfolio and contingent liabilities
(the maximum limit for each bank - 30% of total
net loans) was respected by all banks (average
for the banking sector - 21.9%).
The indicator of the total amount of the bank’s
net exposures in foreign currency, expressed
in Moldovan lei, of individuals, including those
who perform entrepreneurial activity or other
type of activity (the limit for each bank ≤ 30%
of the TRC) was respected by all banks. The
sector average of the above-mentioned
indicator was 2.5%. The ratio of the total
amount of currency-linked net exposures other
than mortgages to individuals in the total
regulatory capital (the limit for each bank ≤
10% of the TRC) was also respected by all
banks. The sector average of the
above-mentioned indicator was 0.6%.
Loans granted to bank employees accounted
for MDL 293.2 million or 0.9% of the total loan
portfolio and 2.8% of the total regulatory
capital of the banking sector (the limit for each
bank ≤ 10.0%).
The ratio between the total value of
investments in long-term tangible fixed assets
and TRC per sector constituted 22.1% (the
limit for each bank ≤ 50%) and was respected
by all banks.
The ratio of the total value of investments in
long-term tangible fixed assets and
participation quotas in the capital of legal
entities and TRC in the banking sector
registered the value of 27.1% (the limit for
each bank ≤ 100%) and it was respected by all
banks.
The share of assets in foreign currency on the
balance sheet together with currency-linked
assets as of total assets constituted 36.8%.
The proportion of liabilities in foreign currency
on the balance sheet and of currency-linked
liabilities as of total assets accounted for 36.5%.
The difference of 0.3 p.p. between the above-
mentioned indicators shows that the exchange
rate risk, directly, cannot significantly influence
the financial stability of the banking sector.
Incomes and profitability evolution
By the 31.12.2017, the profit registered by the
banking sector constituted MDL 1 480.7
million, recording an increase of MDL 116.7
million (8.6%), as compared to the end of the
previous year, as a result of the decrease of
non-interest expenses by MDL 327.3 million
(7.6%) (including impairment of financial
assets not valued at fair value through profit or
loss - by MDL 746.6 million (61.4%), as well as
increase of non-interest income by MDL 161.9
million (6.8%), mainly from taxes’ and fees’
income by MDL 153.6 million (10.8%) as a
result of increase in the number and volume of
transactions performed through SAPI, SWIFT
payment systems and of the number and
volume of card transactions issued in Moldova.
On the background of base rate decrease,
interest expenditures have decreased by
MDL 1 097.0 million (37.1%). At the same
time, there was a decrease in income by
MDL 1 469.5 million (23.6%), constituting MDL
4 746.2 million or 65.0% of total revenues. The
dynamics of banks’ revenues and expenditures
over the reported period is shown in the chart
4.10.
Chart 4.10 Income and expenses dynamics of the banking
sector of the Republic of Moldova (MDL, million) for 2016-
2017
10000
8000
8606
2391
6000
4000
6216
2000
0
-2959
-2000
-4000
-6000
-4283
-8000 -7242
-10000
12/16
Non-interest expenditures -4283
Non-interest incomes 2391
Interest-related expenditures
Interest-related incomes
-2959
6216
Source: NBM
In the interest income structure, the largest
share was held by interest income on loans and
receivables, which amounted to MDL 3 813.2
million or 80.3%, decreasing by MDL 1 070.3
million (21.9%) compared to 31.12.2016.
Non-interest income amounted to MDL 2552.5
million or 35.0% of total revenues, increasing
by MDL 161.9 million (6.8%) as compared to
31.12.2016. Total non-interest income
accounted for a major part of revenues from
taxes and fees amounting to MDL 1 574.0
million or 61.7%, recording an increase of MDL
153.5 million (10.8%).
Non-interest expenses amounted to
MDL 3 955.6 million or 68.0% of the total
amount of expenditures, decreasing by 327.3
million lei or by 7.6% compared to 31.12.2016.
The largest share in non-interest expenditures
constituted the administrative expenses
(43.9%), increasing by MDL 120.3 million or by
7.4% and registered MDL 1 737.6 million by
31.12.2017.
Chart 4.11 Incomes structure of the banking sector of the
Republic of Moldova for 2017 (%)
11.6%
3.1%
11.5%
52.2%
21.6%
Income from loans and receivables
Fee and comission income
Income from investments held to maturity
Net gain on exchange differences
Other operating income
Source: NBM
At the same time, the depreciation of financial
assets, which are not priced at fair value
through profit/loss method, amounted to MDL
469.6 million, decreasing by MDL 746.5 million
7299
(61.4%) as compared to the end of the
2553 previous year, due to the decrease of the loan
portfolio.
4746
-1862 The depreciation of non-financial assets of the
-3956
banking sector amounted to MDL 165.3 million,
-5818
increasing by MDL 20.0 million (13.8%) as
compared to the end of the previous year.
12/17
-3956
2553 Interest expenses amounted to MDL 1 862.4
-1862
4746
million or to 32.0% of the total expenditure,
decreasing by MDL 1 097.0 million or by 37.1%
compared to 31.12.2016.
The structure of the banking sector’s revenues
and expenditures for 2017 is shown in the
charts 4.11 s, i 4.12.
67
For the year 2017, the return on assets28 and
return on capital29 of the licensed banks
recorded values of 1.8% and 11.1%,
respectively, being at the same level as at the
end of the previous year.
The net interest margin30 amounted to 4.7% by
the 31.12.2017, being by 0.8 p.p. lower than
at the end of the previous year.
The dynamics of net interest margin, of return
on assets and of the banking sector capital of
the Republic of Moldova for the period
31.12.2016 -31.12.2017 is shown in the chart
4.13.
The absolute value of interest-earning assets
increased during 2017 by MDL 3 281.2 million
or by 5.5%, constituting MDL 63 486.2 million
by 31.12.2017. The significant share of
interest-generating assets in total banking
sector assets, which amounted to 74.9%,
indicates banks’ ability to generate revenues
in the future.
Chart 4.12 Expenses structure of the banking sector of the
Republic of Moldova in 2017 (%)
4.4% 3.0% 2.7%
8.7%
debt, overnight loans) - 97.7% (MDL 64 446.1
million), increasing in absolute value by
MDL 4 980.5 million (8.4%) compared to the
end of the previous year. Customer deposits
constituted MDL 59 987.7 million or 91.0% of
total liabilities, the absolute value of customer
deposits increased compared to 31.12.2016 by
5 015.4 million lei (9.1%). At the same time,
other liabilities have increased (such as:
transit and clearing amounts, payment cards
operations, settlements with bank employees,
settlements with other natural and legal
entities, budget settlements, settlements /
sales of securities and currency, etc. ), by MDL
382.8 million (65.0%), which constituted MDL
971.8 million. Provisions increased by MDL
296.0 million (4.1 times), amounting to MDL
392.9 million, including provisions for business
restructuring, employee benefits, provisions
for expenditures for damages resulting from
bankruptcy proceedings, financing
commitments and other provisions. Tax
liabilities increased by MDL 63.0 million
(91.5%), amounting to MDL 131.8 million
(Table A.19).
Chart 4.13 Dynamics of net interest margin, the return on
assets and return on equity in the banking system of the
32.0% Republic of Moldova for 31.12.2016-31.12.2017 (%)

8.7%

18
10.9%
16
29.9% 15.4
14.6 14.3
Interest-related expenditures on financial debt evaluated on amortised 14
cost
Administration costs 12
11.1 11.1
Impairment on financial assets not measured at fair value through profit 10
or loss and impairment on non-financial assets
Other operating expenses 8

Fee and comission expenses 6

5.5
4.8 4.8 4.7 4.7
Amortised cost 4
2.6 2.4 2.4
2 1.8 1.8
Tax expense
0
Other expenses
12/16 3/17 6/17 9/17 12/17

Return on assets Return on equity Net interest margin

Source: NBM

Source: NBM

Liquidity and compliance
requirements
The liabilities of banks as of 31.12.2017
constituted MDL 65 942.5 million, increasing
by MDL 5 722.2 million (9.5%) as compared to
31.12.2016. The major share in total liabilities,
as of 31.12.2017, was held by financial
liabilities measured at amortized cost
(customer deposits, other loans, subordinated
28 Return on assets = annualized net income / average
with legal The balance of deposits according to the
prudential reports as of 31.12.2017
constituted MDL 59 896.9 million, increasing
by MDL 5 058.3 million (9.2%) as a result of
the increase in deposits from legal entities by
MDL 3 111.2 million (18.3%) compared to
31.12.2016 to MDL 20 108.8 million and
deposits of individuals by MDL 1 954.0 million
(5.2%) to MDL 39 623.1 million. At the same
time, deposits from banks decreased by MDL
6.8 million (4.0%) to MDL 165.0 million.

assets The total amount of deposits in proportion to

29 Return on capital = annualized net income /average of
GDP decreased insignificantly by 0.3 p.p.
shareholding capital compared to the previous year, accounting for
30 Net interest margin = Net income from annualized

interest / Average interest-earning assets 40.3% at the reporting date.

68
As of 31.12.2017, deposits in foreign currency
as a percentage of total deposits represented
42.8% (the equivalent of MDL 25 632.3 million),
their absolute value increased by MDL 148.5
million (0.6%), compared to the end of the
previous year. The deposits increased due to
an increase in attracted funds, by MDL 1 813.4
million, and decreased due to the revaluation
as a result of exchange rate fluctuations, by
MDL 1 683.8 million (the calculation of the
revaluation of deposits was made based on
expressed in cash, deposits with NBM, liquid
securities, net interbank means with a term up
to one month / total assets x100%) constituted
55.4% rising by 6.1 percentage points over
2017. This indicator was respected by all
banks (the limit for each bank ≥ 20%).
Chart 4.15 Dynamics of liquid assets (MDL, million) and
their share in total assets of the banking sector of the
Republic of Moldova (%)
45000
55.5%

53.2%
EUR, USD, Russian rubble, Romanian leu and 40000
50.3%
51.3%
49.3%
Ukrainian hryvnia, the share of other currencies LA / A
35000

being insignificant). Deposits in Moldovan lei 30000

amounted to 57.2% of total deposits, or MDL 25000

34 264.6 million, and represented an increase 20000

of MDL 4 909.9 million (16.7%), as compared 15000

to 31.12.2016. 10000

5000

Concentration of bank sector debt over the 0

12/2016 03/2017 06/2017 09/2017 12/2017
Cash and precious metals 3628.5 4337.9 4736.4 4660.3 4128.3
reporting period is shown in the chart 4.14. Deposits at NBM 14285.6 15235.2 16919 17579.9 15929.9
Liquid securities 11151.5 11264.7 9917.3 10227.9 15131.6
Net current interbank means 6837.6 6409.2 6890.9 8818.6 8939.6
The share of debt of the large banks in the Total liquid assets 35903.2 37247 38463.6 41286.7 44129.4

total debt of the banking sector at 31.12.2017 Source: NBM

constituted 79.2%, recording an increase of
1.3 p.p., compared to 31.12.2016. At the same
time, the share of debt of medium banks
decreased, accounting for 16.9% as of
31.12.2017, and the share of debt of small
banks remained at the same level, accounting
for 3.9% of total debt in the sector. The value
of the long-term liquidity indicator for the
banking sector (principle I of liquidity, assets
with a repayment term of more than two years
/ financial resources with a potential
withdrawal period of more than two years)
amounted to 0.6 (average per sector). This
indicator was respected by all banks (the limit
for each bank ≤1).
Chart 4.14 Dynamics of liabilities concentration in the
banking system of the Republic of Moldova by group of
banks for 31.12.2016 -31.12.2017 (%)
3.9% 3.9%
100%
80% 18.2% 16.9%
60%
40% 77.9% 79.2%
20%
0%
12/16 12/17
Small banks ( Assets < MDL 2000 mil.)
Medium banks (MDL 2000 mil. =<Aseets <MDL 7000 mil.)
Large banks ( Assets >=MDL 7000 mil.)
Source: NBM
As of 31.12.2017, the liquidity principle III,
which shows the ratio between the adjusted
effective liquidity and the required liquidity for
each maturity band (limit ≥ 1), was respected
by all banks.
Thus, the liquidity indicators reveal the
existence of adequate levels of liquidity to
cover potential needs both in the short and
long term.
Liquid assets amounted to MDL 44 129.5
million, increasing by MDL 8 226.3 million
(22.9%) compared to 31.12.2016.
In the structure of liquid assets, liquid
securities increased by MDL 3 980.1 million
(35.7%), current net interbank funds with a
maturity of up to 1 month increased by MDL
2 102.0 million (30.7%), deposits with NBM
increased by MDL 1 644.3 million (11.5%) and
cash and precious metals increased by MDL
499.9 million (13.8%), the details are
presented in the Chart 4.15.
Within the structure of liquid assets by banking
sector, the deposits with NBM held the largest
share of 36.1%, followed by the share of liquid
securities - 34.3%, the share of current net
interbank instruments - 20.3% and the share
of cash and precious metals - 9.3%.

The value of the current liquidity indicator by

sector - liquidity principle II (liquid assets,

69
Sensitivity to market risk Shareholding modification

The proportion of the foreign currency assets During the year 2017, the National Bank of
aggregated with the assets attached to foreign Moldova authorized access to the banking
currency exchange rate in total assets at market of the Republic of Moldova to two
31.12.2017 constituted 36.8%. The proportion significant banks of the European Union:
of the foreign currency balance sheet liabilities
and of bonds attached to the foreign currency
exchange rate in total assets on the same date (i) Intesa Sanpaolo S.p.A. (Italy) - a banking
amounted to 36.5%. The insignificant institution of systemic importance for the
difference of these weights indicates that the European Union supervised by the Central
direct currency risk is insignificant. Bank of Europe, which is the parent bank of
the Intesa Sanpaolo Group, with a significant
Placements abroad by banks of the Republic of presence in Central and Eastern Europe, the
Moldova as of 31.12.2017, according to data Middle East and North Africa, which acquired
presented by licensed banks, constituted MDL the integral share package issued by BC
9 782.8 million, recording an increase of MDL “EXIMBANK - Gruppo Veneto Banca” SA;
1 984.9 million (25.5%), compared to the end
of the previous year, and representing 12.3%
of total bank assets and 96.8% of Tier I capital. (ii) Banca Transilvania S.A. (Romania) - the
Details are shown in Table A.20. Thus, second largest bank of the banking sector in
placements in Germany registered the largest Romania and the parent bank of Banca
increase of MDL 2 380,5 million (259.0%). Transilvania Financial Group, which has a
significant presence on the financial services
According to the situation on 31.12.2017, the market in Romania, as well as in the Republic
largest share of total placements in the sector of Moldova in the field of financial leasing,
was in Germany - 33.7%, USA - 21.7%, Belgium which acquired the control package in the
- 16.6% and France - 12.3%, the details are share capital of BC “VICTORIABANK” S.A.
presented in the chart 4.16.

According to the Regulation on classification of

contingent assets and liabilities (MO of RM No 4.2 The NBM supervisory
216-221 of 09.12.2011), banks reduce their
capital by the amount of potential losses, activity
taking into account the rating assigned by
international agencies by countries and by
banks. Throughout 2017, the National Bank of
Moldova continued to promote reforms in the
Chart 4.16 Structure of total placements abroad of banks
of the Republic of Moldova (%)
banking sector, focusing in particular on
establishing a transparent shareholder
structure in order to attract new and
40 appropriate investors, on proper assessment
35 33.7 of the bank’s management, on identification of
30
29.2 transactions concluded with affiliated banks
25 and on the timely recognition of
21.7

20
20.5
non-performing loans. These functions are
16.6 16.7

15
being carried out through both on-site and ex
12.3

10
11.8

8.8
officio controls, using the supervisory tools
6
5 5.2 available at the National Bank.
5
1.9 1.3 2.4
1.3 1.6 1.7 1.4
0.5 0.3 0.2
0
Germany USA Belgium France Austria Italy Republic of
Ireland
Russia United
Kingdom
Romania Others
(Belarus,
On-site controls
Kazahstan,
Spain,
Ukraine)
12/16 12/17
In 2017, there were performed 8 complex
inspections at licensed banks.
Source: NBM

As a result of inspections, sanctions were

imposed on 4 banks: sanctioned with warnings
- 1 bank; 10 members of the Board, 14

70
members of the Committee; sanctioned with
fines -15 members of the Committee; 33
prescriptions.
Decisions with application of sanctions and
prescriptions have been adopted as a result of
the finding of violations and deficiencies,
mainly related to the following:
• the administration of the bank was not
performed in strict compliance with the
requirements of the law and regulatory
acts issued by the NBM;
• the positions’ requirements for
risk-weighted assets were not met;
• the limits and requirements for risk
concentration (exposures) have not been
met);
• engaging the bank in risky and doubtful
operations.
At the same time, it is important to mention
that in the reporting year, 293 inspections
were performed, including 260 planned and 33
unannounced inspections. As a result of these
inspections, 64 currency exchange entities
were warned, the activity of 20 currency
exchange units was suspended, fines were
applied to 18 currency exchange units and
license was withdrawn from one currency
exchange unit.
Ex-officio controls
Following the implementation of the Credit
Risk Register, the National Bank is receiving
detailed, reliable and prompt information
related to credit risk to which licensed banks
are exposed.
Availability of complex operative data allows
the central bank to determine the respective
risk not only by sector but also by groups of
banks or by individual bank. It contributes
to the early identification of risks associated
with credit portfolios, ensuring a process of
analytical and interpretative investigation of
the corrective actions taken by the National
Bank. Accordingly, the NBM monitors on a daily
basis the quality of the loan portfolios, including
requests for granting, classification of credits
granted to regulated requirements, etc. In
case of classification of credits contrary to the
regulations in force, the NBM requests through
letters to remove the detected violations. Thus,
banks are motivated to become more cautious
in accepting transactions and to assess risks
adequately.
71
During 2017, as a result of monitoring of the
loan portfolios, the process of increasing the
share of non-performing loans was ascertained.
In this context, in the first quarter of 2017, the
National Bank repeatedly recommended banks
to apply appropriate governance measures, to
have effective processes for identifying,
monitoring, managing and reporting the risks
to which they may be exposed, and to
strengthen internal control procedures, in
particular those related to monitoring and
management of non-performing loans. Thus,
banks have developed strategies or plans to
mitigate non-performing loans and are
constantly undertaking concrete measures to
improve the quality of loan portfolios.
In order to ensure transparency of the banking
sector in the Republic of Moldova, the National
Bank, as a regulatory and supervisory
authority, monitors the ownership structure of
banks, verifies their shareholders to determine
suitability of shareholders to the requirements
of the Law on banking activity and of the
Regulation on holding participation quotas in
the bank’s share capital, as well as in order to
ensure certainty in identifying effective
beneficiaries by implementing the following:
• permanent tracking of transactions with
banks’ shares;
• requesting presentation of information
related to the identity and activity of
potential purchasers, including direct and
indirect quota holders, to actual
beneficiaries, and submission of
questionnaires, additional documents /
information necessary to assess their
quality, including presentation of
information in the event of modifications
on previously presented data to the NBM;
• conducting inquiries on how to acquire
bank’s shares, as well as requesting
support of competent authorities;
• analysis of information / documents,
available media sources containing
information about banks’ shareholders
During 2017, remedial measures and
sanctions were applied to shareholders of two
banks. The Executive Board of the National
Bank on the 14 of March 2017 decided to
impose a fine to a direct and indirect holder of
the substantial quota in the capital of BC
“VICTORIABANK” S.A. for non-observance of
requirements of the Law on financial
institutions regarding presentation of
information and documents requested by the
National Bank for the purposes of supervision
and evaluation of the quality of the bank’s
shareholders. The fine was applied in the
amount of about 1% of the share held in the
share capital of BC “VICTORIABANK” S.A. by
the direct and indirect holder.
Also, the Executive Board of the National Bank,
on 21.09.2017, decided to sanction by fine a
direct holder of substantial quota in the capital
of the “Bank of Finance and Commerce” S.A.
for non-observance of requirements of the Law
on financial institutions for presentation of
information and documents requested by the
National Bank for the purposes of supervision
and evaluation of the quality of the bank’s
shareholders. The fine was applied in the
amount of 1% of the participation quota held
by the shareholder in the bank’s share capital
and was paid into the state budget.
Banking supervision measures meant to
increase the financial sector’s resilience have
intensified. Out of 11 banks, 7 were subject to
complex on-site inspections. Two systemic
banks were under intensive supervision and
one bank was in early intervention regime.
The National Bank conducted thematic
inspections on shareholders’ transparency and
quality, on verification of transactions with
related parties, on assets’ quality assessments,
as well as other thematic controls.
As a result of adoption on October 4, 2016 of
the Law on recovery and resolution of banks
no. 232 of 03.10.2016, published in the Official
Monitor of the Republic of Moldova no.
343-346 art. 707 of 04.10.2016, according to
art. 9 of the specified Law, the NBM has
requested banks to develop and maintain a
recovery plan that sets out the measures to be
taken to restore their financial position in case
of significant deterioration. At the same time,
in order to facilitate the implementation of the
recovery plan, the NBM has developed and
submitted to banks a Guide on development of
a recovery plan containing detailed
information on all aspects that need to be
included in the plan. In this context, in the
third quarter of 2017, as a result of
examination of completeness of recovery
plans, letters were sent to banks indicating
elimination of drawbacks and submission to
NBM of updated recovery plans. In the fourth
quarter of 2017, the banks submitted to the
NBM revised recovery plans, following
comments previously received from the
National Bank.
In the context of transition to BASEL III
standards, the NBM has solicited the licensed
72
banks to develop the implementation strategy
for the Basel III Agreement, including
alignment to the provisions of the Law on
banking activity and the Regulation on the
bank’s activity management framework. The
banks report regularly, every 2 months, on the
progress made, the results achieved and the
actions taken. Thus, banks have set up
working groups on implementation of Basel III
framework and have concluded contracts with
audit firms to provide specialized assistance.
At the same time, in order to assess the
adequacy of capital and the ability of banks to
report under the new framework, NBM
resumed the Quantitative Impact Study (QIS),
which stated that all banks in the Republic of
Moldova have sufficient capital to meet the
new prudential requirements. At the same
time, in 2017, the National Bank of Moldova
initiated the identification, with the assistance
of a foreign audit company, of transactions
concluded with related parties of the B.C.
“MOLDOVA-AGROINDBANK” S.A., B.C.
“VICTORIABANK” S.A. and BC
“Moldindconbank” S.A. These banks are in
breach of prudential limits and will have up to
2 years to comply.
Intensive supervision and early
intervention
In 2017, two banks (BC
“MOLDOVA-AGROINDBANK” S.A. and BC
"VICTORIABANK" S.A.) continued to be under
the intensive supervision regime and one bank
(BC "Moldindconbank" S.A.) under the early
intervention regime. The mandate of the
temporary administrators of BC
"Moldindconbank" S.A. have been prolonged
several times during 2017.
In order to avoid excessive risk, the National
Bank monitors daily the activity of banks
under intensive supervision and under the
early intervention regime. In such a way, the
financial situation of these banks, the
transactions, the agenda of the meetings of
the governing bodies, etc. are examined.
The specified banks are well capitalized and
operate in normal regime (they provide all
services, including those related to deposits,
credits and settlement).
In 2017, the NBM carried out a range of
complex inspections, including at the
aforementioned banks. Following the results of
inspections performed, the Executive Board of
the NBM approved decisions of imposing
sanctions on the management of banks. At the
same time, banks have been prescribed
remedial measures to optimize their lending
and customer due diligence procedures, to
improve regulatory standards in the field of
credit and internal control, to improve the
security management system, the internal
control system and the payment system, etc.
The banks have developed remedial action
plans for liquidation of infringements and
drawbacks found during inspections and will
report to the National Bank during the 2018 on
their implementation.
The findings made by the National Bank of
Moldova regarding two groups of shareholders
of the BC "MOLDOVA-AGROINDBANK" S.A.
which acted in concert and acquired a
qualifying holding in the bank’s share capital in
the size of 43.1%, without prior written
permission of the National Bank,these groups
intended to sell the acquired shares within 3
months. Because the mentioned shares were
not alienated within the set deadlines, the
shares were cancelled and new ones were
issued. Thus, on June 1, 2017, two unique
packages of shares were put on sale at the
Moldova Stock Exchange. The National
Commission for Financial Markets has
repeatedly extended the term of sale of new
shares issued by the bank. It is worth
mentioning that as of 29.12.2017 the
amendments to the Law on capital market no.
171 of July 11, 2012, by which it was
established the procedure for cancellation,
issuance and sale of participation quotas held
in breach of the requirements on the quality of
shareholders’ equity in the capital of banks,
the period of exposure for sale having been
extended.
With reference to BC "Moldindconbank" S.A.,
according to provisions of the Law on financial
institutions, the persons identified by the NBM
as acting in concert without prior written
permission of the NBM were supposed to
alienate voluntarily the shares within 3 months.
After finalization of legal actions related to
safeguarding measures of shares, as of
October 2017, the aforementioned
shareholders had the possibility to alienate the
shares held.
Banks in liquidation
As of 31.12.2017, 8 banks were placed in
forced liquidation process. During 2017, the
National Bank of Moldova approved the
Reports on completion of the liquidation
73
process of BC “Basarabia” and BC “Bancosind”
S.A.
Regarding the liquidation process of Banca de
Economii S.A., BC “UNIBANK” S.A. and BC
“BANCA SOCIALĂ” SA, initiated in 2015, we
mention that, with the purpose of recovering
the funds of these banks, in the year 2017 the
liquidators cooperated with the law
enforcement bodies, undertook organizational
measures regarding sale of assets owned and
in possession of banks and continued work
with debtors of banks. As a result, at the end
of 2017, 179 actions were in progress in courts,
in order to recover funds previously disbursed
by banks, in total value of MDL 7,440.0 million.
At the same time, the investigation bodies
were managing 44 criminal cases filed
according to liquidators’ notifications.
As a result of the actions undertaken by
liquidators, during the liquidation process, up
to date funds in a total amount of MDL 1 002.6
million were recovered, including in 2017 –
MDL 306.6 million (Banca de Economii SA –
MDL 159.4 million, BC “BANCA SOCIALĂ” SA –
MDL 134.4 million and BC “UNIBANK” SA – MDL
12.8 million).
The financial resources recovered during the
process of liquidation of banks were used for
the payment of debts related to emergency
loans granted to Banca de Economii S.A., BC
“BANCA SOCIALĂ” S.A. and B.C. “UNIBANK”
S.A., until the appointment of liquidators of the
respective banks. Thus, until the 31.12.2017,
funds amounting to MDL 1 071.2 million were
repaid, including in 2017 – MDL 209.9 million.
Another aspect of actions related to the
recovery of the resources of the Banca de
Economii S.A., BC "BANCA SOCIALĂ" S.A. and
B.C. "UNIBANK" S.A. represents the survey
conducted by the consortium Kroll and Steptoe
& Johnson. On 21 December 2017, the
National Bank of Moldova published a detailed
summary of the banking fraud investigation,
which it received together with the second
report from the consortium Kroll and Steptoe &
Johnson. The synthesis reveals the way the
money was embezzled, as well as the
countries were they circulated or arrived. The
document has eight chapters that reflect the
international investigative methodology, the
analysis of fraudulent banks’ exposures in
2012-2014, Shor’s group link to fraudulent
banks’ ownership, money laundering
mechanisms, and the destination of fraudulent
funds.
The National Bank of Moldova analysed the
draft report and requested a few clarifications,
provided comments and suggestions to
representatives of Kroll and Steptoe & Johnson.
Consequently, on March 6, 2018, the National
Bank of Moldova received the final report on
the banking fraud investigation from Kroll and
Steptoe & Johnson. The document contains
information about the fraud that led to
insolvency of “Banca de Economii” S.A., BC
"BANCA SOCIALĂ" S.A. and B.C. "UNIBANK"
S.A.
The final report will be used by the National
Bank of Moldova for the purpose of identifying
shortcomings in the system and implementing
the appropriate measures. At the same time,
following the visit of Kroll representatives to
the Republic of Moldova, the NBM officially
received all the investigation papers from the
international consortium Kroll and Steptoe &
Johnson, which were forwarded to the Anti-
Corruption Prosecutor’s Office.
Representatives of Kroll and Steptoe & Johnson
have confirmed their willingness to work with
investigation bodies to support efforts to
recover internationally fraudulent funds and to
strengthen the evidence base within the
procedures at national level.
4.3 Banking sector risks’
assessment
In order to monitor risks in the banking sector,
the National Bank of Moldova performs stress
tests, which are supervisory tools used to
assess the strengths of each bank, as well as
the overall resistance to shocks of the banking
sector. The stress tests used by the National
Bank focus on credit risk, liquidity risk, interest
rate risk and exchange rate risk as well as on
combinations of these. All stress tests are
based on the information reported by licensed
banks and are applied across the banking
sector, by groups of banks and of individual
banks.
As a result of the stress tests performed at the
level of the banking sector, it was found that
banks in the Republic of Moldova are
sufficiently capitalized and capable to cope
with most of simulated shocks. Exceptions are
scenarios where the likelihood of severe
shocks or so-called historical peaks affect
credit risk. Under these circumstances, it is
possible that the solvency ratios of individual
banks fall below the limits regulated by the
National Bank. However, the probability of
74
such scenarios materializing is very low. At the
same time, banks take the necessary steps to
improve the quality of credit portfolios, which
will allow them to reduce losses in case of
excessive stress scenario.
With regard to liquidity risk, stress test results
confirm the high level of liquidity in the
banking sector, the banks being able to cope
with deposits’ withdrawals at historical
maximum rates, and liquidity deficits for stress
test scenarios applied were not recorded.
Also, in order to assess the potential risks that
could affect the stability of the sector and each
bank in the capital categories, asset quality,
income, liquidity and market risk sensitivity,
the National Bank conducts the study on
identifying vulnerability of the banking
sector.The study’s results indicate a low level
of vulnerability of the banking sector by the
end of 2017 situation, with some
vulnerabilities recorded in the categories of
market risk sensitivity, assets’ quality and
profitability.
In order to capture the opinion of risk
managers of the licensed banks on major risks
to which the financial system is exposed, the
National Bank of Moldova conducts a systemic
risk survey every six months. Respondents
believe that key risks persist in the financial
system, on the background of a reduction of
probability of appearing of an event with a
high impact on the system.
In order to determine the financing conditions
and the risk profile of the sectors financed
by Moldovan banks, the NBM is conducting
quarterly a bank credit survey.
Survey results indicate a slight relaxation
trend in credit standards and credit
agreements over the year 2017. This trend
was largely driven by a reduction in financing
costs and competitive pressure. At the same
time, factors such as risk perception and
tolerance have moderated the relaxation of
credit standards and contract terms, especially
for businesses. During the period considered,
the demand for loans from businesses
remained broadly stable, while demand for
loans from the population followed an upward
trend. In the short term, banks anticipate an
increase in demand for loans from both
categories of borrowers. At the same time,
respondents anticipate a slight tightening of
standards for business loans and a relaxation
of standards applied to individual loans.
The risk of contagion
At the end of 2017, the domestic banking
sector registered a low level of contagion risk
in terms of interbank placements both in
domestic banks and in foreign banks.
Chart 4.17 The net interbank placements of the licensed
banks in the Republic of Moldova in the domestic banking
sector
Source: NBM
Chart 4.18 The volume of net placements of licensed banks
in foreign banks
Source: NBM
The net interbank placements of the licensed
banks in the Republic of Moldova in the
domestic banking sector, by the 31.12.2017,
amounted to MDL 38.9 million, decreasing by
MDL 8.8 million compared to the same period
of the last year (Chart 4.17).
The volume of net placements of licensed
banks in foreign banks constituted, by the
31.12.2017, MDL 9 686.5 million, recording an
increase of MDL 2 036.4 million as compared
to the end of the previous year (Chart 4.18).
Out of these, 90.2% were placed in banks of
Germany, USA, Belgium, France and Austria.
75
4.4 Fighting money
laundering and
terrorist financing
During the year 2017, the NBM assessed the
policies for identifying the risks of money
laundering and terrorist financing in on-site
inspections of licensed banks, foreign
exchange units and non-bank payment service
providers. At the same time, the proper
implementation of the provisions of the
normative acts, namely the procedures for
knowing the customer, of requirements for
increased precautions, monitoring of
transactions, retention of data, reporting of
transactions in accordance with the Law on
prevention and fighting money laundering and
terrorist financing no.190-XVI from 26.07.2007,
as well as the development of an efficient
internal control system in this domain.
During verifications, the NBM found
shortcomings and violations of normative acts
applicable in the field of prevention and
combating money laundering and terrorist
financing and as a result has applied sanctions
to supervised institutions and to their
administrators, in accordance with the Law on
financial institutions no.550-XIII of 21.07.1995.
NBM representatives, also, contributed to the
national process of identification and
assessment of the risks of money laundering
and terrorism financing implemented with the
World Bank’s methodological support, process
which was completed with the publication of
the National Risk Assessment Report SB / FT
and the approval of the Action Plan on the
reduction of risks in the field of money
laundering and financing terrorism for
2017-2019 (GD no.791 of 11.10.2017).
At the same time, the NBM performed
activities for implementing of an IT solution in
order to streamline the process of monitoring
shareholders’ transparency and remote
analysis in the field of money laundering and
terrorism financing. Thus, there were
developed tender specifications and other
tender documents for procurement of goods
and services. The implementation of this IT
solution will continue and in the next period by
utilizing the procurement procedure through
competitive dialogue. At the same time, the
NBM continued its actions aimed at enhancing
cooperation and information exchange
activities with the Anti-Money Laundering
Service and other national and overseas
institutions and authorities.

