## 1mdaea2019001

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### Summary of mission outcomes and priority recommendations
- Mission: IMF’s Statistics Department (STA) TA mission in Chisinau, Moldova, during March 18-29, 2019, supported by IMF’s European Department (EUR) and financed by Netherlands Capacity Development Partnership Program.
- Objectives:
  - (i) review available source data for deposit takers (DTs) and other sectors including other financial corporations (OFCs);
  - (ii) review current FSIs compiled by the NBM for methodological consistency with the IMF’s FSI Compilation Guide 2006 (FSI Guide).
- Outcomes:
  - Mission delivered objectives in collaboration with NBM staff and agreed an action plan to improve FSIs in Moldova to enhance policy analysis and decision-making by the NBM.
- Current reporting:
  - NBM compiles and reports FSIs on a quarterly basis to STA including 11 of 12 core and 7 of 13 encouraged indicators for DTs, sectoral financial statements (FS2 template), institutional coverage (FS1 template), and metadata (FSM template).
- Historical issues:
  - Q3 2015 data were distorted by three major banks whose licenses were withdrawn in October 2015; mission recommended excluding data on these three banks starting from Q3 2015 from FSIs calculations.

### Key methodological findings
- Capital measurement:
  - NBM uses balance sheet capital for certain indicators (e.g., NPLs net of provisions to capital; net open position in foreign exchange to capital; capital to assets; large exposures to capital).
  - 2019 FSI Guide prescribes use of regulatory capital according to Basel III; Moldova adopted Basel III in 2018.
  - Mission recommended using regulatory capital in line with the 2019 FSI Guide.
- Loan loss provisions:
  - NBM currently includes both general and specific provisions in provisions used for FSIs.
- Inconsistencies:
  - Discrepancies between FSD and FS2 often arise from differences among reporting and supervisory standards (e.g., total gross loans should exclude advances per FSI Guide).
- Metadata:
  - Identified deviations from FSI Guide will be documented in the metadata accordingly.

### Feasibility and expansion of indicators and coverage
- New and unreported FSIs feasible to compile (source data available):
  - sectoral distribution of loans to total loans;
  - spread between reference lending and deposit rates.
- New DT FSIs from 2019 FSI Guide feasible with available source data (four of six):
  - CET-1 capital to risk-weighted assets;
  - Tier 1 capital to assets;
  - provisions to NPLs;
  - credit growth to private sector.
- Liquidity ratios:
  - Liquidity coverage ratio and net stable funding ratio (NSFR) among the new FSIs noted; scheduled to be introduced in Moldova starting from 2020.
- OFCs coverage and new FSIs:
  - Current FS1 coverage mainly includes insurance companies, microfinance institutions (MFIs), and to a significantly lesser extent non-deposit-taking SCAs.
  - NCFM is starting data collection for leasing companies which will expand OFCs coverage.
  - For new OFC FSIs, insurance companies are relevant for Moldova; pension funds and investment funds (including MMFs) do not operate meaningfully.
  - NCFM indicated required source data already available to compile new FSIs for insurance companies.

### Priority recommendations (selected action plan excerpts and timelines)
- Target Date: December 2019
  - Finalize and regularly report to STA for posting on the IMF’s FSI webpage:
    - the FSIs (FSD template) and the sectoral financial statements (FS2 template) for DTs for all quarterly data in 2018;
    - the FSI institutional coverage (FS1 template) for annual data for 2018;
    - the FSI metadata (FSM template) for Q3 2018.
  - Responsible Institution: NBM [FSD]
- Target Date: March 2020
  - Revise and submit to STA for review:
    - FSD and FS2 for DTs for historical quarterly data, and FS1 for annual data between 2012 and 2017.
  - Responsible Institution: NBM [FSD]
- Target Date: September 2020
  - Expand the coverage of the OFCs sector to include the non-bank credit organizations (microfinance institutions and leasing companies) in collaboration and coordination with the NCFM.
  - Responsible Institutions: NBM [FSD] and NCFM

### Background and context
- HQ-based remote TA:
  - STA provided HQ-based remote TA to address methodological shortcomings (definition of underlying series in FSD; discrepancies between FSD and FS2); some shortcomings remained prior to the mission.
- Banking sector events in 2015:
  - Three major banks had licenses withdrawn in October 2015 (two large, one medium); liquidation still under way.
  - Data for September 2015 for those banks showed a sharp increase in NPLs and negative capital, causing negative capital for the entire banking system and large fluctuations in income/expense and sectoral balance sheet series.
  - STA suggested Q3 2015 and Q4 2015 data not be disseminated on the IMF FSI webpage, creating a historical data gap.