NBM endorsed the draft of a new law on

prevention and combating money laundering
and terrorism financing, taking into account
international standards and the Directive no.
2015/849 of the European Parliament and of
the Council from the 20 May 2015 on
prevention of the use of the financial system
for the purposes of money laundering or
terrorist financing.

76
Chapter 5

Payment System
5.1 Payment systems
regulation and
supervision
In accordance with the Law on the National
Bank of Moldova no. 548-XIII of 21 July 1995,
regulation and supervision of financial market
infrastructures in the Republic of Moldova is
one of the core tasks of the National Bank.
This attribution is implemented in accordance
with the best international practices, with the
recommendations, principles and standards in
this domain issued by the Bank for
International Settlements, the European
Central Bank, the International Monetary Fund
and the World Bank.
During 2017, modifications and completions to
the Regulation on automated interbank
payment system, approved by the Decision of
the Administrative Council of the National Bank
of Moldova no. 53, dated 02.03.2006, which
resulted from the need to adjust the legal
framework in the context of implementation of
transfer requirement from the Electronic
Governance Centre (MPay) to the Ministry of
Finance of the responsibility for performing
direct debit operations, in accordance with the
amendments made to the Government
Decision no. 280 of 24.04.2013 on certain
actions of implementation of the Government
Electronic Payments Service (MPay), as well as
of the need to adjust the respective Regulation
to the provisions of the Law on settlement
finality in payment and financial instruments
settlement systems no. 183 of 22.07.2016.
According to the Payment System Supervision
Policy of the Republic of Moldova (approved by
the Executive Board Decision No. 299 of
October 27, 2016), the core objective of the
NBM supervision is promotion of efficiency and
stability of the country’s payment system. In
the context of the basic objective, the
elements of the payment system of the
Republic of Moldova are subjected to National
Bank supervision, safe and efficient operation
of which is essential for financial stability,
monetary policy implementation and public
confidence in cashless payments.
In the domain of payments’ and settlement
systems’ supervision, the following are
subjected to supervision:
1. Payment and settlement systems (high
value payment systems and high volume
and low value payment systems);
2. Clearing and settlement systems of
securities;
3. Money remittances;
4. Payment tools.
In exercising its oversight function, the NBM
pays special attention to systems that process,
compensate and settle high value payments
and pose a substantial risk in the event of an
operational or settlement failure. At the same
time, the NBM ensures an appropriate level of
attention to all components of the payment
system subjected to supervision.
5.2 Licensing, regulation
and supervision of
payment services
providers and of
electronic money
issuers
According to the Law on payment services and
electronic money no. 114 of 18.05.2012, the
National Bank of Moldova (NBM) licenses,
regulates and supervises the activity of
payment services providers and of electronic
money issuers.
In accordance with the nominated Law, no
license was issued/withdrawn during the year
2017 for providing payment services/electronic
money issuance activity.
As of 31.12.2017, seven non-bank payment
services providers were active in the Republic

77
of Moldova, including two payment companies,
one postal services provider and four
companies’ issuers of electronic money.
During the year 2017, 4 on-site inspections
were performed, of which three complex and
one thematic, within which licensed non-bank
payment services providers underwent
verification.
As a result of these controls, infringements and
deficiencies were found related to:
• registration at the NBM of payment agents
in the Register of electronic money issuing
companies;
• identification of customers while
performing electronic transactions;
• internal procedures for prevention and
combating money laundering, which are
incomplete and do not contain all
mandatory requirements according to
legislation;
• notification of the NBM regarding
modification of data in the documents
attached to the license issuing statement;
• making non-cash payments within foreign
exchange operations of individuals in the
absence of identity documents or without
indicating the purpose of the transfer etc.
Proposals and recommendations were
forwarded regarding necessary actions to be
taken in order to eliminate the infringements
and drawbacks found and, where appropriate,
remedial measures and sanctions were
applied.
Also, according to the provisions of the Law on
payment services and electronic money no.
114 of 18.05.2012, the NBM performed ex
officio supervision of the activity developed by
payment services providers, including by
continuous monitoring of their activity,
analysis of quarterly reports submitted to the
NBM, examination of complaints (claims)
regarding the activity of payment services
providers and of e-money issuers, review of
information published on web pages etc.
During the year 2017, 75.2 million payment
transactions were performed through providers
of non-bank payment services, which is by
1.8% more transactions than in 2016. These
transactions represented a total value of MDL
21.6 billion, that is by 6.4% more than in 2016
(Chart 5.1). It is worth mentioning that the
overwhelming majority of these payments were
performed by users – individuals.
78
Chart 5.1 The number and value of payments made
through non-bank payment service providers
25000 6000
Number (thousands transactions)
5000
20000
Value (MDL, million)
4000
15000
3000
10000
2000
5000
1000
0 0
I/16
II/16
III/16
IV/16
I/17
II/17
III/17
IV/17
Value Number
Source: NBM
5.3 Automated interbank
payment system
The automated interbank payment system
(AIPS) consists of the real-time gross
settlement system (the RTGS system) and the
designated-time net settlement system (the
DNS system). The RTGS system is designed to
process urgent and high value payments, and
the DNS system is designed to process small
value payments.
In 2017, through AIPS, a total volume of 12.9
million transactions worth of MDL 1 229.4
billion were processed, increasing both in
number and in value by 7.4% and 48.9%,
respectively, compared to the year 2016. The
average daily31 volume of operations
amounted to 50.7 thousand transactions worth
of MDL 4.8 billion. The maximum volume of
payments settled daily in AIPS was reached on
25 April 2017, being settled 112.7 thousand
payments.
From the payments’ structure point of view,
the largest share of these payments was due
to budget credit transfers (49.1% of total
payments), followed by ordinary customer
transfers (49.0%) and other types of payments
(1.9%). In terms of value, the payment
structure presents another picture: the
amount of ordinary customer transfers (13.8%
of the total amount of payments) exceeded
the amount of budget credit transfers (10.9%),
but the largest share (75.3%) was attributed to
transfers made by banks in their own name
and on their own account.
31 In 2017 there were 254 workdays.
In 2017, the distribution of the number of
payments per AIPS component systems was as
follows: 8.7% for the RTGS system and 91.3%
for the DNS system. The distribution of the
payment value has another picture, so that by
RTGS 95.4% of the total payment was settled,
and by DNS only 4.6%.
In 2017, on average, daily, through the RTGS
system, 4.4 thousand payments were settled,
amounting to MDL 4.6 billion, and through the
DNS system 46.3 thousand payments,
amounting to MDL 223.0 million. The average
value of a settled payment in the RTGS system
amounted to MDL 1 047.2 thousand, and of a
payment settled in the DNS system – to MDL
4.8 thousand.
Comparing the total value settled through the
RTGS system in 2017 and the annual GDP of
the Republic of Moldova (MDL 150 369 million),
it is estimated that in the RTGS system the
annual GDP equivalent is settled in about 33
operational days. This indicator reveals the
importance of the RTGS system within the
Moldovan financial system.
At the Eurosystem’s32 level, the gross
settlement system in real time – Target2
processes a volume comparable to the annual
GDP of the euro area every six workdays.
Table A.21 shows the evolution of payments
settled by AIPS compared to 2016.
At the end of 2017, there were registered 16
participants in AIPS, and namely:
• The National Bank of Moldova;
• 11 banks licensed by the National Bank of
Moldova;
• The cash and settlement centre from
Tiraspol;
• The State Treasury of the Ministry of
Finance, including as a mandated
participant, who does not have an
account opened in the AIPS;
• The National Securities Depository of
Moldova.
AIPS supervision
AIPS supervision is conducted to ensure stable
and efficient operation of this system. During
2017, the availability of the system for
participants was 99.9% and was within the set
parameters, and major incidents to disrupt
AIPS activity and affect the participants did not
take place.
32 The TARGET 2016 annual report, https://www.ecb.
europa.eu/pub/pdf/other/ecb.targetar2016.en.pdf
79
5.4 State securities
book-entry system
The state securities book-entry system (BES) is
a depository and settlement system for
securities issued by the Ministry of Finance of
the Republic of Moldova on behalf of the
Government of the Republic of Moldova and of
securities issued by the National Bank. The
final settlement for these issuance operations
is carried out in AIPS through the real-time
gross settlement system (RTGS system),
according to DvP (Delivery versus Payment)
principle. BES is organized and managed by
the National Bank.
BES supervision is performed to ensure stable
and efficient system operation. During 2017,
BES availability for system participants
accounted for 100% and incidents affecting
operation of the system and participants did
not take place.
5.5 Cashless payment tools
Cashless payment tools are essential
components of the national payment system
and the National Bank conducts their
supervision in order to ensure efficiency and
security of their utilization.
Out of payment tools available, the most used
by population (individuals) are payment cards,
the other payment instruments being at the
incipient stage of utilization. It is worth
mentioning that the NBM is undertaking
relevant measures together with other
international authorities and institutions in
order to promote utilization of cashless
payment tools and fight tax evasion.
Payment cards
The number of cards 33 in circulation at the
end of 2017 accounted for 1 736 056 units and
increased by 14.8% compared to the end of
2016, reaching the highest level so far (Chart
5.2).
33 Standardized and, where appropriate, customized
information support through which the holder usually
has access to his or her identification number and/or
identification codes depending on the type of payment
card to the payment account to which the payment card is
attached for the purpose of making payment transactions.
Against the backdrop of the increase in the Chart 5.3 The number of operations performed with
payment cards issued in the Republic of Moldova (million
number of cards in circulation, the number operations)
of active34 cards had approximately the same
growth rate (by 11.4% more than the end of
2016) and the share of active cards in the total 30
number of cards in circulation did not change 25
significantly, accounting for 58.6%. It is worth
20
mentioning that this rate of use of cards has
remained virtually the same over the last few 15
years. 10

5
Chart 5.2 The number of payment cards in circulation
(thousand units) 0

2008
2007

2011

2017
2005

2013

2015
2014
2006

2009

2010

2016
2012
2000 Cash withdrawals Cashless payments
1800
1600
1400 Source: NBM
1200
1000
800
It is also noted that in the reporting year, 52.7%
600
400 of the total volume of transactions performed
200 with cards issued in the Republic of Moldova
0 represented cash withdrawals. In view of the
II/16

III/16

IV/16
I/15

II/15

III/15

IV/15

I/17

II/17

III/17

IV/17
I/16

strong upward trend in the use of payment

Number of cards in circulation Number of active cards cards for making non-cash payments, in the
near future cash withdrawals could give up
the predominant position in favour of cashless
Source: NBM
payments.
Concerning the technical solution of payment
Daily, on average, with payment cards issued
cards, the share of hybrid35 cards (58.9%)
in the Republic of Moldova, 67 142 cash
represents the majority of total cards in
withdrawals and approximately 60 341
circulation in the Republic of Moldova. The
cashless payments are made. The average
contactless cards grew steadily, their
amount of cash withdrawals reached MDL
number being 1.8 times higher than at the end
1 661 in the reporting year, an increase of
of 2016, with a share of 37.2% of total cards in
1.7% compared to 2016. At the same time, a
circulation in the Republic of Moldova,
cashless payment amounted to an average of
amounting to 645.3 thousand units. Magnetic
MDL 404, decreasing by 11.4% compared to
stripe cards, which at the end of 2016
2016.
accounted for 7.6% of all cards in circulation in
the Republic of Moldova, continue their
Domestic operations36 made with payment
downward trend, reaching only 3.7% of the
cards issued by licensed payment services
total number of cards. Virtual cards, which
providers represents 86.8% of the total
account for only 0.2% of the total cards in
number of transactions performed with cards
circulation in the Republic of Moldova, have
issued in the Republic of Moldova.
also evolved towards diminishing.
Of the total number of domestic operations,
During the year 2017, via payment cards
the share of non-cash payments amounted to
issued by payment services providers from the
39.8% (32.4% for 2016) and to 10.8% as value
Republic of Moldova, 46.5 million operations
(8.5% for 2016).
worth MDL 49.6 billion were made, both in the
country and abroad, an increase compared to
2016 by 28.2% as number of transactions and Daily, 66 533 cash withdrawals and about
17.3% as value. The highest growth rate was 44 070 non-cash payments on the territory of
registered for non-cash payments, an increase the Republic of Moldova with domestic
of 52.6% compared to the previous year, while payment cards are performed. The average
cash withdrawals increased by 12.1% value of a domestic cash withdrawal
compared to 2016 (Chart 5.3). transaction amounted to MDL 1 649 in 2017,
36 Payment transaction performed with an accepting
34 Payment cards that made at least one financial
provider from the Republic of Moldova with cards issued by
transaction during the reporting period.
35 Card with a microprocessor and magnetic tape. payment services providers licensed by the NBM.

80
up by 1.8% compared to 2016. At the same made with the physical presence of the card
time, a non-cash payment accounted for an (Chart 5.5). These figures show that
average of MDL 301, decreasing by 3.6% approximately 2 out of 3 transactions
compared to 2016. performed abroad with cards issued in the
Republic of Moldova represent online
Chart 5.4 The structure of domestic operations purchases and the increase in their volume
denotes the consumers’ growing confidence in
this payment tool.
100%
11.1% 2.9%
7.9%
80% Chart 5.6 The indicators of payment cards market in the
28.7% Republic of Moldova
60%

40% 7
6
20%
60.2% 89.2%
5
0%
4
Number Value
Cashless payments without the physical presence of the card 3
Cashless payments with the physical presence of the card
Cash withdrawals 2
1
0
Source: NBM
2011 2012 2013 2014 2015 2016 2017
POS terminals per thousand inhabitants
Chart 5.5 The share of operations performed abroad with Cashless payments per capita
cards issued in the Republic of Moldova Payment cards per capita

Source: NBM
100% 3.6% 14.0%

80% During the year 2017, the following positive

30.4%
33.6% trends emerged on the Moldovan banking cards
60%
market:
40%

20%
66.0% 52.4% • Non-cash payments made with cards
0% issued in the Republic of Moldova
Number Value continued to increase at accelerated
Cash withdrawals
Cashless payments with the physical presence of the card rates as compared to 2016, increasing by
Cashless payments without the physical presence of the card 52.6% in number of transactions made
and by 35.2% in value;
Source: NBM • 63.1% of transactions performed abroad
with payment cards issued in the
Of the total number of domestic operations, Republic of Moldova represent payment
28.7% were non-cash payments made with transactions for online trade, which
the physical presence of the card and 11.1% denotes an upward trend of these types
were made without the physical presence of of operations and the increased trust of
the card. card holders in this payment tool;

The number of transactions with cards, issued • The payment card acceptance network of
in Republic of Moldova, carried out abroad the Republic of Moldova developed during
during the year 2017 increased by 46.3 p.p. 2017, in particular, by increasing the
compared to the same period of 2016, being number of POS terminals (16 609 POS
approximately 6.6 times lower than the terminals at the end of 2017, an increase
number of transactions performed in the of 10.2% compared to the same period of
country with cards issued in the Republic of the previous year);
Moldova. Of the total number of 6 161 380
transactions carried out abroad, 96.4% • The number of contactless cards in
represent non-cash payments, an increase of circulation increased significantly, being
47.6% compared to 2016. It is worth by 1.8 times higher compared to the end
mentioning that 66.0% of the total number of of 2016, and because of the convenience
transactions carried out abroad are non-cash and simplicity of their use, more and
payments made without the physical presence more users choose to pay for purchases
of the card and 30.4% are cashless payments by means of a cashless payment tool.

81
The core indicator for the assessment of the
situation regarding payment card fraud is the
share of frauds in the total value of transactions
through payment cards issued by local licensed
banks, both domestically and abroad. In the
Republic of Moldova this indicator constituted
0.023% for the year 2017, which is below the
European level (0.039% for 201337 ).
Automated remote service systems
Although the total number of holders of
automated remote services systems (ARSS)
was at the end of the reporting year
of 545 879, an increase of 22.9 p.p. compared
to the same period of the previous year, the
number of active holders38 , reflecting the
actual use of the automated remote service
systems, increased by 36.4% compared to the
end of 2016, reaching 138 078 holders (Chart
5.7).
Chart 5.7 The number of ARSS uses by systems type
600000
500000
400000
300000
200000
100000
0
2013 2014 2015 2016
Internet-payments Mobile-payments
PC-payments Telephone-payments
Source: NBM
The distribution of ARSS holders according to
the type of systems used reveals that 71.7%
of them are registered in Internet-payments
systems (an increase of 24.2 p.p. compared to
the end of 2016); 16.1% of the total number
are holders of Mobile-payments (by 29.2 p.p.
more than at the end of 2016); 10.4% (by 8.8
p.p. more than at the end of 2016) of the total
number of holders use Telephone-payments
and only 1.8% use PC-payments (PC payments
holders are only legal entities, the number of
which has increased by 13.5 p.p. compared to
the end of 2016).
During the year 2017, 13.5 million
transactions were performed via ARSS, an
37 Report on payment card fraud, published by the
European Central Bank in July 2015, https://www.ecb.
europa.eu/pub/pdf/other/4th_card_fraud_report.en.pdf
38 RBSS holder who carried out at least one financial
operation during the management period through a remote
banking service.
increase of 23.3% compared to 2016.
Depending on the type of systems used, most
transactions were made via Internet-payments
(88.4%), while through other ARSSs the
number of operations registered lower values:
PC-payments – 10.1% of total number of
operations, Mobile-payments – 1.5% of the
total number of operations. It should be noted
that only 34.9% of the total number of
operations performed through ARSS during
2017 were initiated by individuals. The value
of transactions performed through ARSS by
individuals and legal entities amounted to MDL
405.4 billion during 2017, up by 16.0% as
compared to 2016 (Chart 5.8). About 98.5% of
the value of operations performed by ARSS
were carried out by legal entities.
Chart 5.8 The number and operations value performed
through ARSS
Number of operations (million) 16 450
400
14
350
Value (MDL, billion)
12
300
10
250
8
200
6
150
4 100
2 50
0 0
2013 2014 2015 2016 2017
Value Number
2017 Source: NBM
Credit transfer
Out of the total of 15.9 million payment
transactions, 10.7 million were initiated in
electronic format (67.5% of the total number
of credit transfer operations) amounting to
MDL 449.1 billion (64.1% of the total value of
credit transfer operations), the remaining
being initiated on hard copy.
On the background of an increase in the total
number of credit transfer operations,
compared to 2016, there is an upward trend in
utilization of the electronic credit transfers,
which according to estimations, by the end of
2018, can reach a proportion of about 90% of
total number of credit transfer operations
initiated by banks’ customers.
Direct debiting
During the year 2017, through direct debiting
were performed 86 329 payment operations
in a total amount of MDL 37.5 million. Total
number of users of this instrument of payment
represented 3 068 individuals.
82
Chapter 6

Cash operations
In 2017, the amount of currency in circulation Chart 6.2 The evolution of banknotes in monetary
circulation in terms of quantity (million banknotes)
continued its upward trend, growth rate
(+10.7%, up to MDL 21 036.0 million) being
lower by 0.6 p.p. compared to that registered 100
90
in 2016. 80
70
60
50
40
6.1 Evolution of currency 30
20
(banknotes and coins 10
in circulation) 0

200 lei

500 lei
1 leu

5 lei

10 lei

20 lei

50 lei

100 lei

1000 lei
2015 2016 2017
The value of banknotes in circulation at the end
of 2017, amounted to MDL 20 905 million, an
Source: NBM
increase of 10.8% compared to the end of the
previous year. The evolution of the value of
banknotes in monetary circulation is shown in hold the largest share of the total number of
the chart 6.1. banknotes in circulation, 34.7%, followed by
banknotes with the denomination of 200 lei,
Chart 6.1 The evolution of banknotes in monetary
circulation in terms of value (MDL, million) with a share of 21.7%, and that of 100 lei, with
a share of 12.9%. Similar to previous years, the
12000 smallest share in the total number of banknotes
11000 in circulation belonged to banknotes with the
10000
9000 denomination of MDL 1 000 (0.5%).
8000
7000 Chart 6.3 The structure by face value of banknotes in
6000 circulation at the end of 2017
5000
100%
4000 6.16
3000 11.78 21.07
2000
80%
1000
0 12.93
1 leu

200 lei

500 lei
5 lei

10 lei

20 lei

50 lei

100 lei

1000 lei

60% 11.31
54.88
4.59
7.25
2015 2016 2017 40% 5.87

Source: NBM
20% 16.84 34.70

7.37
0%
At the end of 2017, about 272 million Value Quantity
banknotes were in circulation, by 8.8% more 1 leu 5 lei 10 lei 20 lei 50 lei
than at the end of 2016. The evolution of 100 lei 200 lei 500 lei 1000 lei
banknotes in monetary circulation, in terms of Source: NBM
quantity, by the amount of each denomination
is presented in the chart 6.2. Quantitative According to the nominal value structure, at
increase of banknotes in circulation was the end of the reporting period, the quantity of
determined by a higher increase in the banknotes in circulation constituted: of 1 leu –
quantity of banknotes with the following 94.48 million banknotes, 5 lei – 15.99 million
denomination: 1 leu, 10 lei, 50 lei and 200 lei. banknotes, 10 lei – 19.73 million banknotes,
20 lei – 12.48 million banknotes, 50 lei – 30.80
From the quantitative point of view, banknotes million banknotes, 100 lei – 35.21 million
with the denomination of 1 leu continued to banknotes, 200 lei – 57.36 million banknotes,

83
500 lei – 4.92 million banknotes and 1 000 lei – coins held the weight of 27.0%, 10 bani coins –
1.29 million banknotes. 30.4%, and 25 bani coins – 28.3%, and from
the point of view of value, held the weight of
The chart 6.3 reflects details on the structure 9.4%, 21.2% and 49.3%, respectively.
of banknotes in circulation at the end of 2017,
by nominal values, represented in quantity and
value.
6.2 Cash issuing,
At the end of 2017, 807.72 million coins were in
circulation, 6.4% more than at the end of 2016.
withdrawal and
The total value of coins in circulation was MDL processing
115.94 million, by 12.6% higher than in the
corresponding period of the previous year. In
terms of value and quantity, the evolution of During the year 2017, the National Bank of
coins in monetary circulation by nominal value Moldova has put into circulation cash of total
structure is presented in the chart 6.4 and 6.5, value of MDL 6 680.9 million, which is about
respectively. 12.9% less compared to 2016.
Chart 6.4 The evolution of coins in monetary circulation in
terms of value (MDL, million) In terms of value, the banknotes issued in
2017 constituted the amount of MDL 6 673.8
70 million (of which MDL 4 428.4 million were
up-dated banknotes), which is about 13.0%
60
less compared to 2016, and from
50 quantitatively there were 97.7 million
40 banknotes, about 10.0% less than in 2016.
30
The decrease in the quantity of banknotes
20 issued into circulation in 2017 was due to the
10
decrease of the number of banknotes with
denomination of 5 lei, 20 lei, 50 lei, 100 lei,
0 200 lei and 1 000 lei.
1 ban 5 bani 10 bani 25 bani 50 bani
2015 2016 2017 Chart 6.6 The banknotes issued during 2017 in terms of
quantity
Source: NBM

Chart 6.5 The evolution of coins in monetary circulation in 18.87%

terms of quantity (million coins)
8.26%
13.58%

300

250
17.18%

200
18.06%
150
3.91%
1.06%
100 19.07% 0.01%
1 leu 5 lei 10 lei 20 lei 50 lei
100 lei 200 lei 500 lei 1000 lei
50

0
1 ban 5 bani 10 bani 25 bani 50 bani Source: NBM

2015 2016 2017

Source: NBM
The increase in the quantity of small
denomination coins in circulation was due to
the increase of the number of coins of
following denominations: 5 bani, 10 bani and
25 bani. According to the nominal value
structure from quantitative point of view, at
the end of the reference period, the 5 bani
From the quantitative point of view, the
banknotes put into circulation according to the
structure of nominal values constituted: 1 leu –
18.6 million banknotes, 5 lei – 3.8 million
banknotes, 10 lei – 16.8 million banknotes, 20
lei – 8.1 million banknotes, 50 lei – 18.4 million
banknotes, 100 lei – 13.3 million banknotes,
200 lei – 17.6 million banknotes, 500 lei – 1.1
million banknotes and 1 000 lei – 0.01 million
banknotes. The nominal value structure of

84
banknotes put into circulation is presented in The share of banknotes withdrawn from
quantitative terms in the chart 6.6. circulation by nominal value structure, in
terms of quantity and value, is presented in
Metallic coins issued in 2017 in terms of value the chart 6.8 and in the chart 6.9, respectively.
amounted to 7.1 million lei, about 7.6% more
than in 2016, and in terms of quantity – 48.8 Chart 6.9 The banknotes withdrawn from circulation during
2016 in terms of quantity
million coins, about 16.7% more than in 2016.
21.52%
From the quantitative point of view, the metallic 11.58%
coins issued in 2017, according to the nominal
value structure, consisted of: 1 ban – 1.2 million 15.55%
coins, 5 bani – 12.2 million coins, 10 bani – 16.2
million coins, 25 bani – 19.0 million coins and 18.33%
50 bani – 0.2 million coins.

The distribution by volume of each

14.53%
denomination of coinage issued is shown in
the chart 6.7. 5.70%
0.11% 0.62%
12.06%
Chart 6.7 The coins issued during 2017 in terms of quantity 1 leu 5 lei 10 lei 20 lei 50 lei
100 lei 200 lei 500 lei 1000 lei

Source: NBM
33.19%

The National Bank of Moldova is continuously

monitoring the increase of quality level of the
banknotes in circulation, in accordance with
the procedure established by the NBM. Thus
24.94%
75.65 million banknotes were processed in the
38.86% bank to verify authenticity and quality in 2017.
Following such processing, about 51.94 million
0.44% banknotes were classified as inappropriate for
2.57%
circulation.
1 ban 5 bani 10 bani 25 bani 50 bani

Premises of putting into circulation of 1

Source: NBM leu, 2 lei, 5 lei and 10 lei coins

Chart 6.8 The banknotes withdrawn from circulation during In order to exercise effectively the functions of
2017 in terms of quantity
the National Bank of Moldova, which operates
as a single issuer of the national currency, the
20.22%
National Bank continuously ensures adequate
11.84%
monetary circulation. An important role is
15.46%
optimal establishment of the nominal structure
of the national currency, the proportion of
18.70%
coins versus banknotes.

13.41% Thus, in the second half of 2017, the National

5.33% Bank conducted an extensive economic study
0.61% on utilization of cash on the territory of the
14.32% 0.11%
Republic of Moldova and internationally, and
1 leu 5 lei 10 lei 20 lei 50 lei
100 lei 200 lei 500 lei 1000 lei
made the decision to replace small
denomination banknotes (1 leu, 5 lei and 10
lei) with coins of the same nominal value, and
Source: NBM introduce a new coin with the nominal value –
of 2 lei.
During the year 2017, by means of deposits
made by licensed banks, the National Bank of For this purpose, a range of working meetings
Moldova withdrew from circulation banknotes with independent experts, representatives of
with a total value of MDL 4 633.5 million, 19.0% local and central authorities, including
less than in 2016; in terms of quantity 75.7 business, banking and transport, were
million banknotes returned to the central bank, organized. In August 2017, the NBM initiated a
about 15.1% less than in 2016. public consultation process to develop the

85
prototype design of new coins of 1 leu and 2 Chart 6.10 The structure of counterfeits by face value
identified in 2017 in terms of quantity
leu. The public contest was attended by 33
citizens who submitted a total of 80 bids of the
concept for the new metal coins. Inspired by
the sketches proposed by the winners of the
contest, the National Bank has further 86.31%

developed the design of the new metal coins.

6.3 National currency 1.54%

counterfeiting 6.11%
0.46%
4.85%
0.73%
1 leu, 5 lei, 10 lei, 500lei 20 lei
50 lei 100 lei
200 lei 1000 lei
During 2017, the number of counterfeits of
national currency in the banking system Source: NBM
totalled 3 960 banknotes, about 39.1% less
than in 2016. As a fraction of the number of Chart 6.11 The structure of counterfeits by face value
genuine banknotes in circulation at the end of identified in 2016 in terms of quantity
the reporting period, which constituted 272
million banknotes, the number of forged
banknotes was at a very low level and
represented 0.0015% or about 15 fake 90.70%

banknotes per 1 million genuine banknotes in

circulation.

The most frequently forged banknote was that

of 100 lei – 3 418 counterfeits. In second place
was the banknote with the denomination of 1.72%
20 lei, with 242 counterfeits, followed by the 5.79% 0.20%
0.57% 1.02%
200 lei banknote with 192 counterfeits, the 1 leu, 5 lei, 10 lei, 500lei 20 lei
50 lei banknote, with 61 counterfeits and the 50 lei 100 lei
1 000 lei banknote, with a number of 29 fakes. 200 lei 1000 lei

As a basis of comparison, in the year 2016,

Source: NBM
the number of counterfeits of national currency
amounted to 6 498 banknotes, and the highest
number of counterfeits were recorded for the
100 lei banknotes, totalling 5 894 banknotes,
20 lei – 376 banknotes, 50 lei – 112 banknotes,
1 000 lei – 66 banknotes. 6.4 Issuance of jubilee and
commemorative coins
The share of counterfeits by nominal value in
the years 2017 and 2016 is shown in the chart and banknotes
6.10 and in the chart 6.11, respectively.

In order to fight counterfeiting of national
currency, the National Bank of Moldova further
recommends the public become familiar with
the safety features of the banknotes on the
NBM website. Also, to be vigilant for possibility
of fraud and to verify the authenticity of
banknotes and coins. In cases that such fraud
takes place, withdraw the banknotes from
circulation and communicate such cases to the
Ministry of Internal Affairs.
At the same time, the NBM, in co-operation
with the Ministry of Internal Affairs, organizes
specialized trainings for licensed banks on
detection and extraction of counterfeits from
circulation.
In accordance with the Law on the National
Bank of Moldova no. 548-XIII of July 21, 1995,
the National Bank of Moldova issued a new set
of coins for the year 2017. The new issues
represented 10 commemorative coins
representing various events. Out of 10
commemorative coins, two are golden coins
and eight are silver coins. Mintages differed by
the metal in which the coins were struck,
respectively: 200 golden coins and 2 650 silver
coins.
Table A.22 includes details of jubilee and
commemorative coins for the 2017 issue.

86
Chapter 7
Activity related to modification of the legal and regulatory
framework
7.1 Prudential regulation,
regulation of
accounting evidence in
banks
I. During 2017, the regulatory framework
related to corporate governance, quality of
shareholders as well as qualification
requirements set for administrators was
further improved. This process took place in
accordance with the amendments made to the
legal framework regulating banking activity.
In this regard, the Regulation on banks’
activity management framework was
approved. The new provisions of the
Regulation refer to corporate governance
structure, internal control mechanism and risk
management practices in banks. Based on
these guidelines, banks are required to
operate efficiently and transparently, to have
an adequate organizational structure, to have
a regulatory framework that corresponds to
the bank’s business model, to manage all the
risks resulting from its activity and to maintain
financial stability, in order to protect the
interests of its depositors. Also, the banks
have to report cases of fraud that could affect
their safety, soundness and reputation. At the
same time, the banks have to adapt their
policy for appointing administrators to the size
and complexity of their institution and
implement a remuneration policy that would
not favour excessive risk-taking.
The new provisions of Regulation of
requirements to bank administrators aimed at
enhancing corporate governance by improving
the system of continuous promotion to the
position of administrators of banks persons
who correspond to the fit and proper principle,
and respectively, at ensuring an efficient
management of the bank. The Regulation
contains a number of new provisions, based on
the recommendations of the European Banking
Authority Guide and of International Monetary
Fund’s experts, which are intended to outline
87
the process of appointing and confirming
administrators. This way, the banks are
primarily responsible for selecting and
proposing to the position of an administrator
those candidates who meet the requirements
stipulated in the Regulation as well as for the
re-evaluation of their qualifications. The
qualifications and experience criteria,
established for candidates who were proposed
to the position of an administrator, were
reviewed as well. Evaluation for each
candidate is completed by applying the
rational based on significant information
related to the evaluation criteria and taking
into account any other relevant aspect,
including the size of the bank, the nature and
complexity of its activities.
Modifications to the Regulation on holding
participation quotas in the bank’s share capital
aimed to improve the regulatory framework by
establishing mechanisms to allow access to
the banking market only to individuals who
meet the legal requirements related to
banking shareholding quality, and namely:
• extension of requirements regarding the
procedure of obtaining prior written
permission for persons who expect to
receive shares of the bank as a
contribution to their share capital;
• assessment of the quality of potential
acquirer / acquirer by cumulative
examination and of the criteria related to
excessive stratification of shareholding;
• improvement of the set of documents
that follows to be presented by the
potential acquirer / acquirer for its further
examination in the process of granting
prior permission for the solicitation of
holding the quota in the banks’ share
capital;
• obligation of banks to identify and be
aware of all changes in the structure of
their shareholding, including the ultimate
beneficial owner, and to provide this
information to the supervisory authority.
At the same time, the process of granting
permissions to hold quotas in banks’ share
capital was improved for circumstances when
the potential acquirer is an international
organization, a multilateral development bank,
a Moldovan bank or a foreign bank. In this
case, a smaller set of documents is required to
be provided by the above-mentioned entities.
This process was simplified for potential
investors because of their status and the fact
that the respective banks are already
supervised by competent authorities.
In order to create the regulatory framework for
setting up branches of foreign banks on the
territory of the Republic of Moldova, the
Regulation on licensing banks by establishing
the mechanism of setting up a branch of the
foreign bank, was adopted, which includes
licensing requirements, conditions of activity
development, as well as capital requirements.
Therefore, in order to ensure fair and equal
competitive treatment for all participants in
the banking market, the branch of a foreign
bank must have an endowment capital similar
to the capital that a bank shall maintain.
In this context, the Regulation on
risk-weighted capital adequacy was also
adjusted. Respectively, as a component to the
total regulatory capital was included the
endowment capital. At the same time, from
the point of view of consolidation of capital by
banks in conditions of maintaining their
financial stability, the regulation was
supplemented with provisions, which condition
capital distribution by banks in view of the
impact of economic and social events on
prudential indicators of the bank, determined
inclusively by evaluation of stress tests’ results
performed by the bank and/or by the National
Bank of Moldova.
In order to update and improve the accounting
records of licensed banks, the Chart of
accounts of bookkeeping within licensed banks
of the Republic of Moldova was modified. The
adjustments were conditioned by entry into
force on January 1, 2018 of the International
Financial Reporting Standard 9 “Financial
Tools”, which replaces IAS 39 “Financial tools”
and by amendments to legal and regulatory
acts.
II. For the purpose of implementing the
provisions of the Association Agreement
signed between the Republic of Moldova and
the European Union on 27.06.2014, which
establishes the commitment of the Republic of
Moldova to comply with the European norms,
including with the European financial and
banking directives, and in order to accomplish
the actions stipulated in the National Plan of
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Actions for implementing the Association
Agreement between the Republic of Moldova
and the European Union in the period
2017-2019 (approved by the Government
Decision no. 1472 of 30.12.2016), the
Parliament of the Republic of Moldova adopted
the Law on banking activity no. 202 of October
6, 2017.
The new banking law is aimed at improving
national banking legislation taking into
account best international standards and
practices related to licensing, regulation and
supervision process of the National Bank of
Moldova. Thus, the provisions of the Directive
2013/36 / EU of 26 June 2013 on the access to
the activity of credit institutions and prudential
supervision of credit institutions and of
investment firms and of the Regulation
575/2013 of 26 June 2013 on prudential
requirements for credit institutions and
investment firms and on modification of the
Regulation (EU) no. 648/2012 were transposed
into the Law.
Therefore, Basel III standards referring to
capital requirements were transposed into the
Law and, at the same time as the regulation at
the level of legal acts of prudential treatment
of various risks (credit, market, operational,
etc.) for calculation of risk-weighted
exposures.
In order to create adequate capital reserves
designated to reduce the pro-cyclical nature of
crediting, to absorb the negative
consequences of excessive crediting or of
economic recessions that cause financial
instability and which have the ultimate goal of
preventing and mitigating macro-prudential
and/or systemic risk, the Law establishes
additional own funds requirements that the
banks shall hold in order to constitute capital
buffers imposed by the National Bank of
Moldova (capital conservation buffer, bank
specific countercyclical capital buffer, O-SII
buffer, systemic risk buffer, combined buffer).
Taking into account the provisions of the
Moldova-EU Association Agreement, the
notions of “branch” and “subsidiary” (notions
reversed as meaning in utilization in the
Republic of Moldova compared to international
practices) have been modified at the Law level.
At the same time, in order to ensure efficient
performance of the supervisor’s competencies
and strengthening corporate governance in
banks, the Law stipulates certain derogations
from the Law on joint stock companies, in
particular regarding attributions of the general
meeting of shareholders, of the council and of
the executive body, as well as the exclusion of
the commission of censors in the case of
banks from the Republic of Moldova from the
list of banks’ control bodies.
Compared to the legislation in force at the time
of the approval, the Law includes a wide range
of rights and attributions for the National Bank
of Moldova regarding the process of
assessment and supervision of banks, and
continuously promotes the idea of significant
increase and diversification of applicable
sanctions and of sanctioning measures. In
particular, the National Bank of Moldova has
the power to apply pecuniary administrative
sanctions which are sufficiently big to have a
deterrent effect on certain significant
deficiencies or which pose increased risks.
In addition to the general prudential
requirements applicable to the entire banking
sector, the Law includes the requirement for
banks to possess internal capital that,
depending on the risks to which they are or
may be exposed, would be appropriate as
distribution, quality and quantity. Banks will
also apply strategies and processes to assess
and maintain the adequacy of their internal
capital. These rules are part of the second
pillar of Basel III standards.
The basic principles included by the Law refer
to the following:
• creation of a coherent and consolidated
primary and secondary legislative
framework related to banking activity in
the Republic of Moldova, allowing
effective supervision of banks in the
Republic of Moldova;
• development of certain supervisory tools
necessary to prevent and minimize
potential shortcomings in the activity of
banks at incipient stages, thus ensuring
stability of the banking sector and
protection of depositors’ interests;
• harmonization of national banking
legislation with internationally accepted
standards and principles, and increase of
collaboration relations with supervisory
authorities from other countries to ensure
prudential supervision on a consolidated
basis and exchange of information,
especially in case of domestic banks,
which are part of international banking
groups.
In order to improve the legal framework of
prudential supervision, taking into account the
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commitments of the Republic of Moldova in
the context of the Association Agreement with
the EU of transposing the Directive 2002/87 /
EC of the European Parliament and of the
Council of 16 December 2002 and the
developments on international financial
markets which determined the emergence of
certain financial groups providing services and
products related to different financial sectors
called financial conglomerates, the Law no.
250 of 1 December 2017 on supplementary
supervision of banks, of insurers / reinsurers
and investment firms in a financial
conglomerate was developed and approved.
Taking into account the fact that
conglomerates represent the largest financial
groups that carry out inter-sectoral activities,
the Law stipulates additional prudential
supervision at the level of the group in order to
prevent potential contamination risk. Thus, in
order to avoid negative repercussions to the
financial sector, to protect the interests of
depositors, insurers and investors in the event
of financial instability at conglomerate level,
the Law stipulates consolidated prudential
supervision of banks, of insurers /reinsurers
and of investment firms which belong to a
financial conglomerate, in particular with
regard to solvency, risk concentration,
intra-group transactions, internal control
mechanism, internal risk management at the
conglomerate level, and reputation and
competence of financial groups’ management.
The Law establishes measures to facilitate
supplementary supervision of financial
conglomerates, the criteria for designating of a
competent authority-coordinator and its tasks,
as well as the provisions on cooperation and
exchange of information between competent
authorities involved, which should carry out
exchange of information, consult each other
before making important decisions and handle
properly the claims for verification of
information.
The Law also stipulates requirements for
mixed financial holding companies, regulation
of remedial measures and sanctions, as well as
provisions on supplementary supervision in
case of groups, parent companies of which are
based in other countries - cooperation with
competent authorities from other countries
based on cooperation agreements.
7.2 Foreign Exchange
Operations Regulation
In 2017, the National Bank of Moldova (NBM)
promoted a range of amendments to the legal
framework related to foreign exchange
regulation. This framework regulates inflows
and outflows of cash into/from the Republic of
Moldova by banks, the process of submitting
documents for performing payments/transfers
in foreign exchange transactions, notification
to the NBM by residents about foreign
loans/credits within operations related to direct
investments, reporting by banks about foreign
exchange operations to the NBM.
I. In order to grant certain new facilities to
banks related to cash transfers into/from the
Republic of Moldova, there are foreign
companies, which provide services related to
cash transfers from / to the Republic of
Moldova and which can offer more
advantageous conditions for performing
respective operations. In 2017, the Instruction
on introduction/withdrawal of cash into / from
the Republic of Moldova by banks was
modified.
For this purpose, according to the
amendments made, resident banks have been
allowed to perform cash transfers into/out of
the Republic of Moldova and based on
contractual relations with non-resident legal
entities, other than non-resident banks, which
foresee sale / purchase of cash against
cashless financial means. At the same time, in
order to minimize eventual risks in relation to
specialized non-resident legal entities which,
compared to banks, may not be subject to
regulation and supervision according to the
procedures established for banks, certain
criteria have been determined which
non-resident specialized legal entities shall
meet on a permanent and cumulative basis. In
particular, the specialized legal entity shall not
be registered in an offshore country /area, be
subject to regulation and supervision in the
context of legislation on the prevention and
combating of money laundering and terrorist
financing in the country in which it is
registered, shall be operating in the respective
domain for at least 5 years.
II. To stimulate IT development and in order to
simplify certain requirements for presentation
of documents related to making payments and
transfers in the framework of foreign exchange
operations, certain modifications have been
made to the Regulation on conditions and
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procedure of performing foreign exchange
operations. These modifications allow each
resident payment services provider (RPS
provider) to regulate independently these
aspects according to the specifics of their
activity.
The principal amendments to the mentioned
regulation refer to the following aspects:
• lighter requirements have been
established for clients’ applications to
perform payments and transfers; the RPS
providers were granted the possibility to
determine on their own the procedure of
documents’ presentation in order to
perform payments/transfers within
foreign exchange operations, if the
normative acts do not stipulate otherwise;
• conditions were established according to
which an individual does not need to
present the identity card to the RPS
provider, in case the RPS provider has not
established stricter rules, the conditions
are meant to be met cumulatively as
follows:
(i) the legislation on prevention and
combating money laundering and
terrorist financing and/or on providing
payment services and issuance of
electronic money does not establish the
requirement to identify the individual and
(ii) payment/transfer shall be made by
using the account of the natural person
opened at the RPS provider; or the
payment/transfer is made without
utilization of the account of the individual
opened at the provider RPS and the
regulation stipulates performing the
payment/transfer without presentation of
justifying documents.
In addition, legal entities have been allowed to
make single payments/transfers in amounts
not exceeding EUR 1 000 without presentation
of justifying documents. The purpose of this
liberalization is to simplify cashless payments /
transfers in insignificant amounts by legal
persons, but the rule will not apply to
payments / transfers of resident legal entities
made in the framework of foreign exchange
transactions subject to notification /
authorization in accordance with the Law on
foreign exchange regulation.
III. In order to specify certain aspects related to
notification by residents to the NBM about
external loans/credits in the framework of
direct investments operations (norms entered
into force on 10.12.2016 according to the Law
no.94 of 13.05.2016 on modification and
completion of the Law on foreign exchange
regulation no. 62-XVI of 21 March 2008), the
corresponding amendments to the Instruction
on external commitments were applied in
2017. For this purpose, the conditions were
expressly stipulated under which a loan /
credit under direct investment operations
contracted by a resident from a non-resident
before the date of 10.12.2016, but subject to
modifications after this date, becomes subject
to notification and reporting to the NBM. These
conditions cumulatively to be met are as
follows:
a) the contracting parties and/or the term of the
loan/credit and/or the contract amount and/or
the share held by the creditor in the debtor’s
capital have modified, constituting less than
10%;
the licensed banks were allowed to
import/export cash into/from the Republic of
Moldova not only on the basis of contractual
relations with non-resident banks but also on
the basis of contractual relations with
specialized non-resident legal entities;
b) the report “Operations of buying and selling
foreign currency performed by a licensed
bank”;
c) the report “Licensed bank’s operations with
cash in foreign currency and with traveller’s
checks in foreign currency”.
The amendment of these reports was intended
to specify a few aspects regarding the manner
of reflecting foreign exchange transactions in
cash with individuals (the number of operations
and their amount), in case that during the
reporting period revocation by individuals of
the operations concerned took place.

b) it fits into the loan/credit specified in item

2.5 letter (a), (b) or (d) of the instruction;

c) the amount of the loan/credit exceeds EUR

50 000 (or its equivalent).

At the same time, the aforementioned

instruction was supplemented with a new
provision stipulating that taking into account
or authorizing external commitments by the
NBM does not exempt resident payment
services providers, through which notified /
authorized foreign exchange operations are
performed, from complying with other
provisions of the legislation of the Republic of
Moldova, including the provisions related to
enforcement of measures in accordance with
the requirements of legislation in the domain
of prevention and combating money
laundering and terrorism financing.

IV. The need of adjusting the reporting

framework for foreign exchange operations
has conditioned in 2017 the modification and
completion of the Instruction on reporting
certain foreign exchange operations by
licensed banks. In this regard, the following
reports were modified:

a) the report “Cash imported into/exported

from the Republic of Moldova by banks”.