### Financial system structure and key statistics (as reported)
- NBM total assets: 71,119 million Lei (34 percent of GDP) as of end 2018.
- Deposit Takers (DTs) — Commercial banks:
  - Total commercial bank assets: 83,024 million Lei across 11 institutions.
  - Domestically controlled banks: 45,928 million Lei, 4 institutions (29.6 percent of assets in DTs; 27.3 percent of FCs sector).
  - Foreign controlled banks: 37,096 million Lei, 7 institutions (24.0 percent of assets in DTs; 22.1 percent of FCs sector).
- DT-SCAs:
  - Total assets: 796 million Lei, 64 institutions (0.5 percent of assets in DTs; 0.5 percent of FCs sector).
  - DT-SCAs account for 1 percent of DTs’ total assets and are excluded from FSIs coverage due to insignificant size and different regulation.
- Banks in liquidation:
  - Seven banks in liquidation hold total assets of 2.6 billion Lei (total liabilities amount to 29.2 billion Lei); not included in FSIs calculation.
- Financial Corporations (FCs) sector totals:
  - Total FCs assets: 168,085 million Lei as of end 2018.
  - Other Financial Corporations total assets: 13,093 million Lei across 1,090 institutions (7.8 percent of FCs sector).
- OFCs composition:
  - Insurance corporations total assets: 2,997 million Lei, 14 institutions (composite: 899 million Lei; non-life: 2,098 million Lei).
  - Microfinance Institutions total assets: 7,819 million Lei, 176 institutions.
  - Leasing companies: 1,427 million Lei (figures as of 2017; only total fixed assets available), 26 institutions.
  - Payment service providers total assets: 564 million Lei, 6 institutions.
  - NDT-SCAs: 138 million Lei, 204 institutions.
- GDP reference:
  - GDP is 176.8 billion Lei for 2017 (source: IMF World Economic Outlook).
- Note:
  - Since Q1 2019, one domestically controlled bank became foreign controlled.

### Regulatory system and institutional responsibilities
- NBM responsibilities:
  - Regulates and supervises commercial banks, foreign exchange bureaus, and financial payment services providers including electronic money issuers.
  - NBM’s roles and functions are stipulated in the law of the NBM.
- NCFM responsibilities:
  - Regulates non-bank financial institutions (NBFIs): insurance companies, MFIs, SCAs (deposit-taking and non-deposit-taking), brokers and agents, securities dealers, and stock exchanges.
- Non-Bank Credit Organizations (NBCOs) law:
  - Enacted October 2018; NBCOs comprise MFIs and leasing companies.
  - NBCO law empowers NCFM to regulate and supervise MFIs and leasing companies, previously not under supervision.
  - Re-registration at NCFM Registry of authorized NBCOs required by end March 2019.
  - NCFM plans to receive pilot data by Q1 2020 and start regular data collection by Q2 2020.

### Detailed technical assessment — Institutional coverage and consolidation basis
- Institutional coverage findings:
  - FSIs compiled by the NBM cover all 11 commercial banks operating in the country, including four domestically-controlled banks and seven foreign-controlled banks.
  - DT-SCAs excluded from DT reporting population due to size—less than 1 percent of commercial banks’ total assets—and different regulation.
  - Banks in liquidation are excluded from FSIs; three delicensed major banks (licenses withdrawn October 2015) and four smaller banks remain in liquidation.
  - Including September 2015 data for the three delicensed banks significantly affects key FSIs including capital adequacy ratio.
  - NBM separately disseminates key financial information for the three individual banks on a quarterly basis, dating back to Q4 2015; prior to September 2015, more detailed monthly information is available.
- Recommended institutional actions:
  - Exclude Q3 2015 data and onwards for three delicensed major banks from FSIs compilation for STA’s review; resume reporting of FSIs for Q3 2015 and Q4 2015.
  - Reclassify foreign bank branches as domestically incorporated foreign controlled banks in FS1 for 2011 to 2014; update and submit FS1 for 2015 to 2018.
- Consolidation basis:
  - NBM uses a “domestic consolidation” (DC) basis: aggregates resident DTs (domestic and foreign controlled) with their resident DT subsidiaries and includes resident branches of foreign banks; excludes foreign DT subsidiaries and resident/nonresident non-DT subsidiaries.
  - Compiling FSIs for DTs using DC basis is appropriate for Moldova’s banking system structure.