The modification of this report was linked to

the Decision of the Executive Board of the
NBM no.35 of 8 February 2017 “On the
modification and completion of the Instruction
on introduction/exportation of cash into/from
the Republic of Moldova by banks”, by which

91
Chapter 8
External activity of the NBM
8.1 International
Collaboration of the
Republic of Moldova
International Monetary Fund (IMF)
The International Monetary Fund is an
international financial institution with the
fundamental mission of ensuring stability of
the international monetary system. In order to
accomplish this mission, the IMF is directing its
activity to monitoring the economic and
financial policies of member states, promoting
international monetary cooperation and
currency stability, granting temporary financial
assistance to countries with balance of
payments disequilibrium, and grants technical
assistance to IMF member countries. The
Republic of Moldova is member of the
International Monetary Fund as of August 12,
1992.
Current quota of the Republic of Moldova at IMF
amounts to 172.5 million of special drawing
rights (SDRs), which represents 0.04 percent
of the IMF’s capital. This quota entered into
force on the 17th of February 2016, following
the increase by the Republic of Moldova of its
previous quota of (123.2 million SDRs) by 49.3
million SDR. The voting power of our country
at the IMF is of 1,973 votes, which represents
0.08% of the total number of votes.
Throughout 2017, the Republic of Moldova
advanced its collaboration relations with the
IMF, based on a complex program of economic
reforms and financial support, which was
approved on November 7,2016 by the IMF
Executive Board for a period of three years.
The Program is implemented through two
lending tools - the Extended Fund Facility39
(EFF) and the Extended Credit Facility40 (ECF),
39 EFF which stipulates an annual interest rate equal to
the SDRs’ core interest rate, a 10-years reimbursement
term and a grace period of four and a half years.
40 (ECF) which stipulates an interest rate equal to zero by
the end of the year 2018, a grace period of five and a half
years and a repayment term of 10 years. Two thirds of the
loan amount is granted on ECF basis.
92
totalling 129.4 million SDRs (is equivalent to
about USD 183.1 million and to 75% of the
Republic of Moldova quota held at the IMF).
According to the terms of the program, the
disbursement of funds takes place in 6
instalments, preceded by an assessment of
the conditions for each instalment.
The first instalment amounting to SDRs 26
million (about USD 35.9 million) was disbursed
to the authorities of the Republic of Moldova
under the IMF Program in November 2016,
immediately after the Program has been
approved, and during the year 2017 another
two separate instalments were disbursed
totalling SDRs 31.4 million (about USD 43.7
million). The remaining amount follows to be
disbursed during the next stages of the
implementation of the program.
The main objective of the program supported
by the IMF in 2017 was focused on reforms in
the financial and banking sector, prudent
management of public finances and
improvement of the operational framework in
the energy sector. In the banking domain, the
program aimed on strengthening governance
and of financial situation of banks by
increasing transparency of shareholders,
compliance of owners and administrators of
banks with the criteria of honesty and
professionalism, identification of related
parties lending, and ensuring compliance with
regulatory and capital requirements.
In order to organize regular consultations and
perform assessments related to the level of
implementation of the commitments assumed
by the IMF Program, during the year 2017, IMF
experts performed 3 working visits to Chisinau
(14-28 February, 17-21 July and 25 October –
07 November). As a result of the visits,
finalization of the two rounds of assessments
of the Program with the IMF was possible as
well as the development of regular
consultations for the year 2017 in the
framework of Article IV of the IMF Statute41 .
According to findings of IMF experts, as a result
of the visits, the Republic of Moldova had a
41 Article IV of the IMF Statute governs the cooperation
relations between the IMF and the member countries.
Pursuant to the provisions of this article, annually the IMF
grants consultations to the Republic of Moldova in the
economic and financial policy domain
relative macroeconomic and financial stability
in 2017, overcoming the banking crisis of 2014.
Significant progress has been made by the
Moldovan authorities in eliminating the
long-term persistent vulnerabilities of the
financial-banking sector and in advancing the
implementation of structural reforms. The
efforts made during the year significantly
contributed to strengthening the financial
stability and to relaunching the economy.
In addition, IMF experts ascertained that
significant progress has been made in 2017 in
terms of the financial - banking sector
recovery, including strengthening the
supervisory and regulatory framework,
improving management and increasing
transparency of shareholders.
Strengthening the cooperation relations of the
National Bank of Moldova with the IMF was
possible due to the visits made to Washington
D. C. (October 10-15 and April 17-23) by the
NBM leadership, in the context of participation
in annual and spring meetings of the IMF and
of the World Bank Group.
During the visits, members of the Executive
Board of the NBM had a series of meetings
with officials of the IMF, the World Bank,
European Commission, EBRD Treasury USA,
the International Finance Corporation, the
Council of Europe Development Bank and
other important partners to discuss the
implementation of the Program with the IMF,
the achievements and priorities in the process
of reforms in the financial-banking sector, the
investment framework in the Republic of
Moldova and measures taken in 2017 to
ensure macroeconomic stability of the country.
In addition, the successes achieved by the
authorities of the Republic of Moldova in
implementation of the Program with the IMF
were discussed by the Governor of the
National Bank during the bilateral meeting
with the IMF Managing Director, in the context
of participation at the high level conference
Reaccelerating Convergence in Central and
South-eastern Europe, organized by the IMF on
July 10-11, 2017 in Dubrovnik. In this context,
the IMF leadership welcomed the successes
achieved by the Moldovan authorities during
2017 and emphasized the importance of
continuing the reform implementation agenda.
The meeting of the Moldovan delegation with
the managing Director of the IMF can be
considered a strong sign of support and
credibility grunted to our country on behalf of
development partners.
93
In the context of financial arrangements,
during the year 2017, the National Bank of
Moldova received from the IMF 12.4 million
SDRs (USD 17.26 million) offered through the
EFF financing mechanism to strengthen the
international reserves of the Republic of
Moldova. Table A.23 reflects the cumulative
financial arrangements that the National Bank
of Moldova benefited from by the end of 2017.
In the reporting year, total payments for
servicing loans granted to the National Bank of
Moldova by the IMF amounted to SDRs 46.25
million (the equivalent of USD 64 million), of
which payments for the principal loan amount
constituted SDRs 44.46 million (the equivalent
of USD 61.52 million) and payments for loans
interests amounted to SDRs 1.79 million (the
equivalent of USD 2.48 million).
European Union (EU)
In 2017, the Republic of Moldova advanced on
its way of gradual accession to the European
Union in the context of implementation of
provisions of the Association Agreement
signed in Brussels on the 27 June 2014
between the Republic of Moldova on one side
and the European Union and the European
Atomic Energy Community and their member
countries, on the other side.
In order to ensure continuity in the
implementation of the Association Agreement,
the Republic of Moldova and the European
Union agreed on a new Association Agenda for
the period 2017-2019, which was published in
the Official Journal of the EU on the 19th of
August 2017 and which replaced the
Association Agenda 2014 -2016, initially
agreed on the 26 of June 2014. The new
document has the goal of supporting and
strengthening the resilience and stability of the
Republic of Moldova, while pursuing a closer
political association and a deeper economic
integration. The 2017-2019 Agenda foresees a
list of short and medium-term priorities,
including in the areas, which target the tasks
of the NBM, such as: financial services, current
payments and capital flow, right of
establishment and trade in services, economic
development and market opportunities.
In order to monitor the European integration
process at the national level, the Moldovan
authorities have progressed on their way of
implementing the provisions of the National
Action Plan of the Republic of Moldova - EU
Association Agreement (NAPAA) for the years
2017-2019, approved by the Decision of the
Government of the Republic of Moldova no.
1472 from December 30, 2016. This document
was developed based on the proposals
received from relevant public institutions,
including from the NBM, containing key
cooperation priorities in fulfilling the
commitments stipulated in the Association
Agreement with the European Union.
Therefore, the National Bank of Moldova is
committed to implement the Plan through a
range of actions, such as: alignment of
legislation on the central bank to the EU’s best
practices, strengthening the NBM’s capacity in
the field of banking regulation and supervision,
development and strengthening of
requirements related to governance and
banking risk management, transposition and
implementation of EU legislation in the field of
financial-banking services, etc.
The main role in coordination and monitoring
at the national level of the European
integration process during 2017 belonged to
the Governmental Commission for European
Integration, a member of which is the NBM
governor. During the meetings of the
Governmental Commission for European
Integration, held in 2017, there were
discussed, among other issues, the
developments of the NAPAA implementation in
the period 2014-2016 and the priorities of the
new NAPAA for the period 2017-2019, the
implementation of the Association Agenda RM -
EU for the period 2017-2019, the Deep and
Comprehensive Free Trade Agreement (DCFTA)
and preparation for regular meetings with the
European partners.
Thus, in the context of cooperation between
the Republic of Moldova and the European
Union, during 2017, the representatives of the
National Bank of Moldova participated in
meetings of institutional cooperation
organizations established by the Association
Agreement: the Association Council, the
Association Committee, the Association
Committee in Trade Configuration,
Subcommittee on economic and other sectors
cooperation (cluster I).
During these meetings a range of issues were
discussed referring to the evolution of certain
macroeconomic indicators, the current
situation in the area of maintaining financial
stability and of banking system consolidation,
as well as in banking regulation and
supervision domain, the progress related to
the area of banking sector reforms, measures
of fraudulent practices prevention in the
94
banking sector, progress in Association
Agreement implementation, etc.
The relations of the Republic of Moldova with
the European partners were marked in 2017
by signing in Brussels, on 23 of November, of
the package of documents on granting
macro-financial assistance to the Republic of
Moldova by the European Union. The
Memorandum of Understanding was signed by
the European Commissioner for economic and
financial affairs, taxation and customs, by the
governor of the National Bank of Moldova and
by the minister of Finance in the presence of
the prime minister.
The Memorandum of Understanding stipulates
the disbursement of EUR 100 million, in three
instalments, in accordance with the schedule
of implementation of 28 reforms and actions
by Chisinau authorities. Among them were
included a range of actions in the
financial-banking field, such as the approval of
the regulatory framework for transposition of
European directives and of international
principles in the area of prudential supervision,
transparency of banks’ shareholders,
improvement of the deposits guarantee
system, etc.
During the visit of the Moldovan delegation to
Brussels on the occasion of signing the
Memorandum, besides the meetings with the
European Commissioner and the European
Commissioner for Neighbourhood Policy and
Enlargement Negotiations, the NBM governor
also had working meetings with the Deputy
Director-General for EU Neighbourhood Policy
and Enlargement Negotiations, the Director for
International Economic Relations and the
Deputy Director-General of the European
External Action Service for Russia, Eastern
Partnership, Central Asia and the OSCE. During
the meetings, the governor of the NBM spoke
about the progress in implementation of the
IMF program and presented information
received from Kroll and Steptoe &Johnson on
finalization of the investigation report and on
transparency of the report’s conclusions.
Another major event that marked the dialogue
of the NBM with the EU in 2017 is the
successful finalization of the Twinning Project
entitled Strengthening the National Bank of
Moldova’s capacity in the field of banking
regulation and supervision in the context of EU
requirements funded by the European Union.
The project was launched on 30th of June 2015
and implemented during two years by the
National Bank of Moldova together with the
consortium of the National Bank of Romania
and the Central Bank of Netherlands. The
official closing events of the project were held
in Bucharest (16.05.2017) and Chisinau
(30.05.2017), bringing together senior officials,
ambassadors of the European Union, officials
of the National Bank of Moldova and of the
National Bank of Romania, and of the banking
community and experts.
One of the key priorities of the NBM, in line
with the Association Agreement concluded
between the Republic of Moldova and the
European Union (EU) signed on June 27, 2014,
is close cooperation with the central banks of
the EU. Thus, during the year 2017, the NBM
advanced on the way of establishing new
cooperation partnerships with other central
banks of the European Union, in order to gain
experience in various areas that fall within its
competence.
Group of Banking Supervisors from
Central and Eastern Europe (BSCEE)
In 2017, the National Bank of Moldova, as a
member of the Group of Banking Supervisors
in the Central and Eastern Europe, continued
to work with BSCEE members by exchanging
information and experience in the field of
banking supervision and regulation. Thus,
between 31 May and 2 June 2017, an annual
conference on the implementation of the
existing legal framework in the European
Union on Basel III was organized by the Group
of Banking Supervisors of Central and Eastern
Europe (BSCEE). The participation of the
National Bank of Moldova in this event took
place in the context of achieving the strategic
objectives of the National Bank of Moldova,
and specifically the transposition into the
national legislation of the CRD IV package of
the EU (Capital Requirements Directive)
through the Twinning project.
It is worth noting that representatives of the
National Bank of Moldova participate regularly
in the events organized by BSCEE, which offer
the possibility to communicate with the
regulatory and supervisory authorities of other
states. Taking advantage of this opportunity,
during 2017, the National Bank of Moldova
collaborated with BSCEE members on the
subject of compliance risk regulation.
95
Cooperation with other central banks
and banking supervisory authorities
from other countries
In the context of strengthening the
cooperation relations with the Bank of
Lithuania, on 22.08.2017, the Memorandum of
Understanding between the National Bank of
Moldova and the Bank of Lithuania (Lietuvos
bankas) was signed during a working visit of
the NBM delegation to Vilnius. The document
signed by the Governor of the NBM and the
Governor of the Bank of Lithuania stipulates
the establishment of a comprehensive
framework of cooperation and exchange of
information between the institutions. The
signed Memorandum offers new opportunities
to extend technical assistance in the banking
sector and to attract expertise of the EU
central banks.
At the same time, in the framework of
exercising the banking licensing function, in
2017, the National Bank of Moldova
collaborated with banking supervising
authorities from other states (Belarus,
Lithuania, Georgia, Russia, Czech Republic,
Ukraine, Kyrgyzstan, Italy and Romania)
achieving a mutual exchange of information
required in the process of assessment of the
quality of individuals (“Fit & Proper”), which
have developed an authorized and supervised
activity by these authorities.
Black Sea Trade and Development Bank
(BSTDB)
The BSTDB was established on the basis of the
Agreement signed on June 30, 1994 in Tbilisi
by 11 states participating in the Black Sea
Economic Cooperation, including the Republic
of Moldova. BSTDB aims to finance various
regional programs specific for transition to
market economy, and the Republic of Moldova,
one of the founders of the BSTDB, ratified the
Agreement on the establishment of BSTDB by
Parliament Decision no. 670 from November
28, 1995.
On July 3, 2017, the National Bank of Moldova
signed the Memorandum of Understanding with
the Black Sea Trade and Development Bank, at
the Regional Business Forum emph Moldova –
Working Together to Support Growth, organized
on the occasion of the Annual Meeting of the
Board of Governors of the Black Sea Trade and
Development Bank which in 2017 took place in
Chisinau.
The document signed by the Governor of the
NBM and President of the BSTDB stipulates
creation of necessary framework to facilitate
cooperation between the parties and extension
of technical assistance in the banking field. At
the same time, the Memorandum offers new
opportunities to attract international expertise
in areas of high interest for the National Bank
of Moldova on behalf of the countries of the
Black Sea region.
External technical assistance and
collaboration with international
institutions and central banks of other
countries
In the context of the NBM cooperation with
international institutions and with central
banks of other countries, during 2017, the
National Bank of Moldova benefited from
technical assistance from a range of external
donors in order to strengthen its capacities in
various fields, such as monetary policy
framework assessment, strengthening banking
regulation and supervisory mechanism,
aligning banking legislation to EU standards,
creation of the Central Securities Depository,
making external communication more
effective, investment tools diversification and
other areas specific for the central bank.
Thus, due to the technical assistance of the
IMF, assessment of the monetary policy
framework in the context of achieving the
strategic objective of price stability became
possible. During the visits of IMF experts to
Chisinau (19.06.2017 - 30.06.2017 and
28-29.09.2017) an extensive exchange of
opinions took place on a few potential
elements of quantitative substantiation tools
for monetary policy decisions, methods of
improving the monetary policy framework and
making NBM external communication more
effective.
Activities related to banking regulation and
supervision remain among the core priorities
of the NBM. Therefore, in order to strengthen
the capacities in these areas, the central bank
benefited from technical assistance from
several external donors.
In this context, reviewing banks’ policies and
procedures in the area of risk management of
related parties has been an important subject
of discussions during the visits of IMF experts
to Chisinau. The meetings developed on the
occasion of visits gave the possibility to the
NBM employees to get acquainted with the
96
policies and procedures of related parties’ risk
management, to apply the identification
features of banks’ related parties and revise
the SREP Guide in order to include the specific
references regarding the related parties’ risks.
The technical assistance granted by the IMF
gave the possibility to share the experience of
the National Bank of Ukraine in developing
presumptions of affiliation and implementation
of exposure limits for banks’ related parties.
In the framework of the project EU High Level
Advisers’ Mission to the Republic of Moldova
2016-2018, an EU high-level adviser offered
consultancy during the year 2017 in the area
of NBM policies. Assistance was provided in
the context of banking supervisory reform, in
order to create a modern and efficient
supervisory framework in line with the EU
standards and aimed to strengthen the NBM
communication capacities and cooperation
with other institutions for effectively
counteracting financial crimes.
Also, during the year 2017, the National Bank
of Moldova continued to receive EU assistance
through the Twinning Project for the purpose of
gradual harmonization of prudential
regulations with the European CRD IV
framework (Directive no. 36/2013) / CRR
(Regulation no. 575/2013), which incorporates
Basel III rules and standards.
Within the Twinning Project Strengthening the
National Bank of Moldova capacity in the field
of banking regulation and supervision domain
in the context of EU requirements, the NBM
benefited from the support provided by experts
of the National Bank of Romania ((NBR) and
of the Central Bank of Netherlands (CBN) in
order to transpose the European regulatory
framework. The Twinning Project started on
the 30th of June 2015 and was completed on
the 30th of May 2017.
The main results have been achieved due to a
range of activities, among which shall be
remarked training of employees, exchange of
experience with foreign experts,
implementation of impact surveys and of
certain thematic evaluations. In this context,
in collaboration with experts from the NBR, the
impact of introducing CRD IV / CRR liquidity
requirements over the banking sector of the
Republic of Moldova was assessed in terms of
banks’ enrolment within the established limits.
Within the assessment, two liquidity indices of
the Basel III international regulatory framework
were calculated: the liquidity coverage ratio
(Liquidity Coverage Ratio - LCR) and the net
stable funding ratio (Net Stable Funding Ratio -
NSFR). Benefits of the Twinning Project will
become visible together with the full
implementation of the new regulatory
framework and the application of new
risk-based supervisory practices. Although the
direct beneficiaries of the project are the NBM
and the licensed banks in the Republic of
Moldova, the final beneficiaries are the citizens
of the Republic of Moldova, who will enjoy a
more viable, stable and secure banking system.
Also, establishment of a new legal framework
equivalent to that applicable in the European
states contributes to improving the image of
the Moldovan banking sector and to attracting
new investors. Therefore, the adequate
activity of the banks, especially the intense
process of lending, stimulates the overall
economic growth in the Republic of Moldova.
In particular, it is worth noting that one of the
major achievements registered as a result of
the Twinning Project is the approval of the Law
on banking activity no. 202 of 06.10.2017, with
the application of provisions of 01.01.2018.
Due to fruitful cooperation relationships with
the Deutsche Bundesbank, the NBM benefited
during the year 2017 from technical assistance
in the field of banking supervision, focusing in
particular on minimum requirements for
banking capital, capital concept under Basel II
/ III agreement, capital adequacy, risk
management and banks’ recovery plans.
At the same time, sharing the experience of
the German central bank regarding IT tools
utilized both for on-site and off-site supervision
has helped to create a vision of the NBM on
the IT tools used, for determining additional
requirements for the development of the
current Credit Register, as well as of the need
for additional solicitations of information from
the banks for supervisory purposes.
In the context of commitments made by the
Republic of Moldova by signing the Association
Agreement with the European Union, the
National Bank of Moldova has attracted
technical assistance from development
partners in order to monitor transparency of
shareholders of licensed banks. Thus, due to
the technical assistance from experts from
Expert-Grup and PricewaterhouseCoopers,
offered through the program Good Governance
Fund, financed by the UK Government, the
NBM gained expertise in developing technical
specifications and of tender documents for the
acquisition of the IT solution for monitoring
shareholders’ transparency and remote
analysis in the field of prevention and
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combating money laundering and terrorist
financing.
Throughout 2017, the National Bank of Moldova
continued directing its efforts to achieving the
objective of maintaining financial stability of
the Republic of Moldova banking system. For
this purpose, the National Bank of Moldova
benefitted from consultancy services of USA
Treasury experts in strengthening corporate
governance of banks, structural and editorial
aspects of writing the Financial Stability Report,
and in reorganizing the National Committee for
Financial Stability.
In order to strengthen the NBM capacities in
the domain of bank liquidation, during 2017,
USA Treasury experts provided assistance and
consultancy on such issues, as transactions on
sale of assets of banks in liquidation and the
attributions and responsibilities of liquidators.
Taking into account that the Law on banks’
recovery and resolution came into force in
October 2016, the assistance granted in 2017
by the USA Treasury, the International
Monetary Fund, the Central Bank of Germany,
and the Romanian Banking Institute in the field
of recovery and resolution of banks was
extremely beneficial. Within the established
collaboration a range of issues have been
addressed, such as: drafting resolution plans,
recovery plans, application of resolution tools,
modality of identifying systemic banks based
on the methodology of the Basel Committee
on effective supervision, continuity of critical
functions of the bank, saving the viable assets
of the bank in case of application of the
resolution, as well as application of bankruptcy
liquidation procedures of banks with a few
elements of the resolution.
Additionally, at the solicitation of the National
Bank of Moldova, in September 2017, the
International Monetary Fund granted
consultancy on improving the regulatory
framework for liquidity assistance in
emergency situations. Issues undergoing
counselling referred to the term for which
liquidity assistance is provided in emergency
situations, the criteria for granting assistance,
such as solvency, systemic importance of the
bank, eligible collateral and evaluation
methodology, cooperation and sharing
responsibilities between relevant authorities in
situations of crisis, as well as the conditions
that banks have to meet before and after
providing liquidity assistance in emergency
situations. Following the recommendations of
the IMF, the current regulatory framework on
granting liquidity assistance in emergency
situations by the NBM to banks follows to be
amended in order to reflect the best practices
in the field.
Starting from the need to implement the new
financial reporting standard IFRS 9, as of
January 1, 2018, the National Bank of Moldova
has requested technical assistance from the
World Bank related to classification of financial
tools and estimation of expected losses
associated with credit risk. The assistance was
granted in the period of December 13-14,
2017, during the visit of World Bank experts to
Chisinau, being focused on determining the
most appropriate classification of financial
assets and on the best solutions for assessing
expected credit risk losses, starting from the
structure and quality of financial assets in the
NBM portfolio.
At the same time, familiarization with the Bank
of Lithuania’s asset allocation, investment tools
and risk quantification related to them, the
information systems used to estimate, monitor
and report the risks as well as the performance
of managed portfolios was possible thanks to
a documentary visit from 24 to 26 October
2017 to the Central Bank of Lithuania, financed
through the TAIEX program42 .
In order to strengthen the institutional
capacities of the NBM in the field of
preservation and management of foreign
exchange reserves of the state, the European
Fund for Southeast Europe facilitated the
participation of a representative of the NBM at
the seminar Reserves and Assets
Management, organized at the Swiss
Confederation by the Bank for International
Settlements, between September 11 and 15,
2017. The topics of the seminar focused on
asset allocation under current market
conditions, tactical asset allocation, Renmimbi,
Bitcoin and Blockchain, building a portfolio and
calculating its performance. In the context of
this seminar, BIS provided participants with
access to a module for performing the asset
allocation exercise (BAAM – BIS Asset
Management Asset Allocation Module).
In the context of actions to create the Central
Securities Depository (CSD), during the year
2017, the NBM received technical assistance
42 TAIEX is a technical assistance and information
exchange tool of the European Commission aimed at
supporting the beneficiary authorities in the process of
harmonizing national legislation with the EU legislation.
TAIEX assistance is provided to beneficiary public
authorities for a short-term (up to 5 days) in the
form of workshops, EU expert missions to beneficiary
institutions, or study visits of representatives from
beneficiary authorities to EU countries’ authorities.
98
from experts of the Financial Services
Volunteer Corps (FSVC) through the United
States Agency for International Development
(USAID). The assistance was aimed to
implement a series of activities in order to
facilitate the process of establishing the CSD,
focusing on reaching the level of compliance of
the newly created Central Securities
Depository with international standards,
including with the financial market
infrastructure principles developed by the
Bank for International Settlements (BIS) and
the International Organization of Securities
Commissions (IOSCO).
The development of an innovative, accessible,
efficient and safe national payment system
remains one of the core priorities of the NBM.
For this purpose, the NBM has received
technical assistance from the FSVC experts to
prepare a report on financial inclusion and
feasibility of mobile payments. Foreign experts
assessed the local financial market to identify
both the potential benefits and risks of
introducing mobile payments as well as to
formulate recommendations that would help
increase financial inclusion based on research
of experience and on existing implementation
patterns in other countries.
In its capacity of supplier of publications and
analytical materials, which include national
statistical data, the NBM benefited during
2017 from technical assistance of the IMF in
preparing forecasts of external sector’s
indicators.
Also, the NBM representatives in charge of
macroeconomic statistics collaborated with the
National Bank of Serbia (NBS) for organization
of the collecting, storage and data processing
process, as well as for the technical support
needed for compilation and production of
international account indicators. In this
respect, in the period of July 12-13 2017, NBM
representatives made a documentary visit to
the NBS in order to implement its experience
in these areas.
In particular, we note that the National Bank of
Moldova participated as a member of the
Technical Working Group on statistics of
international trade in services, foreign direct
investments and commercial statistics related
to foreign subsidiaries in two sessions under
the Central European Agreement (CEFTA), to
which Moldova is a part as of 2017. The CEFTA
Secretariat has launched the test version of a
data exchange system between member
countries. In this context, the NBM contributed
with statistics of international accounts of the
Republic of Moldova in completing this
database.
CEFTA representatives have supported the
efforts of the NBM in developing the statistics
of international trade in services, for this
purpose, a working visit to Chisinau by a
CEFTA expert in the period of April 4 – 7, 2017
was organized. The final goal of this visit was
to conduct a general evaluation on the
possibility of expanding the capacity of the
NBM to produce statistics on foreign trade with
services according to CEFTA requirements,
including the analysis of possibilities of
expanding geographical distribution of
respective indicators and utilization in the
process of well-known experience in this field.
Taking into account that a modern human
resources management system plays an
important role in the effectiveness of the
organization’s functioning, the NBM
representatives had the opportunity to
implement the experience of the National
Bank of Romania (NBR) in performing certain
practical activities related to employees’
recruitment process. At the same time, the
visit to Bucharest permitted to share the
experience of the NBM in the field of strategic
planning, as well as in organization and
implementation of processes management
system at the NBM.
At the same time, starting from the objective
of strengthening human resources in the
domain of banking regulation and supervision,
during the period 19-20.01.2017 and 20
-21.04.2017, the NBM benefitted from technical
assistance from the NBR (within the Twinning
project) on aspects related to identification of
employees’ development needs in the
respective fields. Additionally, during the
period 01.01.2017 - 27.02.2017, thanks to the
technical assistance from the UK Government,
there was accumulated and utilized knowledge
in the area of human resources management,
by identifying optimization opportunities in
classification of job positions, in increasing the
retention of employees, in reviewing and
standardizing job descriptions, and of the
performance management system.
During 2017, the National Bank of Moldova
also benefited from technical assistance in the
area of external communication, which is
essential in the process of dissemination of
thematic information and of improving the
image of the institution in front of citizens and
foreign partners. In this regard, the Deutsche
Bundesbank Centre for Technical Central Bank
Cooperation and USAID offered training
opportunities to the NBM employees within a
99
range of seminars supported by international
experts. The seminars were designated to
provide necessary information support for
streamlining the external and internal
communication processes carried out by the
central bank. A modern communication
approach, in line with the expertise of other
countries, will help to optimize the NBM
activities and increase its credibility. The topic
of external communication was also the
destination of the documentary visit of the
communication team from the National Bank
of Moldova to the National Bank of Romania,
organized by PricewaterhouseCoopers
Romania under the Good Governance Fund
project, financed by the Government of Great
Britain. The respective support also included
performing an opinions survey on the
perception of the National Bank of Moldova by
public. Subsequently, the results obtained and
the related consultancy were implemented by
finalizing a communication strategy.
Financial education among population
undoubtedly contributes to increasing and
promoting transparency, confidence and
attractiveness of the banking sector. The
National Bank of Moldova is constantly
participating in the process of promoting
financial education at national level alongside
other relevant institutions. In this regard, the
National Bank of Moldova benefitted from the
financial and technical assistance provided by
the EFSE (European Fund for Southeastern
Europe) in implementing the International
Week of Financial Education Project. The
interactive games developed and organized by
the NBM for children of various age groups,
together with other educational activities,
represent an important perspective of
promoting financial inclusion.
In other ways, we note that, in the context of
identifying modalities to manage excess
liquidity in the domestic banking sector,
representatives of the German Economic Team
in Moldova (GET Moldova), working in a project
of the independent consulting centre Berlin
Economics, funded by the German
Government, have collaborated to develop a
range of recommendations and solutions.
It is to be noted, that GET Moldova provided
assistance to Moldovan authorities, including
to the NBM, by identifying current economic
issues and developing recommendations for
their solution, based on an independent
analysis and expertise. Also, on November 9,
2017, at the invitation of GET Moldova and of
the German Council for International Relations
(DGAP), the governor of the NBM made a
working visit to Berlin, where he attended a
seminar dedicated to the Republic of Moldova
economic and banking reforms. During the
event, the NBM governor reported on the
progress of institutional and legislative reforms
in the financial-banking domain, and in
particular remarked the approval of the
banking law which transposes the new banking
supervision principles Basel III, measures of
making banking shareholding more
transparent, financial consolidation of
systemic banks and the main stages of
implementation of the program with the IMF. At
the same time, during the working visit, the
governor of the NBM had meetings with
representatives of the Federal Government, of
financial institutions and with representatives
of foreign embassies in Berlin.

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Chapter 9
Internal activity of NBM
9.1 Corporate Governance
of the National Bank
The Law on the National Bank of Moldova
provides the legal authority and the
governance framework of the National Bank.
The structure of corporate governance
includes senior management bodies,
high-level committees - the Audit Committee
and the Investment Committee - and several
levels of control - external and internal. This
structure is complemented by the compliance
and ethics framework - the Code of Conduct
for NBM Employees, the Anti-Fraud Policy of
the National Bank of Moldova, the Information
Security Policy, as well as public access to the
NBM normative acts, statistics and
publications.
Governing bodies of the National Bank
Governor
The Governor of the National Bank is
appointed by the Parliament at the proposal of
the President of the Parliament. In accordance
with the Law on the National Bank of Moldova,
the Governor is responsible for outlining the
monetary and foreign exchange initiatives, for
submission to the Executive Board and for
their implementation. The Governor, also,
organizes and manages the activity of the
bank and its representation in relations with
any legal or physical person both in the
Republic of Moldova and abroad.
Supervisory Board
The Supervisory Board consists of seven
members appointed by Parliament for a
seven-year term, with the possibility of
renewing the mandate. Out of the 7 members,
3 members belong to the executive structure
of the National Bank: the governor, the first
deputy-governor and a deputy-governor, and
the other 4 members are not employees of the
101
NBM. The Chairman of the Supervisory Board
is the Governor of the National Bank.
In exercising its powers attributed by law, the
Supervisory Board (i) approves the annual
report and annual financial statements; (ii)
adopts internal control system standards,
continuously checks and assesses the
operation of the internal control system; (iii)
adopts the rules of professional ethics; (iv)
determines the remuneration fund of the
National Bank, the level of remuneration of the
members of the Executive Board and the
amount of monthly indemnities of members of
the Supervisory Board who are not members
of the Executive Board; (v) approves the
National Bank’s cost estimate and investment
allowance and monitors their execution; (vi)
selects, on a tender basis, the external audit
organization; (vii) establishes the method in
which the National Bank Committees are
created and operate; (viii) determines the
nominal value, the design of banknotes and
metallic coins, procedures of putting into
circulation and the conditions for their
withdrawal from circulation.
During the year 2017, the Supervisory Board
held 10 meetings and approved 26 decisions,
on the following issues:
• Approval of the Report on the execution
of the cost estimate, of investment
allowances of the National Bank of
Moldova and financial statements of the
National Bank of Moldova for the year
end of period 31 December 2016;
• Approval of the Regulation on the
attributions, competencies and operating
procedures of the Investment Committee
of the National Bank of Moldova;
• Approval of the Report on internal audit
activity in 2016;
• Approval of the Report of the Audit
Committee of the National Bank of
Moldova on the monitoring activity in
2016;
• Approval of the annual Report of the
National Bank of Moldova for 2016;
 • Putting into circulation as means of
payment a modernized banknote with the
face value of 5 lei;
• Approval of graphic designs and of
nominal values of commemorative and
jubilee coins, issue 2017;
• Approval of modification of the nominal
structure of the national currency by
introducing a new nominal value of 2 lei
as metallic coin and replacement of 1, 5
and 10 lei banknotes with new metallic
coins;
• Approval of the cost of estimate and of
allowances for National Bank of Moldova
investments for the year 2018;
• Approval of the Strategic Plan of Internal
Audit of the NBM 2018-2022 and of the
annual internal audit plan for 2018;
• Approval and modification of the internal
regulations related to fulfilment of its
duties.
In its activity, the Supervisory Board paid
special attention to examination of
international experience and of best practices,
within permanent collaboration with
representatives of the development partners
of the Republic of Moldova and with other
financial-banking institutions on subjects of
common interest. The Supervisory Board
promoted transparency of decision making
and monitoring of activities of the NBM with
reference to legal attributions.
Executive Board
The Executive Board is composed of 5
members appointed by the Parliament: the
governor, the first vice-governor and three
vice-governors. The Chairman of the Executive
Board is the Governor of the National Bank.
During 2017, the mandate of one deputy
governor was suspended by law.
According to the Law on the National Bank of
Moldova, the main tasks of the Executive
Board are: (i) establishes the monetary policy
in the state; (ii) establishes the foreign
exchange policy in the state and the exchange
rate regime of the national currency; (iii)
decides on the procedure of issuing licenses,
authorizations, permits and approvals to be
issued by the National Bank; (iv) examines
results of controls performed at entities
supervised by the National Bank and adopts
the related decisions; (v) decides on the
issuance of claims of the National Bank, the
102
volume and conditions for their issuance; (vi)
adopts the normative acts of the NBM; (vii)
ensures implementation of decisions of the
Supervisory Board; (viii) plans and organizes
the current activity of the NBM.
During the year 2017, 77 meetings of the
Executive Board were organized, at which 369
decisions were examined and approved.
The most important decisions concerned the
following areas:
• the monetary and foreign exchange policy
of the National Bank of Moldova;
• regulation and banking supervision;
• the supervisory policy of the payments
system in the Republic of Moldova;
• reports and statistics;
• the accounting policies of the National
Bank of Moldova;
• internal regulatory framework.
During the year, 43 decisions of the Executive
Board were issued for publication in the Official
Monitor of the Republic of Moldova.
The Executive Board has continuously
promoted the application of monetary policy
tools and measures to ensure and maintain
price stability; ensure the economy with the
national currency and credibility of the
national currency; regulate and supervise
financial institutions, as well as efficiency,
safety, accessibility and innovative character
of payments.
Structure of the governing bodies:
Sergiu CIOCLEA
Governor, Chairman of the Supervisory Board
(SB) and Executive Board (EB)
Vladimir MUNTEANU
First Deputy Governor, SB and EB
Vice-President Cristina HAREA
Deputy Governor, member of the SB and of the
EB Ion STURZU
Deputy Governor, member of the EB Aureliu
CINCILEI
Deputy Governor, member of the EB
(suspended of right Dumitru URSU
member of the SB Alexandru PELIN
member of the SB Valeriu IAS, AN
member of the SB Vadim ENICOV
member of the SB
Committees
In order to ensure the efficiency of the
decision-making process, the Audit Committee
and the Investment Committee operate in the
NBM. These permanent Committees have their
own operating regulations, which detail their
specific composition, attributions and
responsibilities.
Audit Committee
The audit committee is made up of 3 members
of the Supervisory Board who are not on the
pay-roll of the National Bank. The Audit
Committee assists the Supervisory Board by
providing consultancy on: (i) monitoring the
financial reporting process of the National
Bank; (ii) monitoring the effectiveness of the
internal control and risk management system;
(iii) monitoring and directing the internal audit
function; (iv) monitoring the independence
and external audit activity.
In order to ensure the activity and fulfillment
of its duties, the Audit Committee in 2017 took
a range of practical measures and actions, of
which the most important are:
• monitoring the effectiveness and
adequacy of the internal control and risk
management framework at NBM level;
• monitor compliance issues that may have
a material impact on the NBM financial
statements and/or the reputation of the
National Bank;
• the analysis of the implementation of the
Strategic Internal Audit Plan for the period
2013-2017;
• the analysis and coordination of the
Strategic Internal Audit Plan for the
period 2018 - 2022 and its presentation
to the Supervisory Board of the NBM for
examination and approval;
• the analysis and coordination of the
Annual Internal Audit Plan for 2018 and
its presentation to the Supervisory Board
of the NBM for examination and approval.
Investment Committee
The Investment Committee of the National
Bank consists of 10 bank employees, including
2 vice-governors, one of whom is the chairman
of the committee.
The Investment Committee is set up to assist
the Executive Board of the National Bank of
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Moldova in reviewing the investment policies
and strategies for managing the foreign
currency reserves of the state.
Meetings of the Investment Committee are
usually held monthly, and in the case of major
issues, extraordinary meetings are organized.
The Investment Committee met in 2017 12
times, in ordinary regime. During each
meeting, the performance of the investment
portfolio for the previous reporting month, the
evolution and forecasts of the domestic foreign
exchange market and international financial
markets, the ratings of authorized
counterparties and the risks of the investment
portfolio were discussed. At the same time,
new counterparties were examined and
included in the list of counterparties authorized
to perform transactions. Also, periodically,
issues related to short and medium term
investment strategy related to the strategic
allocation of assets were discussed.
External and internal control levels
External control
The Law on the National Bank stipulates two
levels of external control - the annual external
audit of the financial statements, of accounts
and registers of the NBM undertaken by a
renowned company and with experience in the
field of central bank audit and external public
audit on the legality and compliance of cost
estimates and of allowances for investments
made by the Court of Accounts of the Republic
of Moldova.
Internal control
The NBM is in the process of aligning
operational risk management and internal
control system with international standards
COSO43 , ISO 3100044 , with best practices in
the field (International Operational Risk
Working Materials and Studies Group, IORWG),
the National Bank is a member of this group).
The governance of operational risk
management and the internal control system
at the NBM, according to these standards, is
carried out through three lines of defense.
The appropriate establishment of control
procedures and activities by subdivisions in
43 COSO - The Committee of Sponsoring Organizations of
the Treadway Commission.
44 ISO 31000 - Risk Management - Guidelines,
International Organization for Standardization
the process of risk management, based on the
processes management system, is the first line
of defense of the National Bank against the
factors that may threaten goals achievement.
For this purpose, each structural subdivision of
the NBM identifies risks and applies a set of
control procedures on a daily basis to manage
risks associated with business processes it
operates with and ensures their effectiveness
and efficiency.
The second line of defense is to provide the risk
management framework, process organization,
independent coordination and supervision of
the risk control and risk management process.
The functions of the second level of control
include specific monitoring mechanisms and
processes to exercise adequate control over
financial and operational risks. The second line
of defense is represented by the Investment
Committee and financial and operational risk
management structures.
At this level of defense is ensured the
normative framework regarding operations on
the financial market, the procedures of
conducting and controlling foreign exchange
operations, planning and organizing NBM
procurement, ensuring the continuity of
activity and security of information, including
standards, policies and plans to manage
incidents that disrupt or threaten any
operational function within the NBM. The NBM
keeps record of the incidents that take place,
including measures undertaken and personnel
responsible for these measures.
The third line of defense provides independent
assurance and is represented by the internal
audit. Internal audit grants management and
line managers an adequate reasonable
independent assurance on the adequacy and
effectiveness of governance, risk management
and internal controls, including the method in
which the first and second line of defense
meet the risk management objectives.
Framework of Compliance and Ethics
Code of Conduct of the NBM Employee
The National Bank requires that all employees
comply with the highest standards of
professional ethics. For that purpose, the Code
of Conduct is established to address personal
and professional ethics conduct of National
Bank staff, including conflict-of-interest
behavior, confidentiality, security and
management of information.
104
Anti-fraud policy
Anti-Fraud Policy aims to increase fraud risk
awareness and management, identify areas of
fraud at risk and implement appropriate
control measures at all levels of the NBM,
which will help prevent and detect fraud,
monitor fraud risk and promote consistent
organizational conduct. Anti-fraud policy also
sets out the conditions for conducting
investigations regarding prevention and
investigation of suspicions of fraud.
Implementation of anti-fraud policy, staff
training on fraud risk and its management,
reporting suspected frauds - all these establish
and develop the anti-fraud culture, which
discourages potential perpetrators and
reinforces the commitment of the National
Bank staff to combat fraud. The responsibility
of the entire staff of the National Bank makes
a major contribution to creating an enabling
environment for raising awareness of risk and
of consequences of fraud.
The governing bodies of the National Bank are
promoting a zero tolerance policy regarding
fraud and corruption.
Measures to combat money laundering
and terrorist financing
The National Bank has established internal
rules on prevention and combating money
laundering and terrorist financing in the
framework of operations performed. The
purpose of these rules is non-admittance of
involvement of the National Bank in operations
or activities with the risk of money laundering
and terrorist financing.
The norms are in line with international
standards and with national legislation on
customer knowledge and transactions
performed through the National Bank and
establishes the requirements for organizing,
implementing and monitoring compliance by
bank’s subdivisions of the criteria for
prevention and combating money laundering
and financing terrorism.
The internal reporting system supports the
activity of the NBM in combating money
laundering and terrorist acts financing by
systematically centralizing all findings of the
activity carried out in the domain and bringing
them to acknowledgement of the member of
the Executive Board, who coordinates the
activity. For high risk operations, reporting is
done to the Executive Board.
Information security policy
The information security policy within the
National Bank ensures security of information
in all its forms and protection of informational
resources managed in accordance with the
bank’s needs and provisions of the legal
framework.
The members of the Supervisory Board and of
the Executive Board, as well as any employee
of the National Bank are obliged to ensure
security of information they possess and to
which they have access. At the same time, the
responsibilities in the process of ensuring
information security, information management,
monitoring of utilization and distribution of
information, reporting of information security
incidents, as well as the method of their
investigation, are clearly established and
clearly divided.
Public access to normative acts,
statistics and publications of the NBM
Public access to normative acts, statistics and
publications of the NBM ensures a high degree
of transparency, while respecting the NBM
independence as well as confidentiality of
certain aspects related to the fulfillment of the
NBM attributions. Publication of various data
and analysis related to the attributions of the
National Bank of Moldova, as well as
promotion of an open relationship with the
target groups are aspects of major importance
in external communication of the bank.
The National Bank of Moldova pays increased
attention to the reverse connection in the
communication scheme. In such a way, by
regular and frequent communications, the
National Bank provides detailed explanations
about its activity and activities of the banking
sector. The functioning of the interactive
database on the NBM website provides public
access to information, internal data and
analysis and aims to provide accurate, current,
clear and transparent information for creating
a public opinion regarding the decisions of the
National Bank, but also for conducting various
studies and research.
105
9.2 The strategic plan of
the National Bank of
Moldova
The strategic plan of the National Bank of
Moldova for the years 2013-2017
The strategic plan aims to strengthen the role
of the NBM in society by fulfilling its
responsibilites, of ensuring efficient use of
resources and reducing exposure to risks. The
priorities set by the objectives of the plan are
designed to ensure a high level of efficiency,
transparency and performance, by aligning to
best international practices of communication,
credibility and corporate governance.
The strategic plan of the NBM for the years
2013-2017 includes several key elements such
as mission, vision, values, core business areas,
strategic objectives, etc.
Mission of the National Bank of Moldova
The fundamental objective of the National
Bank of Moldova is to ensure and maintain
price stability. Without prejudice to its
fundamental objective, the National Bank of
Moldova promotes and maintains a financial
system based on market principles and
supports the general economic policy of the
state.
Vision of the National Bank of Moldova
The National Bank of Moldova is an
independent, efficient and credible public
authority, which promotes an adequate
monetary policy and contributes to ensuring
the integrity and stability of the financial
system, by consistently applying the best
international practices for the interest of
society.
Values of the National Bank of Moldova
Civic Commitment – activity aimed at the
benefit of the public interest;
Efficiency – application of modern innovations
and technologies in the use of resources;
Excellence – demonstrating competence and
professionalism in the exercise of duties and
adoption of best international practices;
Transparency – transparent and impartial
attitudes in decision-making;
Responsibility – responsible attitude towards
society in the implementation of established
tasks;
Integrity – ethical behavior at the bank and
every employee level;
Credibility – conduct that inspires and
maintains public trust.
By setting up the core business areas,
emphasis is placed on the concrete functions
of the NBM, these areas actually reflecting the
mission of the NBM and constitute its core
pillars. The principal areas of activity are serve
as a basis for formulating strategic objectives,
as follows:
Monetary policy – the application of monetary
policy tools and measures to ensure and
maintain price stability;
Currency issue – securing the economy with
the national currency and promoting the
credibility of the national currency;
Supervision of financial institutions – regulate
and supervise the work of financial institutions;
Payment system – promoting the efficiency,
safety, accessibility and innovative character
of payments. Strategic objectives are those
priorities that the NBM establishes based on its
mission for a determined period in order to
contribute to the realization of its vision.
Strategic objectives of the NBM for the period
2013-2017 are:
• Ensure price stability;
• Increasing the credibility of the national
currency;
• Development of NBM oversight function;
• Promote cashless payments and reduce
cash in circulation;
• Strengthen the financial stability function;
• Improve external communication;
• Strengthening the image and credibility of
the NBM;
• Increase the efficiency of NBM’s
operational activity;
• Optimize human resource management;
• Development of corporate governance.
The year 2017 marks the end of the first
Strategic Plan of the NBM for the years
2013-2017. During the implementation of the
Strategic Plan, the NBM followed development
directions in strict connection with its mission
and vision, which were oriented towards the
creation of a strong and competitive financial
sector.
106
9.3 Management and
organization
According to the National Bank of Moldova
Strategic Plan for 2013-2017, out of the ten
strategic objectives, two are related to human
resources: optimization of human resources
management and development of corporate
governance.
Respectively, the key priorities of the
departments dealing directly with human
resources management and development, in
2017, were focused specifically on these areas;
the measures taken are being detailed in
continuation.
Organizational evolutions
In 2017, a range of modifications took place
regarding the organizational structure of the
National Bank of Moldova, which meant to
contribute to the achievement of the Bank’s
strategic objectives and of its core
competencies, as well as to increase its
efficiency by lowering the hierarchical levels.
At the same time, these changes aim to
increase the capacity of the NBM to adapt to
changes in the economic environment by
redefining responsibilities, restructuring
activities, and strengthening institutional
capacity in the long run. Thus, functions
related to the NBM core competencies have
been developed through the creation of
specialized subdivisions in the areas of
supervision, resolution, financial stability,
combating money laundering and terrorist
financing, etc.
At the same time, compared to 2016, the
number of managerial positions of the bank
was reduced by about 4%, with the reduction
of 30 sections. Contrary the ratio of units
related to the NBM core activities increased by
about 3% compared to the number of units in
the support and governance area. These
optimizations had a positive impact on
efficient utilization of the banks’ resources of
personnel, considering the extension of the
institution’s responsibilities as a central bank.

9.4 Internal audit
Internal audit at the NBM is an independent
activity of objective assurance and counselling,
designated to add value and improve the
institution’s activities. Internal audit helps the
institution achieve its objectives through a
systemic and disciplined approach within the
framework of assessment and enhancement of
effectiveness of risk management, control and
governance processes by providing the
institution’s governing bodies with a
reasonable and objective assurance on their
functionality.
The structure and positioning of the internal
audit within the NBM is in line with the
requirements of the Law on the National Bank
of Moldova45 , the Standard of Qualification46
and good practices in the field. Accordingly,
the NBM Internal Audit Department is
organized and operates in accordance with a
normative and methodological framework in
line with international standards.47 . The
applicable regulatory framework assures the
responsibility of IAD staff to avoid conflict of
interest and to ensure objectivity in carrying
out audit missions. Internal DAI procedures
ensure reporting of cases of damage to the
independence and / or objectivity of IAD/ IAD
employees. In the audit activity, IAD
employees are guided by the Audit Manual. In
2017, the audit activity was performed
according to the approved audit plan and set
priorities. IAD in its work did not encountered
obstacles in expressing independent opinion.
The IAD Director has regularly reported the
results of the audit work to the NBM governing
bodies: the Audit Committee and the
Supervisory Board. The annual internal 2017
audit plan was fulfilled to a 100%
accomplishment. The Internal Audit
Department fulfilled the insurance missions,
audited financial statements and the NBM
budget execution report, audited and
monitored areas of increased-risk. Audit
missions and advisory activities have
materialized through: 15 insurance missions,
37 reports, 31 consulting / advisory advice to
managers and members of the governing
bodies of the National Bank.
At the same time, the internal auditors
participated as technical-analytical
45 Law on the National Bank of Moldova no. 548-XIII of
21.07.1995 - Article 33 (4)
46 Standard IIA - 1100 “Independence and Objectivity”)
47 International Standards for the Professional Practice of
Internal Auditing
107
consultants, carrying out monitoring and
counseling in 5 major projects of the NBM. The
opinion and proposals of the internal auditors
on project areas and risks were submitted,
either as a result of the examination of the
project documentation or at the request of the
project management committee.
In order to monitor the actions taken to
implement the recommendations made in the
special audit reports / special reports, DAI
performs quarterly follow-up monitoring to
assess the extent to which recommendations
were met both in 2017 and in previous years.
Also, in 2017, DAI developed the Strategic
Internal Audit Plan for 2018-2022. The
planning process has been performed
according to existing regulations and best
practices and based on the risk assessment
procedure. For the implementation of the
Strategic Plan, the Annual Internal Audit Plan
2018 was also developed. The
above-mentioned plans were coordinated and
approved.
9.5 Information technology
During the year 2017, in the field of
information and communication technology (in
continuation ICT), the most important results
were achieved in the major projects at the
NBM level, but also as a result of certain
projects for strengthening ICT infrastructure
and capacities.
In total, 8 projects were implemented, of which
4 transversal-projects at NBM level, the other
projects being internal at subdivision level.
Referring to transversal projects, their
description is presented in Table A.32 “The
Evolution of Major Projects of the NBM during
2017”. From the other category, first of all, it is
worth mentioning the project aimed at
implementing a new remote modular reserve
data center. The necessity for this project
derives from the premise that ensuring
continuity of NBM business processes is a
critical success factor in the realization of the
NBM mission. As a result, the solution
implemented for the new Reserve Data Center
corresponds to the highest standards in the
field, as well as to the requirements and
demands for reliability and performance
characteristic to central banks. Other
important achievements pertained, in
particular, to the extension of infrastructure
capabilities, as a proactive measure for system; awareness of individual salary level;
continuous increase of ICT resources increasing attractiveness of the NBM as an
necessities, resulting from the implementation employer. The second step, which involves
of new solutions and respectively, from the establishing a direct relationship between the
increase of the level of automation of activities value of the position and the level of salary, as
at the NBM level. well as ensuring internal equity and external
competitiveness of salary, is to be achieved in
Overall, all efforts made and achievements 2018 as part of an implementation project of
obtained in the ICT field, ultimately, pursue an integrated human resources management
the same common goal of ensuring a proactive system with the aid of a consulting company
and effective alignment of ICT capabilities with with international experience in the field.
the strategic and operational needs of the NBM.
Statistical information

In 2017, volunteer staff turnover rate was

9.6 Human resources 4.98%, which represented a decrease,
management compared to 2016, when it registered a level
of 8.43%. Analyzing volunteer staff turnover
rate by hierarchical levels, for managerial
positions in 2017 it reached 5.16%, and for
Chart 9.1 Human resource management processes
executive positions 4.91%.
250
Chart 9.3 General information about NBM employees
209
200

305
296
293 280 281 279
277 278
people

150 261
129 127

100
80 178 182
176
58 61
51 55 49 49 53 53 48 49 130
50 37 35
31 95 102
22 20
16

0 40.5 40.5 40.8

Employments Dismissals Transfers Promotions 10 10 10
8 8 9
2013 2014 2015 2016 2017
MEN WOMEN UNION BACHELOR MASTERS PHD AVERAGE RETENTION
MEMBERS STUDY STUDIES AGE (YEARS) IN THE NBM
(YEARS)
Source: NBM
2015 2016 2017

Chart 9.2 Voluntary fluctuation of NBM staff

Source: NBM

12
10.40 It is important to mention that the voluntary
10.62
10 9.37 staff turnover rate includes only those persons
8.43 who have resigned on their own initiative,
8
6.67
excluding those persons employed seasonally
6.82 4.91
6 and those who have left for other reasons
5.94 4.98 (retirement, termination of the employment
4 5.16
4.12 3.88 contract, reduction of staff, etc.).
2
The average age of the bank’s stuff as of 31
0
December 2017 was 40.8 years. Nearly
2014 2015 2016 2017
two-thirds are women (62.63%) and more than
Total Heads Executors
one-third (37.37%) are men. We also mention
that women are represented in senior
Source: NBM positions, including in the Executive Board.
Optimizing the payroll system

The first stage of implementation of a new

payroll system for employees of the National
Bank was accomplished by uniformity of
payment of wages, which has the following
benefits: increasing the transparency of the

108
 subdivision and to the strategic objectives of
the bank. Measurement of achieving
Professional training objectives and matching skills with the
established set of competencies serves as a
basis for possibilities of promotion and for
Professional development other development measures.

During the year 2017, in order to ensure the Corporate culture

development of skills and increase human
capital of the NBM, 170 employees benefited Chart 9.5 Duration of training attended by employees
from various forms of training, selected
according to the individual needs of 8 to 14 days 15 to 30 days
professional development. 15% 2%

The duration of trainings was between one day

and 14 days. Most of the trainings attended by
NBM employees were from 3 to 7 days.

NBM employees were trained in various fields

hosted by countries such as Romania, Italy, up to 3 days
20%
Austria, Turkey, the Netherlands, Germany,
France, Poland, USA, UK, CIS countries, as well
3 to 7 days 63%
as at trainings and seminars in the Republic of
Moldova.

Chart 9.4 Age distribution of employees who participated Source: NBM

in the training
During the year, events were organized to help
89.4%
strengthen corporate culture and employee
160 retention, such as: organizing sports activities
140 and encouraging employees to take part in
120
recreational activities, excursions, and charity
number of persons

100
activities organized within the “Christmas
Caravan” which contributed to social
80
empowerment of employees and to civic
60
7.6 % education.
40 2.9%

20
Recruitment
0
less 25 25-54 more 55 Chart 9.6 Training areas in which employees participated
age (years)

Monetary Policy 21
Source: NBM Human Resources 21

Banking Supervision 20

Governance 20

Payments Systems 19

Risk management 19

Regulation 18

Performance management IT
SIRF
16
16

BASEL III 15

Accounting 15

In 2015, the Performance Management System Statistics

14
15
AREAS

Banking Operations

was implemented at the National Bank of Acquisitions

Cash Operations
10
10

Moldova through which a set of generic, Communication

Banking resolution 8
9

managerial and professional competencies Macroeconomy

Audit
7
7

were developed for which an optimal expected Legal

Finance
6
6

level was established. The measurement of Stress testing

Financial stability
4
4

the level of competences of each employee Finacial markets

International relations 2
3

was also carried out in 2017, the results being Combating money laundering

0
2

5 10 15 20 25

a platform for identifying the needs for further TRAINING

development and improvement. Source: NBM

Also, within the performance management The recruitment process at the National Bank
system, regular meetings are held for setting of Moldova has registered substantial
individual goals for each employee, which are improvements in communication of vacancies,
directly related to the objectives of the increase of the number of candidates and

109
employment of qualified staff, prepared for accept students from higher education
challenges in implementing the NBM institutions from the country and from abroad
attributions. In 2017, the scope of ads for for internships. For this purpose, the NBM
vacancies on social and profile pages, participated in the Job and Internships Fair, in
Facebook and LinkedIn has increased. The order to provide the necessary information to
number of ads increased from 730 in 2016 to 1 interested candidates.
804 in 2017. In order for vacancies to be as
visible as possible to the targeted group of At the same time, in 2017, an increase in the
candidates, the NBM participated in Job Fairs number of trainees was registered, including 6
and in visits at higher education institutions for students from abroad.
informative purposes regarding vacancies and
possibilities of internships.