### Detailed technical assessment — Regulatory and accounting frameworks
- Regulatory framework findings:
  - Regulatory framework underlying FSI data for DTs is BCBS standards.
  - In 2018, NBM changed from Basel I to Basel III; since then all banks started adopting Basel III for supervisory data including capital adequacy.
  - All commercial banks have adopted IFRS for financial data reporting, including income statements and balance sheet data used for compiling FSIs.
  - NBM adopted COREP in conjunction with Basel III in July 2018 and introduced revised FINREP reflecting the shift from IAS 39 to IFRS 9 in January 2018.
  - NBM uses FINREP, COREP, and national supervisory standard report forms for compiling FSIs: FINREP includes income and expense statements and balance sheet data; COREP includes detailed regulatory capital (Tier I and Tier II); national forms provide classification of assets by type and counterpart including loan quality.

### Detailed technical assessment — Methodological issues and recommended capital measurement
- Overall assessment:
  - Compilation of FSIs for Moldova is broadly in line with the FSI Guide methodology, with a few minor deviations originating from differences among IFRS, national supervisory standards, and the FSI Guide.
  - Deviations are to be documented in metadata.
- NPLs and loan classification:
  - NPLs defined using the 90-days past due criterion or evidence of nonpayment; loans classified into five categories: (i) standard, (ii) supervised, (iii) substandard, (iv) doubtful, and (v) compromised. NPLs include substandard, doubtful, and compromised loans.
- Loan loss provisions:
  - Provisions are not distinguished between general and specific provisions; FINREP/IFRS-based provisions used in FS2 include both general and specific provisions, deviating from the FSI Guide which recommends distinguishing them.
  - Slight discrepancy exists between IFRS and national supervisory standards because calculation of loan loss provisions is stricter for national standards than for IFRS; this leads to discrepancy in NPLs net of provisions between FSD (national supervisory data) and FS2 (FINREP/IFRS).
- Capital measurement and recommended action:
  - NBM uses balance sheet capital for some supervisory indicators; the 2019 FSI Guide prescribes regulatory capital (Basel III) for these indicators.
  - Recommended action: Use appropriate measures of regulatory capital for relevant supervisory FSIs in line with the 2019 FSI Guide instead of balance sheet capital.
- Table of recommended measures (as in source):
  - NPLs net of provisions to capital — NBM 2006 FSI Guide: Balance sheet capital — 2019 FSI Guide: Total regulatory capital; or balance sheet capital for a DC basis — Total regulatory capital only
  - Net open position in foreign exchange to capital — 2006: Balance sheet capital — 2019: Total capital; or Tier 1 capital* — Total regulatory capital only
  - Capital to assets — 2006: Balance sheet capital — 2019: Balance sheet capital; or Tier 1 capital for cross-border consolidated data — Tier 1 capital (changed to Tier 1 capital to assets)
  - Large exposures to capital — 2006: Balance sheet capital — 2019: Total capital; or Tier 1 capital* — Tier 1 capital only
  - *The 2007 Amendments to the FSI Guide prescribe the measurement of capital as such instead of providing a choice of balance sheet capital.