Chart 9.7 Recruitment in NBM

398

400

350

300 185

250

200
58
150 34 42
90 61
76
100

50

0
Number of Canditates Employement Total employees
vacancies competitions

Total 2017 Total 2016

Source: NBM

Chart 9.8 Internships for students in the NBM

20 19

18
16 14
14 13

12 11 11
9
10
8 6
6 5

4 2
2 0
0
Total trainees In the country Abroad Bachelor Masters/ PhD
study studies

2016 2017

Source: NBM

The important indicators that show the

evolution of recruitment are: the number of
vacancies, the number of candidates, the
contests organized and the persons employed.
There is also a positive trend in professional
training and in the level of experience of newly
employed people.

Internships In order to contribute to

professional development of specialists with
banking and other profiles, the NBM is open to

110
Chapter 10
Analysis of the financial situation for 2017
10.1 General
considerations
In accordance with the Law on the National
Bank of Moldova no. 548-XIII of 21 July 1995
(republished in the Official Monitor of the
Republic of Moldova, 2015, no. 297-300,
art.554), the fundamental objective of the
National Bank of Moldova is to ensure and
maintain price stability.
The basic tasks of the National Bank are
established in the Law on the National Bank of
Moldova. In accordance with the legal
provisions, the operations of the National Bank
of Moldova are performed in order to promote
and maintain the monetary and foreign
exchange policy in the state, to ensure
stability of the banking system, issuance of
national currency, management of currency
reserves of the state, provision of payment
services and issuance of electronic money, etc.
Respectively, maximization of profit from the
activity of the National Bank of Moldova is not
an end in itself and cannot serve as an
impediment to the achievement of the core
objective and attributions.
10.2 Available profit for
distribution
The financial result of the National Bank of
Moldova depends directly on the necessity to
perform monetary and foreign exchange
operations in order to achieve the fundamental
objective and fulfilment of the Bank’s core
tasks. Evolution of available profit for
distribution during the period 2015-2017 is
reflected in chart 10.1.
On December 31, 2017, the level of statutory
capital in the total monetary liabilities
constituted about 5.08% (on December 31,
2016: 6.23%).
111
Chart 10.1 Evolution of available profit for total
distribution/losses (MDL million)
1960.89
-262.15 -95.31
Source: NBM
According to the financial statement, on 31
December 2017, the bank recorded a total loss
of MDL (95.31) million, compared to December
31, 2016 when it recorded a total loss of MDL
(262.15) million, this fact being determined, to
a large extent, by the following developments
with significant impact:
• Increase of interest income on other state
securities held to maturity - government
bonds of MDL 467.26 million compared to
2016 (MDL 150.73 million) representing
the revenues from state bonds issued on
4 October 2016 for a total amount of MDL
13 341.20 million for the Ministry of
Finance to execute payment obligations
derived from state guarantees.
Government bonds with maturities of 1-9
years were issued with the coupon rate of
1.40% annually, and those with
maturities of 10-25 years with the coupon
rate of 5.30% per annum.
On the 31 of December 2017, the total
amount of state bonds constituted MDL
13 291.20 million (on 31 December 2016:
MDL 13 341.20 million).
• Decrease of interest expenses on banks’
required reserves by MDL 265.22 million
compared to 2016 (MDL 799.78 million)
following the gradual decrease of interest
rates applied to main monetary policy
operations. The average rate paid on the
required reserves in Moldovan Lei during
the year 2017 varied between a
 maximum of 6.0% annually and to a
minimum of 3.56% annually (2016:
16.50% - 6%). The amount of required
reserves maintained by banks as of 31
December 2017 amounted to MDL
12 638.58 million, USD 70.65 million and
EUR 118.53 million (December 31, 2016:
MDL 10 063.69 million, USD 61.34 million
and EUR 105.54 million). The level of the
required reserves held in Moldovan lei
was gradually increased, during the year
2017, from 35% to 40%, in 2016 being
maintained at 35%. The level of required
reserves in foreign currency, USD and
EUR, has not been changed for six
consecutive years, accounting for 14% of
the calculation base. The calculation base
for the required reserves in Moldovan lei
during the year 2017 increased,
registering an increase of about 9.9%
compared to the end of the previous year.
• Decrease in revenues from foreign
currency operations by MDL 178.21
million compared to 2016 (MDL 238.75
million) as a result of appreciation of the
MDL against the USD by about 14.42%,
versus GBP (by 6.20%) and compared to
EUR by 2.30%, the revenues being mainly
recorded due to the sales of foreign
currency. Most of the revenues were
achieved between 1 January and 5
February 2017, during which the MDL
depreciated compared to EUR by 3.16%
and compared to the GBP by 3.10%.
In 2016, the revenues were higher,
following the depreciation of the
exchange rate of MDL versus the USD by
about 1.64%, being registered, mainly,
due to sale of foreign currency.
• Registration of revenues from the
recovery of certain expenditures related
to liquidation procedures of the banks in
liquidation in the amount of MDL 75.24
million (2016: MDL 0 million).
The impact of events on realizing a total loss,
by fields of activity performed by the National
Bank of Moldova during 2017 is presented in
table A.24.
112
Impact of implementation of the
monetary policy and of activities related
to relations with the Government of the
Republic of Moldova on the financial
situation of the National Bank of
Moldova
During the year 2017, the National Bank of
Moldova continued to utilize financial tools to
absorb excess liquidity. Expenditures from
sterilization operations performed through
issuance of certificates of the National Bank of
Moldova have increased, amounting to about
MDL 520 million in 2017 compared to about
MDL 346 million in 2016. The increase of
expense on amortization of the discount of
CBN was determined by the increase in the
average daily balance of certificates issued by
the NBM, which during the reporting period
amounted to MDL 6 358.07 million (2016: MDL
2 959 million).
At the same time, during the 2017, as a result
of gradual decrease of the interest rate
applicable to required reserve from the funds
attracted in Moldovan lei from 6% to 3.56%
(2016: from 16.50% to 6%), the NBM recorded
smaller net expenditures by about MDL 264
million, compared to 2016.
The interest rates paid on attracted funds in
freely convertible currencies varied from 0.6%
to 0.3% (2016: variation range from 0.2% to
0.65%).
The set of monetary policy tools applied by the
National Bank of Moldova during 2017 and the
activities related to relations with the
Government of the Republic of Moldova
generated a net loss of MDL 448.42 million,
smaller by MDL 291,021 million compared to
the losses in 2016 (Table A.25).
Impact of management of state currency
reserves operations on the financial
situation of the National Bank of
Moldova
The official reserve assets of the state, held by
the NBM, increased as of 31 December 2017
as compared to 31 December 2016 by 27.08%
or by about USD 597.33 million (from USD
2 205.93 million to USD 2 803.26 million),
being invested predominantly in financial
instruments denominated in USD, euros and
pounds. At the same time, during the year
2017 there was an increase in the average
annual volume of international reserves by
25.74% or by USD 487.98 million (from USD
1 934.79 million to USD 2 432.77 million).
The net revenues related to the management
of foreign exchange reserves and other foreign
exchange operations in the year 2017
constituted MDL 541.52 million, decreasing by
about MDL 124.20 million as compared to the
previous year, when revenues amounted to
MDL 665.72 million.
It should be mentioned that in 2017 there was
a significant decrease in net income from
currency rate differentials of MDL 193.81
million (the net income from currency rate
differentials in 2017 amounted to MDL 44.62
million compared to MDL 238.43 million in
2016) due to the appreciation of the MDL
exchange rate against the USD - 14.42%
during the year 2017 (2016: depreciation of
1.64%) and the slowdown of appreciation of
the exchange rate of MDL versus EUR - 2.30%
(2016: 2.74%) and GBP - 6.20 % (2016:
15.88%).
The impact of currency reserves management
operations on the financial situation of the
National Bank of Moldova is presented in table
A.26.
The average profitability ratio for managing
currency reserves for 2017 decreased by
0.07 pp. to 1.14% (2016: 1.21%), as a result of
a lower currency exchange rate profit than in
the previous year (Chart 10.2).
Chart 10.2 Evolution of currency reserves profitability in
2017 compared to 2016
2.0%
1.5%
1.0%
1.00%
1.47%
1.40%
0.5% 0.68%
0.0%
Deposits in foreign Securities in foreign
currency currency, including net
income from sales
2017 2016
Source: NBM
It should be noted that, in accordance with
international best practices as well as with the
provisions of the Law on the National Bank of
Moldova, the main criteria for the selection of
reserve assets are the safety of core principal
amounts and its liquidity. Thus, only after
ensuring these two criteria, the profitability of
instruments in which the foreign exchange
reserves of the state are invested is taken into
account.
The evolution of the official exchange rate of
the MDL against the currencies in which
currency reserves are held had a significant
impact on the financial situation of the
National Bank of Moldova. Its dynamics and
the average annual values are reflected in
Table A.27.
Thus, at the end of 2017, unrealized losses
were recorded as a result of the appreciation
of the MDL against currencies, which are
components of the investment portfolio, i.e.
against USD by 14.42%, against EUR by 2.30%
and against GBP by 6.20%. Due to exchange
rate differentials at revaluation of currency
stocks which amounted to MDL (4 851.88)
million and the decrease in prices of securities
held in foreign currencies on international
markets the NBM incurred unrealized losses
from revaluation of the investment securities
in the amount of about MDL (28.89) million.
According to the Law on the National Bank of
Moldova, the unrealized losses were offset
with unrealized revenues from the
corresponding reserve accounts.
At the end of 2016, unrealized losses from the
exchange rate differentials from the
revaluation of foreign exchange reserves
represented an amount of MDL (1 033.31)
million and unrealized losses from the
differentials of the revaluation of investment
securities portfolio an amount of MDL (18.15)
million.
10.3 Capital and reserves
The activities carried out by the National Bank
of Moldova during the year 2017, in order to
1.14%
1.21% fulfil its core duties, are reflected in the
structure of the bank’s balance sheet, as
shown in Table A.28.
Total Portfolio
The capital and reserves situation is presented
in Table A.29.
In accordance with the art. 19 of the Law on
National Bank of Moldova no.548-XIII of
21.07.1995, the general reserve fund shall be
used exclusively to cover losses registered
according to the result of the activities at the
end of the financial year.
Thus, on 31 December 2017, the general
reserve fund was used to cover losses
113
registered at the end of the financial year in
the amount of MDL 95.31 million, the reserve
fund decreasing to MDL 1 448.48 million.
Consequently, the statutory capital was
reduced, amounting to MDL 2 351.45 million.

By December 31, 2017, the Bank’s capital and

reserves amounted to a total of MDL 4 004.72
million, decreasing as compared to December
31, 2016. This decrease was due to coverage
of unrealized losses from exchange
differentials as a result of the revaluation of
foreign currency stocks in the amount of MDL
(4 851.88) million and of coverage of
unrealized losses from revaluation of
investment securities in the amount of MDL
(28.89) million.

Other reserves include the reserve of

cumulative revenue and losses from
revaluation of government securities,
classified as available for sale, and favorable
differentials from revaluation of monetary gold.
The revaluation of these assets represents
changes in global market values that may
subsequently register profits or loss.

By December 31, 2017, the level of statutory

capital in total monetary liabilities amounted to
about 5.08% (by December 31, 2016: 6.23%).

114
Chapter 11

External communication
The National Bank of Moldova continued to International Week of Financial Education,
improve its communication by using new tools Open Doors Day, International Savings Day,
and informational channels. In 2017, the etc. was completed with new ones: "A Holiday
Communication Strategy was approved. The Day at NBM" and "From Student to Student"
Strategy was adapted to new realities and has (attracting high school students of the
the objective to encourage opening of the Academy of Economic Sciences of Moldova to
National Bank to the public on the principles of volunteer in educational activities).
transparency, accessibility, clarity, actuality
and predictability. As well, in the context of assuming a social
communication, the National Bank has been
The importance of communication of the involved in trainings on communication in
National Bank of Moldova derives from its situations of crisis and emergencies.
mission, vision, and its values and relates to
the strategic objectives of the bank. The
National Bank makes its decisions known to
the public, explains their meaning and the
expected effect on the economy, the
financial-banking sector and related
participants. In this context, more than 600
comments to journalists’ requests were
provided, 6 press conferences including
quarterly reports and 9 thematic interviews
were organized. The researches and
macroeconomic analysis performed by the
NBM were presented in 27 publications.

The use of new tools and modern

communication channels, such as multimedia
and social networks, as well as openness to
the public, have generated positive results
confirmed by monitoring the implementation
of the Communication Strategy on a quarterly
basis.

As a result, the interest of users increased

regarding monetary policy issues, banking
supervision, regulatory acts developed
together with alignment to the latest
international banking regulatory principles
adopted in 2010, known under the generic title
BASEL III. At the same time, the impact of
National Bank’s posting on social networks
increased: Facebook, YouTube, Twitter,
LinkedIn (For example, from 100 to 4 000
views on Facebook), which also reflects the
interest of target groups, which are less
familiar with financial-banking issues.

In the context of openness to the public, the

National Bank continued to pay special
attention to the financial education process,
receiving as guests over 2,000 children and
young people. The range of traditional projects
developed in this respect included:

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List of Figures

1.1 GDP comparative evolution in selected economies (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

1.2 USDX evolution in the context of Fed monetary policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.3 The annual average growth rate of world price indexes (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.4 Global oil supply and demand (milion barrels per day) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

1.5 Profitability rates for state securities with maturity of 2 years (%) . . . . . . . . . . . . . . . . . . . . . . . . . 15

1.6 Base rates in USA, EU and UK (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.1 Contribution of demand components (p.p.) to the GDP growth (%) . . . . . . . . . . . . . . . . . . . . . . . . . 16

2.2 Contribution of economic sectors (p.p.) to the GDP growth (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2.3 Contrubution of components (p.p.) to the household final consumption growth (%) . . . . . . . . . . . . . . . . 17

2.4 Evolution of the household disposable income (%, versus the same period of the previous year) and contribution
of components (p.p.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2.5 Annual rate of gross capital formation (%) and components contribution (p.p.) . . . . . . . . . . . . . . . . . . 17

2.6 Investments in long-term tangible assets (%) and contribution of founding sources (p.p.) . . . . . . . . . . . . . 18

2.7 Global agricultural production (%, versus the same period of the previous year . . . . . . . . . . . . . . . . . . 18

2.8 Evolution of industrial production (%, versus the same period of the previous year) and components’ contribution
(p.p.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.9 Evolution in real terms of transport of goods (%, versus the same period of the previous year) and components’
contribution (p.p.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

2.10 Evolution in real terms of internal trade (%, versus the same period of the previous year) . . . . . . . . . . . . . 19

2.11 Evolution of wholesale trade (%, versus the same period of the previous year), current prices . . . . . . . . . . . 19

2.12 Evolution of exports annual rate (%) and contribution by categories of countries (p.p.) . . . . . . . . . . . . . . 20

2.13 Evolution of exports annual rate (%) and contribution by groups of goods (p.p.) . . . . . . . . . . . . . . . . . . 20

2.14 Evolution of exports annual rate (%) and contribution by origins (p.p.) . . . . . . . . . . . . . . . . . . . . . . . 20

2.15 Evolution of imports annual rate (%) and contribution by categories of countries (p.p.) . . . . . . . . . . . . . . 21

2.16 Evolution of imports annual rate (%) and componets’ contribution by groups of goods (p.p.) . . . . . . . . . . . 21

2.17 Annual growth rate of employed population (%, versus the same period of the prevous year) and its formation by
national economy sectors (p.p.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2.18 Evolution of unemployment and employment rates (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

116
2.19 Wage bill in economy and average number of employees (%, versus the same period of the previous year) . . . . 22

2.20 Real average wage (%, versus the same period of the previous year) . . . . . . . . . . . . . . . . . . . . . . . . 22

2.21 Annual rate of CPI and of core inflation (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.22 Annual rate of inflation subcomponents (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.23 CPI evolution (%) and subcomponents’ contribution (p.p.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.24 Components contribution (p.p.) to the annual growth rate of core inflation (%) . . . . . . . . . . . . . . . . . . 24

2.25 Components’ contribution (p.p.) to the annual growth of food prices (%) . . . . . . . . . . . . . . . . . . . . . . 24

2.26 Components’ contribution (p.p.) to the annual growth of regulated prices (%) . . . . . . . . . . . . . . . . . . . 25

2.27 Components contribution (p.p.) to the annual growth of fuel prices (%) . . . . . . . . . . . . . . . . . . . . . . 25

2.28 Annual rate of IPPI (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

2.29 Annual rate of IPPI (%) and its components’ contribution (p.p.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

2.30 Evolution of construction price index (%, compared to the similar period of the last year ) . . . . . . . . . . . . . 27

2.31 Producer prices of agricultural products (%, versus de previous year ) . . . . . . . . . . . . . . . . . . . . . . . 27

2.32 Indicators of national public budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

2.33 State debt as a share of GDP (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

2.34 The current account – main components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

2.35 The export of goods in 2017, by geographical area (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

2.36 The import of goods in 2017, by geographical area, CIF prices (%) . . . . . . . . . . . . . . . . . . . . . . . . . 31

2.37 The import of energy products and electricity (USD, million, CIF prices) . . . . . . . . . . . . . . . . . . . . . . 31

2.38 The financial account by functional categories (million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

2.39 The external loans (net incurrence of liabilities), inflows and reimbursement by maturities (million, USD) . . . . . 33

2.40 Direct investment: net incurrence of liabilities, disaggregated by instruments (million, USD) . . . . . . . . . . . 33

2.41 International investment position in dinamics, end of period (million, USD) . . . . . . . . . . . . . . . . . . . . 34

2.42 The indicators of official reserve assets adequacy of the Republic of Moldova (million, USD) . . . . . . . . . . . . 34

2.43 Direct investmens, liabilities, main components, stock* end of period (million, USD) . . . . . . . . . . . . . . . . 35

2.44 The external debt to GDP ratio (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

2.45 The external debt structure by maturities, end of period (million, USD) . . . . . . . . . . . . . . . . . . . . . . 36

2.46 The short-term external debt by types, as of 31.12.2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

3.1 The evolution of daily balance of money market operations (million, MDL) . . . . . . . . . . . . . . . . . . . . . 39

3.2 The evolution of average monthly balance of overnight deposits and of average interest rate . . . . . . . . . . . 40

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3.3 The evolution of attracted funds in MDL, required reserves in MDL and required reserves ratio . . . . . . . . . . 41

3.4 The evolution of required reserves in USD and EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

3.5 The evolution of the official exchange rate of MDL/USD and the volume of daily transactions of the NBM in 2017 . 41

3.6 The evolution of components of M2 money supply (%, increase versus the same month of the previous year) . . . 42

3.7 The dynamics of components of M3 money supply (%, increase versus the same month of the previous year) . . . 42

3.8 The balance of credits granted to the economy (%, increase versus the same month of the previous year) . . . . 43

3.9 The dynamics of balance components of credits granted in economy (%, increase versus the same month of the
previous year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

3.10 The dynamics of volume and weighted average interest rate of new credits granted in MDL . . . . . . . . . . . . 43

3.11 The dynamics of volume and weighted average interest rate of new credits granted in foreign currency . . . . . 43

3.12 The dynamics of balance components of attracted deposits (%, increase versus the same month of the previous
year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

3.13 The dynamics of volume and weighted average interest rate of new term deposits attracted in MDL . . . . . . . 44

3.14 The dynamics of volume and weighted average interest rate of new term deposits attracted in foreign currency . 45

3.15 The average interest rate in MDL (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

3.16 The evolution of banking margin on new operations in national and foreign currency (p.p.) . . . . . . . . . . . . 46

3.17 The average interest rate of credit and deposit balances (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

3.18 The quantitative indicators of the primary market of SS (MDL, million) . . . . . . . . . . . . . . . . . . . . . . . 47

3.19 The monthly dynamic of indicators of the primary market of SS . . . . . . . . . . . . . . . . . . . . . . . . . . 47

3.20 The structure of SS issues by maturity in 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

3.21 The structure of SS issues by maturity in 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

3.22 The dynamic of nominal interest rates on SS with the maturity up to one year (%) . . . . . . . . . . . . . . . . . 48

3.23 The evolution of interest rates on financial market (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.24 The dynamic of SS in circulation at the end of period (MDL, million) . . . . . . . . . . . . . . . . . . . . . . . . 49

3.25 The dynamic of SS indicators traded on the secondary market . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.26 The structure of SS traded on secondary market by maturity in 2016 . . . . . . . . . . . . . . . . . . . . . . . . 49

3.27 The structure of SS traded on secondary market by maturity in 2017 . . . . . . . . . . . . . . . . . . . . . . . . 50

3.28 The structure of SS procurements on the primary market by category of participants . . . . . . . . . . . . . . . 50

3.29 The selling-buying transactions performed by the primary dealers on the secondary market (MDL, million) . . . . 50

3.30 The structure of SS in circulation in the holders’ profile as of 31.12.2016 . . . . . . . . . . . . . . . . . . . . . . 51

3.31 The structure of SS in circulation in the holders’ profile as of 31.12.2017 . . . . . . . . . . . . . . . . . . . . . . 51

3.32 The evolution of reference rates on the interbank market and of NBM base rate (%) . . . . . . . . . . . . . . . . 52

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3.33 The turnover of foreign exchange transactions against MDL carried out on the domestic forex market, by the
settlement method (bank transfer or cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

3.34 Currency structure of the total turnover of foreign exchange transactions carried out against MDL on the domestic
forex market in 2016 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

3.35 Currency structure of the total turnover of foreign exchange transactions carried out against MDL on the domestic
forex market in 2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

3.36 Total number of currency exchange transactions carried out by legal entities, by currency . . . . . . . . . . . . 54

3.37 The number of transactions carried out against euros and US dollars on the intra-bank forex market through bank
transfer, by the amount traded (showing the equivalent of amounts ranging from 10 000 to 100 000 US dollars) . 54

3.38 The number of transactions carried out against euros and US dollars on the intra-bank forex market through bank
transfer, by the amount traded (showing the equivalent of amounts exceeding 100 000 US dollars) . . . . . . . . 54

3.39 Balance sheet assets, by asset type, at the effective exchange rate (in USD million) . . . . . . . . . . . . . . . . 55

3.40 Currency structure of foreign currency assets, at the effective exchange rate (%) . . . . . . . . . . . . . . . . . 55

3.41 Foreign currency liabilities on the balance sheet, at the effective exchange rate, by liability type (in USD million) 56

3.42 Currency structure of foreign currency liabilities, at the effective exchange rate (%) . . . . . . . . . . . . . . . 56

3.43 Fluctuations in the official exchange rate of the domestic currency against the US dollar and the euro . . . . . . 57

3.44 Evolution of currencies of the main trading partners of the Republic of Moldova and other countries from the
region against the US dollar, 31 December 2017/31 December 2016 (%) . . . . . . . . . . . . . . . . . . . . . . 57

3.45 Contribution of Moldova’s main trading partner countries to fluctuations of the REER in 2017 . . . . . . . . . . . 58

3.46 The evolution of the REER of the domestic currency, calculated on the basis of shares held by currencies of the
main trading partner countries, during 12/2014 - 12/2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

3.47 The currency structure of the net foreign currency supply from individuals (recalculated at a constant exchange
rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

3.48 The coverage of the net foreign currency demand by supply and the evolution of the official rate . . . . . . . . . 59

3.49 Evolution of official reserve assets presented as months of imports of goods and services (MBP6) . . . . . . . . 59

3.50 The structure of foreign exchange reserves, by investment instruments, at the end of 2015-2017 (USD million) . 60

3.51 The composition of foreign exchange reserves, as of 31 December 2017 . . . . . . . . . . . . . . . . . . . . . . 61

3.52 The regulatory currency composition, as of 31 December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

4.1 Dynamics of main indicators for 31.12.2016 – 31.12.2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

4.2 Dynamic of capital and risk weighted capital adequacy for 31.12.2016 -31.12.2017 . . . . . . . . . . . . . . . . 63

4.3 Dynamics of Tier I capital concentration in the banking system of the Republic of Moldova by groups of banks for
31.12.2016 – 31.12.2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

4.4 Dynamics of assets concentration of the banking system of the Republic of Moldova by groups of banks as of
31.12.2016 – 31.12.2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

4.5 Assets concentration of the banking sector as at 31.12.2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . 64

119
4.6 Dynamics of assets, loans and deposits to GDP (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

4.7 Distribution of the loan portfolio according to the sector in which the borrower operates as at 31.12.2017 (%) . . 65

4.8 Dynamics of the structure of loan portfolio of the banking sector of the Republic of Moldova according to the level
of investment operations risk as of 31.12.2016 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

4.9 Dynamics of the structure of loan portfolio of the banking sector of the Republic of Moldova according to the level
of investment operations risk as of 31.12.2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

4.10 Income and expenses dynamics of the banking sector of the Republic of Moldova (MDL, million) for 2016-2017 . . 67

4.11 Incomes structure of the banking sector of the Republic of Moldova for 2017 (%) . . . . . . . . . . . . . . . . . 67

4.12 Expenses structure of the banking sector of the Republic of Moldova in 2017 (%) . . . . . . . . . . . . . . . . . 68

4.13 Dynamics of net interest margin, the return on assets and return on equity in the banking system of the Republic
of Moldova for 31.12.2016-31.12.2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

4.14 Dynamics of liabilities concentration in the banking system of the Republic of Moldova by group of banks for
31.12.2016 -31.12.2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

4.15 Dynamics of liquid assets (MDL, million) and their share in total assets of the banking sector of the Republic of
Moldova (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

4.16 Structure of total placements abroad of banks of the Republic of Moldova (%) . . . . . . . . . . . . . . . . . . . 70

4.17 The net interbank placements of the licensed banks in the Republic of Moldova in the domestic banking sector . 75

4.18 The volume of net placements of licensed banks in foreign banks . . . . . . . . . . . . . . . . . . . . . . . . . 75

5.1 The number and value of payments made through non-bank payment service providers . . . . . . . . . . . . . . 78

5.2 The number of payment cards in circulation (thousand units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

5.3 The number of operations performed with payment cards issued in the Republic of Moldova (million operations) . 80

5.4 The structure of domestic operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

5.5 The share of operations performed abroad with cards issued in the Republic of Moldova . . . . . . . . . . . . . 81

5.6 The indicators of payment cards market in the Republic of Moldova . . . . . . . . . . . . . . . . . . . . . . . . 81

5.7 The number of ARSS uses by systems type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

5.8 The number and operations value performed through ARSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

6.1 The evolution of banknotes in monetary circulation in terms of value (MDL, million) . . . . . . . . . . . . . . . . 83

6.2 The evolution of banknotes in monetary circulation in terms of quantity (million banknotes) . . . . . . . . . . . 83

6.3 The structure by face value of banknotes in circulation at the end of 2017 . . . . . . . . . . . . . . . . . . . . . 83

6.4 The evolution of coins in monetary circulation in terms of value (MDL, million) . . . . . . . . . . . . . . . . . . . 84

6.5 The evolution of coins in monetary circulation in terms of quantity (million coins) . . . . . . . . . . . . . . . . . 84

6.6 The banknotes issued during 2017 in terms of quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

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6.7 The coins issued during 2017 in terms of quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

6.8 The banknotes withdrawn from circulation during 2017 in terms of quantity . . . . . . . . . . . . . . . . . . . . 85

6.9 The banknotes withdrawn from circulation during 2016 in terms of quantity . . . . . . . . . . . . . . . . . . . . 85

6.10 The structure of counterfeits by face value identified in 2017 in terms of quantity . . . . . . . . . . . . . . . . . 86

6.11 The structure of counterfeits by face value identified in 2016 in terms of quantity . . . . . . . . . . . . . . . . . 86

9.1 Human resource management processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

9.2 Voluntary fluctuation of NBM staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

9.3 General information about NBM employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

9.4 Age distribution of employees who participated in the training . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

9.5 Duration of training attended by employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

9.6 Training areas in which employees participated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

9.7 Recruitment in NBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

9.8 Internships for students in the NBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

10.1 Evolution of available profit for total distribution/losses (MDL million) . . . . . . . . . . . . . . . . . . . . . . . 111

10.2 Evolution of currency reserves profitability in 2017 compared to 2016 . . . . . . . . . . . . . . . . . . . . . . . 113

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List of Tables

1.1 Apreciation (-)/depreciation (+) of currencies in 2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.2 The evolution of selected indicators in neighbouring economies, main trading partners in 2017 (%) . . . . . . . . . . . . . . 14

3.1 The annual weighted average nominal interest rates of the state securities by maturities (%) . . . . . . . . . . . . . . . . 48

A.1 Balance of payments of the Republic of Moldova (according to BPM6) (million, USD) . . . . 125

A.2 Structure of external trade in services (million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . 126

A.3 Structure of primary income (million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

A.4 Structure of secondary income (million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

A.5 Financial account by functional categories (million, USD) . . . . . . . . . . . . . . . . . . . . . . 127

A.6 Foreign loans (incurrence of liabilities), receipts and repayments (million, USD) . . . . . . . 127

A.7 International investment position of the Republic of Moldova as of December 31, 2016
(million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

A.8 Gross external debt of the Republic of Moldova at the end of the period (million, USD) . . . 128

A.9 Total turnover of the domestic foreign exchange market operations of the foreign currency
against MDL (equivalent in USD, million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

A.10Structure of turnover of foreign exchange transactions against MDL on domestic foreign

exchange market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

A.11Net balance (purchases minus sales) operations of foreign currency against MDL performed
by licensed banks, sorted by transaction date (equivalent in USD, million) . . . . . . . . . . . 130

A.12Balance sheet assets in foreign currency of the licensed banks (equivalent in USD, million) 130

A.13Disposable funds in foreign currency of the licensed banks (equivalent in USD, million) . . 131

A.14Balance sheet liabilities in foreign currency of licensed banks (equivalent in USD, million) 131

A.15Current accounts and deposits in foreign currency of bank’s clients, by tipes of currency
(equivalent in USD, million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

A.16Conditional assets and liabilities in foreign currency of licensed banks (equivalent in USD,
million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

A.17Investment limits and constraints applied by the NBM for investment risk management . . 133

A.18Dynamics of the assets structure of the banking sector of the Republic of Moldova in
31.12.2016 - 31.12.2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

A.19Dynamics of liabilities structure of the banking sector of the Republic of Moldova in

31.12.2016 - 31.12.2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

122
A.20Dinamics of placements abroad of banks of Republik of Moldova (MDL, milion) . . . . . . . . 135

A.21Evolution of payments settled through AIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

A.22Commemorative coins issued in 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

A.23Financial arrangements with the IMF received by the National Bank of Moldova . . . . . . . 136

A.24Analysis of profit available for distribution in conjunction with the main activities of the NBM136

A.25Net result from the monetary policy implementation and activities related to relations with
the Government of Republic of Moldova . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

A.26Net result obtained from the management of foreign exchange reserves held by the NBM 137

A.27Evolution of the official exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

A.28Share of significant balance sheet items (%) and the annual average rates related to the
financial instruments (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

A.29Capital and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

A.30List of decisions of the Supervisory Board and Executive Board of the National Bank of
Moldova issued for publication in the Official Monitor of the Republic of Moldova in 2017 . 139

A.31List of decisions of the Executive Board of the National Bank of Moldova issued for
publication in the Official Monitor of the Republic of Moldova in 2017 (continuation) . . . . 140

123
Appendix A

Statistical tables

124
Table A.1: Balance of payments of the Republic of Moldova (according to BPM6) (million, USD)

2015 2016 2017

CURRENT ACCOUNT -467.72 -285.58 -616.94
Goods and services -1 998.45 -1 869.78 -2 253.71
Goods -2 123.47 -2 087.98 -2 569.00
export (FOB) 1 506.94 1 547.33 1 857.74
import (FOB) 3 630.41 3 635.31 4 426.74
Services 125.02 218.20 315.29
export 972.04 1 046.24 1 252.69
import 847.02 828.04 937.40
Primary income 450.11 460.65 510.80
inflow, of which: 816.83 744.70 882.51
compensation of employees 783.15 713.83 839.56
investment income 36.52 33.66 45.35
outflows, of which: 366.72 284.05 371.71
investment income 283.59 213.97 291.49
Secondary income 1 080.62 1 123.55 1 125.97
inflow, of which: 1 223.78 1 245.49 1 264.74
current international cooperation 196.42 216.98 183.73
personal transfers 756.97 750.39 800.10
outflows 143.16 121.94 138.77
CAPITAL ACCOUNT 54.87 -20.79 -30.41
Net lending (+) / net borrowing (-)
(Balance of the current and capital account) -412.85 -306.37 -647.35
FINANCIAL ACCOUNT -458.05 -214.56 -569.77
Direct investment -209.12 -74.68 -205.77
net acquisition of financial assets 7.02 16.29 2.69
net incurrence of liabilities, of which: 216.14 90.97 208.46
equity and investment fund shares, except earning reinvestment 43.88 43.97 39.23
earning reinvestment 123.37 91.03 86.81
debt instruments 48.89 -44.03 82.42
Portfolio investment -4.04 -0.36 -1.00
net acquisition of financial assets -0.01 - -0.87
net incurrence of liabilities 4.03 0.36 0.13
Financial derivatives (other than reserves) – banking, net value -0.70 0.49 -0.43
Other investment 62.30 -671.15 -893.77
net acquisition of financial assets -1.00 -421.65 -480.41
other equity investment - - 0.56
currency and deposits -42.09 -340.03 -384.78
loans 0.16 1.48 -3.42
trade credits and advances 40.93 -45.00 -92.77
other claims - -38.10 -
net incurrence of liabilities -63.30 249.50 413.36
currency and deposits -119.75 0.83 13.24
loans 24.71 124.74 107.24
trade credits and advances 36.21 127.93 288.92
other liabilities -4.47 -4.00 3.96
Reserve assets -306.49 531.14 531.20
Errors and omissions net -45.20 91.81 77.58
Information:
Personal transfers: credit 1 449.93 1 377.78 1 559.21

Source:NBM

125
Table A.2: Structure of external trade in services (million, USD)
2015 2016 2017
Credit (export) 972.04 1 046.24 1 252.69
Services for processing raw materials that are owned by others 139.63 147.89 189.02
Transport 321.90 351.17 410.65
Travel 210.26 243.36 312.01
Charges for the use of intelectual property n.i.e. 4.48 6.24 5.69
Telecommunications, computer and information services 162.04 152.41 173.42
Other business services 87.57 93.23 114.11
Government goods and services n.i.e. 31.88 36.33 29.04
Other services 14.28 15.61 18.75
Debit (import) 847.02 828.04 937.40
Services for processing raw materials that are owned by others 2.88 2.82 10.86
Transport 302.19 298.16 345.69
Travel 281.48 254.36 305.35
Charges for the use of intelectual property n.i.e. 18.33 19.07 20.33
Telecommunications, computer and information services 84.13 73.09 79.80
Other business services 87.33 110.59 106.82
Government goods and services n.i.e. 33.34 35.84 27.28
Other services 37.34 34.11 41.27
Balance 125.02 218.20 315.29
Services for processing raw materials that are owned by others 136.75 145.07 178.16
Transport 19.71 53.01 64.96
Travel -71.22 -11.00 6.66
Charges for the use of intelectual property n.i.e. -13.85 -12.83 -14.64
Telecommunications, computer and information services 77.91 79.32 93.62
Other business services 0.24 -17.36 7.29
Government goods and services n.i.e. -1.46 0.49 1.76
Other services -23.06 -18.5 -22.52
Source: NBM

Table A.3: Structure of primary income (million, USD)

2015 2016 2017
Credit (inflow) 816.83 744.70 882.51
Compensation of employees 783.15 713.83 839.56
Investment income 36.52 33.66 45.35
of which: reserve assets income 23.76 23.68 28.12
Other primary income -2.84 -2.79 -2.40
Debit (outflows) 366.72 284.05 371.71
Compensation of employees 83.34 70.51 80.74
Investment income 283.59 213.97 291.49
Other primary income -0.21 -0.43 -0.52
Balance 450.11 460.65 510.80
Compensation of employees 699.81 643.32 758.82
Investment income -247.07 -180.31 -246.14
of which: reserve assets income 23.76 23.68 28.12
Other primary income -2.63 -2.36 -1.88
Source: NBM

Table A.4: Structure of secondary income (million, USD)

2015 2016 2017
Credit (inflows) 1 223.78 1 245.49 1 264.74
General government 123.66 155.97 141.13
Other sectors*, of which: 1 100.12 1 089.52 1 123.61
Personal transfers** 756.97 750.39 800.10
Debit (outflows) 143.16 121.94 138.77
General government 8.46 5.81 10.27
Other sectors*, of which: 134.70 116.13 128.50
Transferuri personale** 70.77 65.16 69.00
Balance 1 080.62 1 123.55 1 125.97
General government 115.20 150.16 130.86
Other sectors*, of which: 965.42 973.39 995.11
Personal transfers** 686.20 685.23 731.10
*Financial corporations, non-financial corporations, households and non-profit institutions serving households.
**Current transfers between resident and non-resident households.
Source: NBM

126
Table A.5: Financial account by functional categories (million, USD)

2015 2016 2017

Net lending (+) / net borrowing (-) -458.05 -214.56 -569.77
(Financial account balance)
net acquisition of financial assets -300.48 125.78 52.61
net incurrence of liabilities 157.57 340.34 622.38
Direct investment -209.12 -74.68 -205.77
net acquisition of financial assets 7.02 16.29 2.69
net incurrence of liabilities 216.14 90.97 208.46
Portfolio investment and financial derivatives -4.74 0.13 -1.43
net acquisition of financial assets -0.01 - -0.87
net incurrence of liabilities 4.73 -0.13 0.56
Other investment 62.30 -671.15 -893.77
net acquisition of financial assets -1.00 -421.65 -480.41
net incurrence of liabilities -63.30 249.50 413.36
Other equity investment - - 0.56
net acquisition of financial assets - - 0.56
Currency and deposits 77.66 -340.86 398.02
net acquisition of financial assets -42.09 -340.03 -384.78
net incurrence of liabilities -119.75 0.83 13.24
Loans -24.55 -123.26 -110.66
net acquisition of financial assets 0.16 1.48 -3.42
net incurrence of liabilities 24.71 124.74 107.24
Trade credits and advances 4.72 -172.93 -381.69
net acquisition of financial assets 40.93 -45.00 -92.77
net incurrence of liabilities 36.21 127.93 288.92
Other accounts receivable / payable 4.47 -34.10 -3.96
net acquisition of financial assets - -38.10 -
net incurrence of liabilities -4.47 -4.00 3.96
Reserve assets -306.49 531.14 531.20
Note: Reserves assets flows were evaluated at daily rate
Source: NBM

Table A.6: Foreign loans (incurrence of liabilities), receipts and repayments (million, USD)
2015 2016 2017

receipt repayment receipt repayment receipt repayment

Loans 339.40 314.69 434.84 310.10 423.06 315.82
Central Bank - 35.16 11.74 48.65 17.27 61.54
long-term - 35.16 11.74 48.65 17.27 61.54
Public administration 138.71 40.39 233.13 57.66 200.97 74.58
long-term 138.71 40.39 233.13 57.66 200.97 74.58
Deposit-taking corporations, 24.62 111.50 20.52 75.99 47.38 27.06
except Central Bank
short-term 4.43 4.28 3.13 3.09 4.32 2.10
long-term 20.19 107.22 17.39 72.90 43.06 24.96
Non-financial corporations, 146.16 93.78 126.60 99.31 89.22 99.08
households and non-profit
institutions serving households
short-term 2.90 1.68 16.31 1.64 3.62 3.12
long-term 143.26 92.10 110.29 97.67 85.60 95.96
Other financial corporations 29.91 33.86 42.85 28.49 68.22 53.56
short-term 4.32 0.02 - 0.20 - 0.65
long-term 25.59 33.84 42.85 28.29 68.22 52.91
Source: NBM

127
Table A.7: International investment position of the Republic of Moldova as of December 31, 2016 (million, USD)
As of Changes reflecting As of
31.12.2016 total BP price exchange rate other 31.12.2017
dynamics flow changes fluctuations adjustments
Internationat investment position
(net) -3 034.13 -920.20 -569.77 -63.43 -484.95 197.95 -3 954.33
Assets 4 608.75 381.99 52.61 -1.54 128.61 202.31 4 990.74
Direct investment 249.74 2.99 2.69 - 0.30 - 252.73
Equity participations 177.31 8.04 8.04 - - - 185.35
Debt instruments 72.43 -5.05 -5.35 - 0.30 - 67.38
Portfolio investment 5.09 -0.87 -0.87 - - - 4.22
Equity participations 2.57 -0.01 -0.01 - - - 2.56
Debt instruments 2.52 -0.86 -0.86 - - - 1.66
Financial derivatives 4.00 - - - - - 4.00
Other investment 2 143.99 -217.46 -480.41 - 60.64 202.31 1 926.53
Other participations - 0.56 0.56 - - - 0.56
Currency and deposits 1 416.83 -131.85 -384.78 - 50.62 202.31 1 284.98
Loans 111.07 -3.42 -3.42 - - - 107.65
Trade credits and advances 607.07 -82.75 -92.77 - 10.02 - 524.32
Other assets 9.02 - - - - - 9.02
Reserve assets* 2 205.93 597.33 531.20 -1.54 67.67 - 2 803.26
Liabilities 7 642.88 1 302.19 622.38 61.89 613.56 4.36 8 945.07
Direct investment 3 037.51 664.23 208.46 61.03 390.21 4.53 3 701.74
Equity participations 1 312.97 549.87 126.04 61.03 358.27 4.53 1 862.84
Debt instruments 1 724.54 114.36 82.42 - 31.94 - 1 838.90
Portfolio investment 90.84 13.83 0.13 0.86 13.01 -0.17 104.67
Equity participations 90.38 - - - - - 103.80
Debt instrumentse 0.46 - - - - - 0.87
Financial derivatives 4.29 0.43 0.43 - - - 4.72
Other investment 4 510.24 623.70 413.36 - 210.34 - 5 133.94
Currency and deposits 135.84 29.49 13.24 - 16.25 - 165.33
Loans 3 138.64 281.14 107.24 - 173.90 - 3 419.78
Trade credits and advances 933.98 299.62 288.92 - 10.70 - 1 233.60
Other liabilities 144.03 3.96 3.96 - - - 147.99
SDR allocations 157.75 9.49 - - 9.49 - 167.24
*evaluated at daily rate
Note: The official cross exchange rates of original currencies against the U.S. dollar at the end of the period were used for the evaluation of stocks
Source: NBM

Table A.8: Gross external debt of the Republic of Moldova at the end of the period (million, USD)
2015 2016 2017
General government 1 353.76 1 481.68 1 722.54
Short-term 0.07 0.46 0.87
Long-term 1 353.69 1 481.22 1 721.67
Central Bank 339.29 292.28 264.29
Long-term 339.29 292.28 264.29
Deposit-taking corporations, 376.56 374.63 440.44
except Central Bank
Short-term 172.63 228.10 267.87
Long-term 203.93 146.53 172.57
Other sectors 2 253.44 2 362.11 2 707.54
Short-term 970.45 1 044.52 1 332.00
Long-term 1 282.99 1 317.59 1 375.54
Other financial corporations 98.24 112.36 126.92
Short-term 6.11 5.67 4.92
Long-term 92.13 106.69 122.00
Non-financial corporations 2 125.80 2 220.16 2 550.59
Short-term 964.01 1 038.79 1 327.02
Long-term 1 161.79 1 181.37 1 223.57
Households s, i NPISHs* 29.40 29.59 30.03
Short-term 0.33 0.06 0.06
Long-term 29.07 29.53 29.97
Direct investment: intercompany lending 1 781.16 1 724.53 1 838.89
Short-term 106.44 115.51 146.94
Long-term 1 674.72 1 609.02 1 691.95
TOTAL 6 104.21 6 235.23 6 973.70
*Non-profit institutions serving households.
Source: NBM

128
Table A.9: Total turnover of the domestic foreign exchange market operations of the foreign currency against MDL
(equivalent in USD, million)
Transactions of licensed banks in the foreign exchange market against MDL, structured Foreign Domestic foreign
by sources (including operations with financial derivatives) exchange exchange market
NBM Resident Non-resident Legal Individuals and foreign Miscellaneous Total offices Transfer Cash Total
banks banks entities exchange offices (Cash)
Cash Transfer Total
Turnover
2016 454.1 270.6 17.8 5 728.4 2 310.0 312.2 2 622.2 585.4 9 678.5 994.2 7 368.5 3 304.2 10 672.7
2017 433.8 279.8 27.7 6 476.5 2 474.2 345.4 2 819.6 625.9 10 663.3 1 344.3 8 189.1 3 818.5 12 007.6
2017/
2016, % –4.5 3.4 55.6 13.1 7.1 10.6 7.5 6.9 10.2 35.2 11.1 15.6 12.5
Purchases
2016 28.2 135.3 11.8 2 076.2 2 017.7 224.0 2 241.7 352.0 4 845.2 512.8 2 827.5 2 530.5 5 358.0
2017 0.0 139.9 20.6 2 409.5 2 128.7 224.7 2 353.4 418.4 5 341.8 719.9 3 213.1 2 848.6 6 061.7
2017/
2016, % -100.0 3.4 74.6 16.1 5.5 0.3 5.0 18.9 10.2 40.4 13.6 12.6 13.1
Sales
2016 425.9 135.3 6.0 3 652.2 292.3 88.2 380.5 233.4 4 833.3 481.4 4 541.0 773.7 5 314.7
2017 433.8 139.9 7.1 4 067.0 345.5 120.7 466.2 207.5 5 321.5 624.4 4 976.0 969.9 5 945.9
2017/
2016, % 1.8 3.4 18.3 11.4 18.2 36.8 22.5 -11.1 10.1 29.7 9.6 25.4 11.9
Source: Report on purchases and sales operations of foreign currency made by licensed banks and the NBM data; Report on foreign exchange
operations carried out by foreign exchange offices; Report on foreign exchange operations carried out by foreign exchange bureaus by hotels.

Table A.10: Structure of turnover of foreign exchange transactions against MDL on domestic foreign exchange market

Domestic foreign exchange Domestic foreign exchange Total foreign

transfer market cash market exchange market

purchases sales purchases sales purchases sales

2016 Share,%
USD 56.5 59.7 24.6 28.6 41.4 55.2
EUR 39.8 37.0 61.9 58.6 50.2 40.1
RUB 2.3 2.8 10.1 5.6 6.0 3.2
Other currencies 1.4 0.5 3.4 7.2 2.4 1.5
Total 100.0 100.0 100.0 100.0 100.0 100.0
2017 Share, %
USD 50.6 56.9 21.7 28.9 37.0 52.4
EUR 45.8 39.5 63.2 56.7 54.0 42.3
RUB 2.0 2.8 10.7 5.8 6.1 3.3
Other currencies 1.6 0.7 4.4 8.5 2.9 2.0
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Report on purchases and sales operations of foreign currency made by licensed banks and the NBM data; Report on foreign exchange
operations carried out by foreign exchange offices; Report on foreign exchange operations carried out by foreign exchange bureaus by hotels.

129
 Net balance (purchases minus sales) operations of foreign currency against MDL performed by
Table A.11:
licensed banks, sorted by transaction date (equivalent in USD, million)

Net balance

NBM Resident Non-resident Legal Individuals Miscellaneous TOTAL

banks banks entities (including foreign
exchange offices)
Quater I -11.4 0.0 0.9 -408.5 415.4 18.0 14.4
Quater II -176.2 0.0 -0.5 -381.5 534.0 29.2 5.0
Quater III -231.7 0.0 8.6 -388.8 564.0 45.1 -2.8
Quater IV 21.6 0.0 -3.2 -397.2 347.8 26.3 -4.7
2016 -397.7 0.0 5.8 -1 576.0 1 861.2 118.6 11.9
Quater I -28.1 0.0 -0.2 -394.4 380.0 43.4 0.7
Quater II -99.7 0.0 8.9 -436.3 470.6 56.2 -0.3
Quater III -196.0 0.0 -0.5 -476.7 625.7 57.4 9.9
Quater IV -110.0 0.0 5.3 -350.1 410.9 53.9 10.0
2017 -433.8 0.0 13.5 -1 657.5 1 887.2 210.9 20.3

Source: NBM

Table A.12: Balance sheet assets in foreign currency of the licensed banks (equivalent in USD, million)

Balance as of Balance as of 31.12.2017/

31.12.2016 31.12.2017 31.12.2016, %
Fixed course Actual Share Actual Share Fixed course Actual
from 31.12.2017 course % course % from 31.12.2017 course
Loans granted in foreign currency,
including: 826.3 759.0 53.6 803.0 46.9 -2.8 5.8
EUR 542.8 475.4 33.6 547.9 32.0 0.9 15.3
USD 283.5 283.6 20.0 255.1 14.9 -10.0 -10.0
Disposable funds in foreign currency,
including: 537.5 497.0 35.1 697.6 40.7 29.8 40.4
EUR 323.0 283.0 20.0 463.8 27.1 43.6 63.9
USD 197.9 198.0 14.0 211.1 12.3 6.7 6.6
Other currencies 16.6 16.0 1.1 22.7 1.3 36.7 41.9
Required reserves in foreign currency 187.3 171.7 12.1 212.1 12.4 13.2 23.5
Other assets in foreign currency (1+2+3),
including: -68.3 -62.4 -4.4 -64.0 -3.7 -6.3 2.6
1."Nostro" accounts opened in
banks of the Republic of Moldova 2.5 2.5 0.2 2.3 0.1 -8.0 -8.0
2.Other assets 32.8 30.3 2.1 44.6 2.6 36.0 47.2
3.Adjustments and allowance
for impairment losses -103.6 -95.2 -6.7 -110.9 -6.5 7.0 16.5
Assets attached to the
foreign exchange rate 56.7 51.4 3.6 63.8 3.7 12.5 24.1
Total foreign exchange
balance-sheet assets 1 539.5 1 416.7 100.0 1 712.5 100.0 11.2 20.9
Source: NBM

130
Table A.13: Disposable funds in foreign currency of the licensed banks (equivalent in USD, million)
Balance as of Share Balance as of Share 31.12.2017/
31.12.2016 % 31.12.2017 % 31.12.2016, %
"Nostro" accounts
opened abroad 315.8 63.5 463.7 66.5 46.8
Cash in foreign currency 97.5 19.6 125.2 17.9 28.4
Placements abroad 51.1 10.3 62.4 8.9 22.1
Overnight placements 31.7 6.4 45.2 6.5 42.6
Securities in foreign currency 0.9 0.2 1.1 0.2 22.2
Total 497.0 100.0 697.6 100.0 40.4
Source: NBM

Table A.14: Balance sheet liabilities in foreign currency of licensed banks (equivalent in USD, million)
Balance as of 31.12.2016 Balance as of 31.12.2017 31.12.2017/31.12.2016, %
Fixed course Actual Share Actual Share Fixed course Actual
from 31.12.2017 course % course % from 31.12.2017 course
Total current and deposits accounts of
non-bank clients, including: 1 384.9 1 269.2 90.0 1 493.4 87.9 7.8 17.7
- residents 1 314.7 1 204.2 85.4 1 409.6 82.9 7.2 17.1
- non-residents 70.2 65.0 4.6 83.8 4.9 19.4 28.9
Term deposits 757.3 693.5 49.2 800.1 47.1 5.7 15.4
Current accounts 437.7 403.3 28.6 491.2 28.9 12.2 21.8
Sight deposits 189.9 172.4 12.2 202.1 11.9 6.4 17.2
Received credits 125.3 115.2 8.2 158.6 9.3 26.6 37.7
"Loro" accounts and term deposits
of banks from abroad 3.7 3.7 0.3 3.2 0.2 -13.5 -13.5
Other liabilities in foreign currency 24.8 22.6 1.6 44.2 2.6 78.2 95.6
Total foreign exchange
balance-sheet liabilities 1 538.7 1 410.7 100.0 1 699.4 100.0 10.4 20.5
Source: NBM

Current accounts and deposits in foreign currency of bank’s clients, by tipes of currency (equivalent in
Table A.15:
USD, million)

Balance as of 31.12.2016 Balance as of 31.12.2017 31.12.2017/31.12.2016, %

Fixed course Actual Share Actual Share Fixed course Actual
from 31.12.2017 course % course % from 31.12.2017 course
EUR 930.6 815.2 64.2 999.7 66.9 7.4 22.6
USD 445.9 445.8 35.1 483.1 32.3 8.3 8.4
RUB 3.9 3.7 0.3 4.2 0.3 7.7 13.5
Other
currencies 4.5 4.5 0.4 6.4 0.4 42.2 42.2
Total 1 384.9 1 269.2 100.0 1 493.4 100.0 7.8 17.7
Source: NBM

131
Table A.16: Conditional assets and liabilities in foreign currency of licensed banks (equivalent in USD, million)
Balance as of Share Balance as of Share 31.12.2017/
31.12.2016 % 31.12.2017 % 31.12.2016, %
Conditional assets in foreign currency
Current purchases 115.2 97.6 54.2 86.6 -53.0
Purchases on term 2.7 2.3 7.7 12.3 2.9 ori
Other conditional assets 0.1 0.1 0.7 1.1 7.0 ori
Total conditional assets 118.0 100.0 62.6 100.0 -46.9
Conditional liabilities in foreign currency
Current sales 115.3 97.5 54.2 87.6 -53.0
Sales on term 3.0 2.5 7.7 12.4 2.6 ori
Other conditional liabilities 0.0 0.0 0.0 0.0 -
Total conditional liabilities 118.3 100.0 61.9 100.0 -47.7
Conditional assets minus
Conditional liabilities -0.3 0.7
(Conditional assets minus
Conditional liabilities)/TRC (%) -0.06 0.11
Source: NBM

132
 Table A.17: Investment limits and constraints applied by the NBM for investment risk management
Risks Techniques to minimize the investment risk
Credit risk * Investing in secure, high credit quality counterparts, selected based on the Standard&Poor, Moody and Fitch’s Ratings (the average rating
quoted by the above three agencies is to be used).
* Setting the minimum allowable rating for authorized counterparts’ transactions.
* Establishing investment limits depending on: the type, duration and rating of investment instruments, as well as the foreign exchange
composition.
* Daily monitoring of investment limits and compliance with credit limits.
* Quantification of credit risk by using the default coefficients determined by the Standard&Poor’s rating agency, for each type of
rating and term to maturity.
Market risk * Daily market risk monitoring by assessing at market price the unrealized gains and losses incurred as a result of exchange rate
fluctuations and developments in securities’ prices.
* Managing and monitoring the market risk of the investment securities portfolio by using the value-at-risk methodology (VaR and CVAR), which
estimates potential financial losses based on a range of parameters and assumptions determined for different changes in market conditions.
133