### Detailed technical assessment — Source data, mapping, and compilation framework
- Source data collection and storage:
  - Source data for FSIs for DTs are collected from 11 commercial banks in the form of FINREP, COREP and national supervisory standard report forms.
  - Data are submitted using electronic forms and stored in the centralized database managed by the Department of Reporting and Statistics (DRS).
  - FSI compilers at Financial Stability Division (FSD) download required data into the bridge table to compile FSIs.
- Source data adequacy:
  - Source data are adequate in coverage, granularity, frequency and timeliness for compiling FSIs for DTs.
  - Most data are reported on a monthly basis within eight working days after the end of the reference period—15 calendar days for quarterly and semi-annual data.
  - Balance sheet data disaggregated by instrument and counterpart sector; income and expense data disaggregated by type.
- Mapping and compilation issues:
  - Mission reviewed NBM compilation spreadsheets and bridge tables linking source data to FSI templates (FS2 and FSD) and found some errors in the bridge tables for income statements and balance sheet data of FS2 summarized in Table 4.
  - Mapping errors and recommended corrections in FS2 (summary):
    - Gains or losses on financial instruments (line 4(ii)): include Gains/losses on financial assets/liabilities (code 287), and exchange rate valuation changes (code 310).
    - Other income (line 4 (iv)): include Gains/losses on derecognition of non-financial assets, net (code 330).
    - Other expenses (line 6 (ii)): exclude Gains/losses on financial assets/liabilities (code 287) and gains/losses on derecognition of nonfinancial assets, net (code 330).
    - Loan loss provisions (line 7.1): Impairment/reversal of impairment on financial assets at amortized cost (code 491) includes provisions unrelated to loans which should be excluded by using chart of accounts for individual banks.
    - Nonfinancial assets (line 14): reclassify codes 184, 260, 330 to appropriate FS2 lines 17, 20, 22 respectively.
    - Loans (line 25): Financial liabilities held for trading and other financial liabilities (codes 060 and 100) should be reclassified as other liabilities (line 27 of FS2).
  - Numerical impacts of the errors were not assessed during the mission; revised FSIs may change after corrections.
- FSD mapping and consistency with FS2:
  - Mapping of source data to the FSD template is appropriate; mapping for some underlying FSD series can be improved by directly linking to FS2 instead of source data to ensure consistency.
  - Direct mapping recommendations (Table 5 summary):
    - Total regulatory capital (S010) — Linked to line 36 of Annex 4
    - Risk-weighted assets (S020) — Linked to line 37 of Annex 4
    - Regulatory Tier 1 capital (S030) — Linked to line 32 of Annex 4
    - Risk-weighted assets (S040) — Linked to line 37 of Annex 4
    - Liquid assets (S190) — Linked to line 40 of Annex 4
    - Total assets (S200) — Linked to line 14 of Annex 3
    - Capital (S250) — Linked to line 32 of Annex 4
    - Total assets (S260) — Linked to line 14 of Annex 3
    - Value of large exposures (S270) — Linked to line 38 of Annex 4
- Remaining discrepancies:
  - Remaining discrepancies between FSD and FS2 mostly appear during the period prior to Q1 2012 where different reporting forms for FS2 (non FINREP based) were used.
  - Discrepancies could be attributed to source data revisions which had never been reflected in FS2.
  - A list of underlying data providing identified reasons for discrepancies is in Appendix III.

### Recommended bridge-table and template consistency actions
- Revise the bridge table mapping source data to FSD and FS2 templates consistent with EBA guidance note; and revise links between FSD and FS2 templates to ensure their consistency where applicable.
- Priority action in mission’s plan:
  - "Revise the bridge table mapping from source data to FSD and FS2 templates and links between FSD and FS2 templates to ensure their consistency where applicable with data for 2018."
  - Target completion: Benchmark September 2019. Priority: H.

### Income and expense statement reporting — recommended change
- Current practice:
  - Income and expense statements are reported on a non-cumulative flow basis in FS2; NBM uses FINREP which is cumulative.
  - NBM transforms cumulative FINREP data into non-cumulative flows by differencing adjacent periods.
- Recommended change:
  - Report income and expense statements in FS2 on a cumulative basis.
- Rationale:
  - FINREP data are originally cumulative and can be reported to FS2 without transformation; annual data can be taken from the last quarter.
- Mission timetable:
  - Target completion: December 2019. Priority: M.

### GDP use for OFC FSI and historical updating
- Current practice:
  - NBM uses annual GDP data because NBS does not publish seasonally adjusted nominal GDP at quarterly frequency.
  - Due to reporting lag, NBM uses previous year’s data for Q1–Q3 and current year’s data for Q4 when available, without replacing previous year’s GDP data for Q1–Q3.
- Suggested approach:
  - Replace the previous year’s GDP data for the first three quarters with the current year’s GDP data when they become available.
- Recommended action:
  - Update historical data for FSIs as the latest GDP data become available.

### Expansion of FSIs — Deposit Takers (DTs)
- Current coverage:
  - NBM currently compiles and reports 11 of 12 core and 7 of 13 encouraged FSIs for DTs.
- Feasible additions (source data available):
  - sectoral distribution of loans to total loans;
  - spread between reference lending and deposit rates.
- Mission recommendation:
  - Compile and regularly report these two additional FSIs for DTs to STA for posting on the IMF’s FSI webpage.
- Timeline:
  - Target completion: March 2020. Priority: M.
- Additional new 2019 FSI Guide FSIs feasible with available source data (four of six):
  - CET-1 capital to risk-weighted assets;
  - Tier 1 capital to assets;
  - provisions to NPLs;
  - credit growth to private sector.
- Note:
  - liquidity coverage ratio and net stable funding ratio scheduled to be introduced in Moldova starting from 2020.

### Expansion of FSIs — Other Financial Corporations (OFCs)
- Current OFC coverage in FS1:
  - insurance companies, MFIs, NDT-SCAs, securities dealers, and a stock exchange. Leasing companies currently excluded.
- Leasing companies:
  - Rapidly expanding OFCs subsector; NCFM developing report forms and projects to start regularly collecting data for leasing companies by Q2 2020.
- MFIs:
  - Coverage not currently universal; could be expanded under NBCO law as MFIs required to re-register and report to the NCFM.
- Recommended action:
  - Expand the coverage of the OFCs sector to include the NBCOs (MFIs and leasing companies) in collaboration and coordination with the NCFM.
- Timeline:
  - Target completion: Benchmark September 2020. Priority: H.
- Feasibility to compile new OFC FSIs:
  - Only insurance companies are currently relevant for Moldova; NCFM indicated source data would enable compilation of all six additional indicators for insurance companies.

### Expansion of FSIs — Other sectors (NFCs, Households, Real estate)
- Current status:
  - NBM does not compile FSIs for nonfinancial corporations (NFCs), households (HHs), and real estate markets due to lack of source data.
- NFCs:
  - Financial data for individual NFCs available annually from NBS; mission suggested NBM review these to assess aggregation feasibility.
- Households:
  - Data not readily available; frequency likely annual and details unknown; coordination with NBS needed.
- Recommended actions:
  - Review existing data on individual NFCs to assess feasibility of compiling FSIs for NFCs. Target completion: September 2020. Priority: M.
  - Investigate availability of source data to compile FSIs for households. Target completion: September 2020. Priority: M.

### Revisions of historical data and approach
- Source data are available in three different reporting frameworks for different time periods:
  - Latest reporting forms from Q1 2018 (revised FINREP based on IFRS 9 introduced January 2018).
  - Reporting forms prior to Q1 2018 used for data starting from Q1 2012 (when FINREP initially introduced).
  - Historical FSIs compiled starting from Q1 2009; source data prior to Q1 2012 are not readily available.
- Mission recommendation and timeline:
  - First revise relevant FSI templates with the latest reporting forms so regular reporting to STA can continue.
  - Revise historical FSIs prior to Q1 2018 to reflect changes in the bridge table and methodologies identified by mission.
  - Start historical data revisions with the latest two periods while investigating feasibility for periods prior to 2012.
- Specific timelines:
  - Revise and report to STA: FSD and FS2 templates for DTs for quarterly data in 2018; FS1 for annual data for 2018; FSM for Q3 2018. Target completion: Benchmark December 2019. Priority: H.
  - Revise and submit to STA FSD and FS2 for DTs for historical quarterly data, and FS1 for annual data between 2012 and 2017. Target completion: Benchmark March 2020. Priority: H.
  - Finalize revisions and start regular reporting of FSD and FS2 for DTs for historical quarterly data, and FS1 for annual data between 2012 and 2017. Target completion: Benchmark June 2020. Priority: H.
  - Investigate feasibility to revise historical data between 2011 and 2009 after 2012+ revisions complete. Target completion: September 2020. Priority: M.