* Monitoring the interest rate risk and determining (by using PV01) the sensitivity of the investment portfolio securities’ prices to interest
rate fluctuations.
* Establishing by the NBM Executive Board of the official currency composition for the investment portfolio, that aims to cover foreign exchange
risk, the portfolio’s optimization through optimal proportioning of foreign exchange assets and liabilities, as well as by setting an investment
horizon to ensure the meeting of current external obligations and implementation of the monetary and foreign exchange policies of the
state. The official currency composition is determined based on an extensive analysis of: the foreign exchange composition of trade
in goods and services, the external debt, the intervention currency, etc. The reserves currency composition may deviate within
+/- 10% from the official currency composition.
* Establishing by the NBM’s Investment Committee of the currency composition of each sub-portfolio, and allowed deviations from it.
* Complying with the official currency composition and currency composition of each sub-portfolio.
Liquidity risk * Securing liquidity through demand deposits and investing in securities with high liquidity and low risk.
* Ensuring daily liquidity risk monitoring by using market benchmarks set for indexed investment sub-portfolios grouped by instrument type
and foreign currency. The applied benchmarks are market indices that are recognized and used worldwide to assess the performance and
risks of investment portfolios.
* The NBM’s investment policy allows active reserves management to ensure limited instrument and duration deviation of +/- 20%
from the benchmark.
Source: NBM
 Table A.18: Dynamics of the assets structure of the banking sector of the Republic of Moldova in 31.12.2016 - 31.12.2017
Indicator 31.12.2016 31.12.201731.12.2017/
31.12.2016
MDL, million Share MDL, million Share MDL, million +/- (%)
in total in total
assets (%) assets (%)
Cash and cash equivalents 21 184.3 38.7 34 867.4 43.8 6 683.2 23.7
Financial assets
held-for-trading 0.0 0.0 0.0 0.0 0.0 -
Financial assets designated as at
fair value through profit or loss 0.0 0.0 0.0 0.0 0.0 0.0
Financial assets available
for sale 594.4 0.8 1 861.3 2.3 1 266.9 213.1
Loans and receivables 35 558.6 48.8 34 508.4 43.4 -1 050.2 -3.0
Investments held to maturity 4 696.0 6.4 4 487.6 5.6 -208.4 -4.4
Tangible assets 2 343.5 3.2 2 271.7 2.9 -71.7 -3.1
Intangible assets 258.7 0.4 262.0 0.3 3.3 1.3
Claims on taxes 60.8 0.1 45.0 0.1 -15.9 -26.1
134

Other assets 612.3 0.8 762.5 1.0 150.2 24.5

Fixed assets and disposal groups
classified as held for sale 521.9 0.7 475.9 0.6 -46.0 -8.8
TOTAL ASSETS 72 830.4 100.0 79 541.7 100.0 6 711.3 9.2
Source: NBM
Table A.19: Dynamics of liabilities structure of the banking sector of the Republic of Moldova in 31.12.2016 - 31.12.2017
Name 31.12.2016 31.12.2017 Dynamics

MDL, million MDL, million MDL, million %

Financial liabilities held for
trading 0.0 0.0 0.0 0.0
Financial liabilities designated
as at fair value through profit or loss 0.0 0.0 0.0 0.0
Financial liabilities measured at
amortized cost: 59 465.6 64 446.1 4 980.5 8.4
including clients deposits 54 972.2 59 987.7 5 015.4 9.1
Provisions 96.9 392.9 296.0 305.6
Debts on taxes 68.8 131.8 63.0 91.5
Other debts 589.0 971.8 382.8 65.0
TOTAL DEBTS 60 220.3 65 942.5 5 722.2 9.5
Source: NBM

Table A.20: Dinamics of placements abroad of banks of Republik of Moldova (MDL, milion)
Name of country 31.12.2017 31.12.2067 Dynamics 31.12.2017/
compared to 31.12.2016
Amount Share Amount Share MDL (%)
in total in total
per sector, (%) per sector (%)
Germany 3 299.7 33.7 919.2 11.8 2 380.5 259.0
United States of America 2 122.1 21.7 2 277.3 29.2 -155.2 -6.8
Belgium 1 619.8 16.6 1 596.1 20.5 23.7 1.5
France 1 198.6 12.3 1305.3 16.7 -106.7 -8.2
Austria 585.2 6.0 686.5 8.8 -101.3 -14.8
Italy 490.8 5.0 102.8 1.3 388.0 377.3
Republic of Ireland 153.9 1.6 403.0 5.2 -249.1 -61.8
Rusia 139.3 1.4 131.6 1.7 7.7 5.9
United Kingdom 125.9 1.3 146.9 1.9 -20.9 -14.3
Romania 26.3 0.3 35.3 0.5 -9.0 -25.5
Belarus 9.1 0.1 16.2 0.2 -7.0 -43.5
Kazakhstan 7.0 0.1 1.0 0.0 5.9 570.9
Georgia 3.4 0.0 0.0 0.0 3.4 x
Ukraine 1.3 0.0 2.7 0.0 -1.4 -50.6
Latvia 0.1 0.0 0.1 0.0 0.0 0.0
Spain 0.1 0.0 173.8 2.2 -173.8 -100.0
Total in all countries: 9 782.8 100.0 7 797.9 100.0 1 984.9 25.5
Source: NBM

135
Table A.21: Evolution of payments settled through AIPS
System Year Number (thousands of payments) Value (MDL, million) Average value
per transaction
Total Daily average Total Daily average (MDL, thousands)
AIPS 2016 11 989.4 47.0 825 816.3 3 238.5 68.9
2017 12 877.1 50.7 1 229 411.7 4 840.2 95.5
Including:
RTGS 2016 1 001.2 3.9 775 664.8 3 041.8 774.7
2017 1 119.9 4.4 1 172 771.1 4 617.2 1 047.2
DNSS 2016 10 988.2 43.1 50 151.5 196.7 4.6
2017 11 757.2 46.3 56 640.6 223.0 4.8
Source: NBM

Table A.22: Commemorative coins issued in 2017

Coin name Face value Metal Weight Diameter Edition
(gr.) (mm) (ex.)
Series: "Historical events"
100 years since establishing the Country Council MDL 100 Silver 999/1 000 31.1 37.0 750
Series: "Alley of Classics from the S, tefan cel Mare s, i Sfânt Public Garden in Chis, inau"
Mihail Kogălniceanu – 200 years since birth MDL 100 Gold 999.9/1 000 7.8 24.0 100
MDL 50 Silver 999/1 000 13.0 28.0 200
Alexei Mateevici – 100 years from passing to eternity MDL 100 Gold 999.9/1 000 7.8 24.0 100
MDL 50 Silver 999/1 000 13.0 28.0 200
Series: "Personalities"
Eugen Doga – 80 years since birth MDL 50 Silver 999/1 000 13.0 28.0 500
Ion Vatamanu – 80 years since birth MDL 50 Silver 999/1 000 13.0 28.0 200
Series: "Famous women"
Maria Dragan – 70 years since birth MDL 50 Silver 999/1 000 13.0 28.0 300
Series: "Red book of the Republic of Moldova"
Garofit, a-triunghiulară MDL 50 Silver 999/1 000 16.5 30.0 300
Series: "Science and innovation"
Vladimir Andrunachievici – 100 years since birth MDL 50 Silver 999/1 000 13.0 28.0 200
Source: NBM

Table A.23: Financial arrangements with the IMF received by the National Bank of Moldova
Type of Amount approved Amount disbursed Share of disbursements Stock as of Stock as of
facility until 31.12.2017 until 31.12.2017 in the total amount approved 31.12.2017 31.12.2017

(SDRs, million) (SDRs, million) (%) (SDRs, million) (USD, million)

Extended Fund Facility (EFF) 374.70 257.52 68.73 119.91 170.36
Extended Credit Facility (ECF) 311.56 191.58 61.49 66.12 93.93

Source: NBM

Table A.24: Analysis of profit available for distribution in conjunction with the main activities of the NBM
2017 2016
Financial result Financial result Difference Absolute Difference
2017/2016
MDL, thousands MDL, thousands % MDL, thousands
Activities managed by the bank
Monetary instruments and activities
related to relations with Government (448,418) (739,439) (39.36) 291,021
Foreign exchange reserves management 541,522 665,720 (18.66) (124,198)
NBM relations with IMF (49,428) (41,276) 19.75 (8,152)
National currency issuance (32,055) 16,720 (291.72) (48,775)
Other operations, including operating costs (106,930) (163,874) (34.75) 56,944
Profit available for distribution (95,309) (262,149) (63,64) (166,840)
Source: NBM

136
Table A.25: Net result from the monetary policy implementation and activities related to relations with the Government of Republic of
Moldova
2017 2016 Difference Absolute Difference
2017/2016
MDL, thousands MDL, thousands % MDL, thousands
Overnight deposits (55,473) (57,904) (4.20) 2,432
Required Reserves (534,322) (797,853) (33.03) 263,531
Accounts and deposits of the Ministry
of Finance (93,147) (48,494) 92.08 (44,653)
Open market operations (519,828) (346,052) 50.22 (173,776)
Leading activity and placement in
state securities 754,353 510,864 47.66 243,488
Net result (448,418) (739,439) (39.36) 291,021
Source: NBM

Table A.26: Net result obtained from the management of foreign exchange reserves held by the NBM
2017 2016 Difference Absolute Difference
2017/2016
MDL, thousands MDL, thousands % MDL, thousands
Securities in foreign currency 326,793 334,060 (2.18) (7,267)
Deposits 188,975 105,154 79.71 83,821
Differences from foreign exchange rate 44,617 238,433 (81.29) (193,817)
Commissions and fees (18,863) (11,927) 58.15 (6,936)
Net Result 541,522 665,720 (18.66) (124,199)
Source: NBM

Table A.27: Evolution of the official exchange rate

2017 2016
Average on At the end Average on At the end
period of the year period of the year
USD/MDL 18.4902 17.1002 19.9238 19.9814
EUR/MDL 20.8282 20.4099 22.0548 20.8895
GBP/MDL 23.7824 22.9715 27.0353 24.4903
XDR/MDL 25.6155 24.2942 27.7060 26.7768
XAU/MDL 746.9164 710.1013 798.7571 736.7237
Source: NBM

137
Table A.28: Share of significant balance sheet items (%) and the annual average rates related to the financial instruments (%)
2017 2016
Share Annual Share Annual
% average % average
interest rate, % interest rate, %
ASSETS 100.00 - 100.00 -
Foreign assets 76.88 1.14 75.57 1.21
State securities 22.89 6.62/1.40/5.30 24.17 16.52/1.40/5.30
Loans granted (short/medium term) 0.04 - 0.04 -
Other assets 0.20 - 0.22 -
LIABILITIES 100.00 - 100.00 -
National currency in circulation 31.01 - 29.46 -
Available funds of the Government, including: 12.95 - 8.86 -
sight, MDL 6 .72 1.66 4.16 1.89
term, MDL 0.77 7.61 - -
sight, FCC 5.46 - 4.70 -
Available funds of the banks, including: 23.56 - 22.21 -
LORO accounts, including: 17.17 - 15.35 -
required reserves in MDL, paid - 5.19 - 10.33
required reserves in FCC, paid 5.35 0.48 5.32 0.27
overnight deposits 0.99 5.24 1.54 9.05
Certificates of the NBM (placed) 13.59 8.11 9.18 11.55
Loans received from IMF (EFF, ECF) 6.67 1.53 9.07 1.08
Other liabilities 6.32 - 7.28 -
Capital and reserves 5.90 - 13.94 -
Source: NBM

Table A.29: Capital and reserves

31 December, 2017 31 December, 2016
MDL, thousands MDL, thousands
Authorized capital 902,970 902,970
General reserve fund 1,448,482 1,543,791
Total statutory capital 2,351,452 2,446,761
Reserve of unrealized gains from exchange rate differences
from the revaluation of foreign exchange stocks 1,479,755 6,331,636
Reserve of unrealized gains from the revaluation
of investment securities 164,542 193,431
Other reserves 8,967 13,713
Total capital and reserves 4,004,716 8,985,541
Source: NBM

138
 List of decisions of the Supervisory Board and Executive Board of the National Bank of Moldova issued for
Table A.30:
publication in the Official Monitor of the Republic of Moldova in 2017
Decision of the Supervisory Board
No. Decision Date of Decision of Published in the Official Monitor
no. approval the SB of the Republic of Moldova

number/article date
1 15 30.11.2017 On putting into circulation as a means of payment of a five-lei banknote 429-433/2236 08.12.2017
with upgraded security features
Decisions of the Executive Board
No. Decision Date of Decision of Published in the Official Monitor
no. approval the EB of the Republic of Moldova

1 20 26.01.2017 On the level of interest rates of the National Bank of Moldova and the 30-39/154 03.02.2017
minimum reserve requirements
2 21 26.01.2017 On the level of base rate applied by the National Bank of Moldova on 30-39/155 03.02.2017
long-term loans
3 35 08.02.2017 On the amendment and completion of the Instruction on the cash 50-59/311 17.02.2017
import/export by Moldovan banks
4 52 22.02.2017 On the level of interest rates applied by the National Bank of Moldova 67-71/486 03.03.2017
5 62 09.03.2017 On the approval of the Regulation on the provision of payment services 119-126/818 14.04.2017
through automated remote service systems and the repeal of a series of
regulatory acts of the National Bank of Moldova
6 73 29.03.2017 On the level of interest rates of the National Bank of Moldova and the 109-118/751 07.04.2017
minimum reserve requirements
7 87 06.04.2017 On the approval of the Instruction on the compilation and submission 144-148/861 05.05.2017
by the banks in course of liquidation of reports and information on
the liquidation
8 89 06.04.2017 On the amendment and completion of the Instruction on reporting of 134-143/840 28.04.2017
foreign exchange operations by licensed banks
9 102 27.04.2017 On the level of interest rates of the National Bank of Moldova and the 144-148/862 05.05.2017
minimum reserve requirements
10 103 27.04.2017 On the level of base rate applied by the National Bank of Moldova on 144-148/863 05.05.2017
long-term loans
11 118 04.05.2017 On the amendment and completion of the Regulation on the Automated 155-161/934 19.05.2017
Interbank Payment System, approved by the Decision of the Council of
Administration of the National Bank of Moldova no. 53 of 2 March 2006
12 120 05.05.2017 On the reporting deadlines set for banks 149-154/874 12.05.2017
13 130 24.05.2017 On the level of interest rates of the National Bank of Moldova and the 171-180/1013 02.06.2017
minimum reserve requirements
14 134 24.05.2017 On the amendment and completion of a series of regulatory acts of 190-200/1162 16.06.2017
the National Bank of Moldova
15 135 24.05.2017 On the repeal of the Regulation on reporting by authorised banks of 171-180/1014 02.06.2017
foreign loans and authorisations for foreign currency export, reflected
in the Balance of Payments
16 141 24.05.2017 On the amendment and completion of the Regulation on adequacy 190-200/1163 16.06.2017
of the risk-weightedcapital (new edition), approved by the Decision of the
Council of Administration of the National Bank of Moldova no.269
of 17 October 2001.
17 142 02.06.2017 On systems falling under the provisions of the Law no. 183 of 22 July 181-189/1082 09.06.2017
2016 on settlement finality in payment and securities settlement systems
18 143 02.06.2017 On the amendment of the Regulation on the activity of foreign 190-200/1164 16.06.2017
exchange offices
19 146 07.06.2017 On the approval and repeal of a series of regulatory acts of 201-213/1183 23.06.2017
the National Bank of Moldova
20 147 07.06.2017 On the amendment and completion of the Instruction on external 201-213/1184 23.06.2017
commitments
21 162 28.06.2017 On the level of interest rates of the National Bank of Moldova and the 229-243/1243 07.07.2017
minimum reserve requirements
22 165 28.06.2017 On the amendment and completion of a series of regulatory acts of 244-251/1284 14.07.2017
the National Bank of Moldova
Source: NBM

139
 List of decisions of the Executive Board of the National Bank of Moldova issued for publication in the
Table A.31:
Official Monitor of the Republic of Moldova in 2017 (continuation)
No. Decision Date of Decision of Published in the Official Monitor
no. approval the EB of the Republic of Moldova

number/article date
23 188 19.07.2017 On the amendment and completion of the Instruction on the compilation 289-300/1541 11.08.2017
and submission by banks of primary reports to identify and supervise
the credit risk, approved by the Decision of the Executive Board of
the National Bank of Moldova no.54 of 09 March2016
24 189 19.07.2017 On the amendment and completion of the Instruction on the reporting of 289-300/1542 11.08.2017
data on the use of payment instruments and services, approved by the
Decision of the Council of Administration of the National Bank of
Moldova no. 211 of 23 October 2014
25 193 26.07.2017 On the level of interest rates of the National Bank of Moldova and 277-288/1511 04.08.2017
the minimum reserve requirements
26 194 26.07.2017 On the level of base rate applied by the National Bank of Moldova 277-288/1512 04.08.2017
on long-term loans
27 195 26.07.2017 On the amendment and completion of the Instruction on the submission 289-300/1543 11.08.2017
by banks of electronic reports to the National Bank of Moldova, approved
by the Decision of the Council of Administration of the National Bank
of Moldova no. 132 of 17 July 2008
28 203 27.07.2017 On the approval of the Regulation on the requirements to bank 289-300/1544 11.08.2017
administrators
29 229 28.08.2017 On the level of interest rates of the National Bank of Moldova and 330-334/1731 08.09.2017
the minimum reserve requirements
30 253 27.09.2017 On the level of interest rates of the National Bank of Moldova and 356-359/1841 06.10.2017
the minimum reserve requirements
31 267 04.10.2017 On the amendment and completion of the Regulation on the licensing 371-382/1944 27.10.2017
of banks no. 23 / 09-01
32 269 06.10.2017 On the amendment and completion of the Instruction on the compilation 371-382/1945 27.10.2017
and submission by banks of reports for prudential purposes, approved
by the Decision of the Council of Administration of the
National Bank of Moldova no.279 of 1 December 2011
33 273 19.10.2017 On the amendment and completion of the Regulation on holding 389/1982 03.11.2017
of equity shares in the share capital of a bank
34 277 25.10.2017 On the level of interest rates of the National Bank of Moldova and 383-388/1980 03.11.2017
the minimum reserve requirements
35 278 25.10.2017 On the level of base rate applied by the National Bank of Moldova 383-388/1981 03.11.2017
on long-term loans
36 305 05.12.2017 On the level of interest rates of the National Bank of Moldova and 429-433/2237 08.12.2017
the minimum reserve requirements
37 307 07.12.2017 On the amendment and completion of the chart of accounts for 441-450/2300 22.12.2017
bookkeeping for licensed banks in the Republic of Moldova
38 328 14.12.2017 On the amendment and completion of the Regulation on the 451-463/2357 29.12.2017
reporting of the balance of payments data
39 341 21.12.2017 On the amendment and completion of the Instruction on the compilation 1-6/29 05.01.2018
of Monetary Statistics Reports by licensed banks
40 342 21.12.2017 On the amendment and completion of a series of regulatory acts of 1-6/30 05.01.2018
the National Bank of Moldova
41 354 27.12.2017 On the level of interest rates of the National Bank of Moldova and 1-6/31 05.01.2018
the minimum reserve requirements
42 355 27.12.2017 On the approval of the Regulation on the required reserves 18-26/89 19.01.2018
43 366 29.12.2017 On the reporting deadlines set for banks 1-6/32 05.01.2018
Source: NBM

140
 Table A.32: Progresses achieved in the implementation of the NBM’s major projects during 2017

No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
1 Implementation 3. Development To streamline the Q III, 2015 In 2017, the public bidding and Completion of the application’s
of the IT solution of the NBM’s processes of procurement procedure was implementation / development
to streamline the supervisory authorisation and carried out, following which the phase. User trainings and start
licensing, function storage of regulatory NBM selected the supplier of of the application’s testing
authorisation acts. To strengthen the IT solution for streamlining phase. Preparation for system
and notification the NBM’s capacity in the licensing, authorisation and deployment and, later, for a
processes the field of increasing notification processes. By the pilot operation of the system.
the level of end of the fourth quarter of Final acceptance and
transparency in the 2017, the analysis and design completion of the project.
ownership structure phases were finalised, during
of licensed banks which the following documents
through an ongoing were developed and submitted:
control programme. the technical solution
document; the document on the
configuration / settings of the
application; and the document
on the conceptual architecture
of the solution. In addition, the
application’s implementation /
development phase was
launched.

141
No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
2 Implementation 3. Development To streamline the Q III, 2014 In the second quarter of 2017, To initiate and conduct the
of the IT of the NBM’s monitoring process; the NBM’s Executive Board procurement and
solution for supervisory to strengthen the decided to merge the project on implementation of the IT
streamlining the function NBM’s capacity in the the implementation of the IT solution.
shareholder field of increasing the solution for streamlining the
transparency level of transparency shareholder transparency
monitoring and in the ownership monitoring process with the
remote analysis structure of licensed project on the remote analysis
in the field of the banks by exercising in the field of the prevention
prevention and an ongoing control; to and combating of money
combating of ensure an automated laundering and terrorist
money monitoring process of financing. Following the
laundering and the shareholder merger, a new set of tender
terrorist transparency. To documents was developed. In
financing ensure obtaining of this context, the NBM organised
information on the presentation sessions with the
exposure of the participation of the IT solution
banking sector and / suppliers, recognised on the
or of each bank to the local market. The NBM
risk of money identified the optimal
laundering and procurement procedure,
terrorist financing. To intending to initiate the
ensure a wider procurement procedure.
application of the
risk-based banking
supervision, taking
into account the
current channels and

142
No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
methods of money
laundering and
terrorist financing.

3 Implementation 3. Strengthening Implementation of June 2013 The NBM approved the Law on Successfully completed
of Basel III the NBM’s the provisions of the the Banking Activity, based on
Agreement supervisory Basel III Agreement to which the regulatory and
function provide a more supervisory standards in the
flexible framework of banking system are being
prudential revised and updated. In this
regulations that context, the NBM prepared
would ensure setting about 20 draft documents of
of capital adequacy secondary regulations to ensure
requirements that are the transposition of the
appropriate to the provisions of the European
risk profile of regulatory framework on
banking institutions. banks. The NBM conducted an
Enhancing the impact study of the
stability of the implementation of Basel III on
banking system and the liquidity level of licensed
fostering banks.
transparency and
order in the market.

4 Setting up of the 5. Strengthening Establishment of the July 2016 During 2017, the NBM defined To sign contract with the
Central of the NBM’s Central Securities functional requirements for the award-winning provider.
Securities financial Depository in Central Securities Depository
(CSD) and developed technical To elaborate the CSD's rules /
Depository stability Moldova, which will
documentation on the CSD's regulations / policies.
143
No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
function deal in corporate hardware and software To set up and ensure the state
securities, solutions. Based on the above registration of the CSD.
government documents, the NBM initiated a
public procurement procedure To appoint the CSD's
securities and money
for the IT solution and awarded management bodies and to hire
market instruments the contract. staff.
issued by the NBM, During the same period, the
and provide the NBM amended a series of To start the implementation of
following basic legislative acts to ensure their the CSD’s IT solution.
securities services: compliance with the Law no. 234
initial registration of of 3 October 2016 on the CSD.
Besides, the NBM developed
securities; opening
documents on the
and administration of establishment of the CSD and
securities accounts; initiated actions in the logistic
managing the and internal organisation fields.
securities settlement
system.
5 Setting up a 8. Increase the To ensure a September Following a public procurement Successfully completed
Remote Back-up efficiency of reasonable level of 2016 procedure conducted in 2017,
Centre NBM's protection of the the NBM selected the supplier
of the IT solution for setting up
operational NBM’s resources
a Remote Back-up Centre.
activity (data,
Subsequently, the IT solution
applications, IT was successfully delivered,
infrastructures, tested, deployed and passed
equipment) and to final acceptance.
strengthen the
capacities required to
ensure the non-stop
operation of the
144
No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
NBM’s IT system in
emergency situations.

6. Transform NBM 8. To improve Ensuring the March 2012 During 2017, the tender To complete the preparation of
the efficiency of assessment and documents were updated tender documents, to announce
the NBM's revision of the NBM’s considering the implementation international public tender for
the selection and
operational business processes in parallel of the project on
implementation of the bank
activity related to banking setting up of the Central operations system and cash
operations and the Securities Depository. operations management
management of Additionally, during the system.
financial, material reporting year, the NBM To initiate a public tender
and human resources, continued the implementation procedure for the procurement
as well as ensuring of measures set out in the of the Human Resources
the modernisation of Action Plan in view of achieving Management Information
the NBM’s banking the optimisation of business System (HRMIS).
information system, processes as well as of the
so as to achieve the medium- and long-term
objective of performance objectives.
increasing the
operational efficiency
of the NBM. The goal
pursued under the
Transform NBM
project focuses on a
multidimensional
transformation of the
organisation with a
view to ensuring its

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No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
maximum alignment
with the NBM’s
strategic objectives.
This approach is
based on the
Enterprise
Architecture model,
which once
implemented ensures
the correlation
between the business
processes,
organisational
structure, personnel,
applicative systems,
information,
technologies etc. to
the organisation's
objectives.
7 Implementation 8. To increase To review and update December Based on the decision taken in To initiate the procurement
of the cash the efficiency of the NBM’s business 2015 2016 to merge the procurement procedure; to select the
operations the NBM's processes of the cash procedures of the system for supplier; to initiate the
management operational operations the cash operations implementation of the cash
system activity management and the management and the bank operations management
bank operations operations system, as separate system.
systems, in order to lots, the NBM modified its
increase efficiency of tender documentation and
the NBM's operational updated eligibility criteria as
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No. Project Reference Objectives Started on Achievements Further actions planned for
strategic goal 2018
activity. well as its functional, non-
functional and system
implementation requirements.
8 Implementation 9. To optimise To implement a new Q I, 2017 The NBM conducted a public Analysis and elaboration of a
of an Integrated the management payroll system based tendering procedure, following career development system.
Human of human on the evaluation of which the contract was signed Analysis and elaboration of the
job positions. with the award-winning service managerial skills development
Resources resources
To ensure internal supplier. In the third quarter of system.
Management
equity of job positions 2017, the implementation of the Defining the talent
System and salaries. new integrated human management program.
To increase external resources management system Final acceptance and
competitiveness of was launched. The first two completion of the project.
the NBM in the labour stages of the project were
market. completed. The first stage
To ensure a high involved redefining functions,
qualification level of the evaluation of job position,
the staff. defining job families; analytical
To improve the evaluation of all job positions
organisational climate within the NBM; training the
and increase the NBM staff and transferring the
employee loyalty. know-how on the methodology
of job position evaluation; the
elaboration of the matrix of
NBM’s job positions;
determining the number of job
families. During the second
stage, a draft document of the
new salary policy for the NBM’s
personnel was elaborated.

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