### NBM’s FSIs and selected methodological numerical differences (as of Q4 2018)
- Capital to risk-weighted assets: IMF 26.5, NBM 26.5.
- Tier 1 capital to risk-weighted assets: IMF 26.3, NBM 26.3.
- NPLs net of provisions to capital*: IMF 10.2, NBM 13.7. (Methodological note: IMF’s capital uses balance sheet capital (to be replaced by regulatory capital following the mission’s recommendation).)
- NPLs to total gross loans*: IMF 12.5, NBM 12.5. (IMF’s gross loans include advances.)
- Return on assets: IMF 2.0, NBM 1.9. (IMF’s assets are averaged over monthly observations while NBM’s assets are averaged over daily observations.)
- Return on equity: IMF 11.6, NBM 11.6.
- Interest margin to gross income: IMF 50.2, NBM 41.1. (NBM’s gross income does not exclude interest related expenses.)
- Non-interest expenses to gross income: IMF 71.6, NBM 55.4. (NBM’s non-interest expenses include income taxes and provisions; NBM’s gross income does not exclude interest related expenses.)
- Liquid asset to total assets: IMF 54.6, NBM 54.6.
- Capital to assets: IMF 17.2, NBM 13.0. (IMF’s capital uses balance sheet capital (to be replaced by Tier 1 capital following the mission’s recommendation).)
- Large exposures to capital: IMF 17.0, NBM 22.0. (IMF’s capital uses balance sheet capital (to be replaced by Tier 1 capital following the mission’s recommendation).)
- Foreign-currency-denominated loans to total loans: IMF 37.9, NBM 38.5. (IMF’s total loans include advances (sourced from FINREP).)
- Foreign-currency-denominated liabilities to total liabilities: IMF 42.1, NBM 42.1.
- Footnote:
  - *Indicators are percentage, as of Q4 2018; *NBM’s term is non-performing credits debt in place of NPLs.

### Metadata, documentation, training, and capacity
- FSM for Moldova has not been updated since Q1 2012.
- Given adoption of Basel III in 2018, mission recommended NBM update metadata as of Q3 2018 and include relevant information identified in the report.
- Recommended action:
  - Revise and submit to STA the FSI metadata template (FSM template) as of Q3 2018. Target completion: Benchmark December 2019. Priority: H.
- FSD capacity:
  - FSD has resources to accomplish short-term objectives; one FSD staff member with two back-up staff members responsible for compilation of FSIs.
- Transition to 2019 FSI Guide:
  - Source data required by new guidelines are already available for currently reported FSIs; mapping into new templates will require new workflows but FSD deemed capable of transition without on-site TA.
- Training:
  - None of current FSI compilers has participated in IMF-organized FSI training; participation in future IMF training courses recommended.
  - NCFM requested future training sessions on methodology and compilation for NCFM staff and reporting financial institutions.
- STA support:
  - STA stands ready to provide remote TA from Headquarters; a follow-up on-site TA mission could be considered if requested and resources permit.

### Action plan highlights (selected items)
- Revise and report to STA: FSD, FS2 (DTs quarterly 2018), FS1 (DTs annual 2018), FSM (Q3 2018). Target completion: Benchmark December 2019. Priority: H.
- Revise bridge table and links between FSD and FS2. Target completion: Benchmark September 2019. Priority: H.
- Exclude data from Q3 2015 onwards for three delicensed major banks from FSIs compilation; resume reporting Q3 2015 and Q4 2015. Target: September 2019. Priority: H.
- Report income and expense statements in FS2 on a cumulative basis. Target: December 2019. Priority: M.
- Revise and submit to STA historical FSD and FS2 for DTs (2012–2017) and FS1 annual data (2012–2017). Target submission benchmark: March 2020. Priority: H.
- Finalize revisions and start regular reporting of FSD and FS2 for DTs for historical quarterly data and FS1 for annual data 2012–2017. Target: June 2020. Priority: H.
- Investigate feasibility to revise historical data 2009–2011 once 2012+ revisions complete. Target: September 2020. Priority: M.
- Compile and regularly report two additional FSIs for DTs to STA. Target: March 2020. Priority: M.
- Expand OFCs coverage to include NBCOs (microfinance institutions and leasing companies) in collaboration with NCFM. Target: Benchmark September 2020. Priority: H.
- Review NFC individual data to assess FSI feasibility. Target: September 2020. Priority: M.
- Investigate availability of source data to compile FSIs for households. Target: September 2020. Priority: M.

*Source: IMF mission report to the National Bank of Moldova, March 18-29, 2019.*

### 1.   Priority Recommendations ____________________________________________________________________ 6

### 1.   Priority Recommendations ____________________________________________________________________ 6

### Summary of mission outcomes and priority recommendations
- Mission: IMF’s Statistics Department (STA) TA mission in Chisinau, Moldova, during March 18-29, 2019, supported by IMF’s European Department (EUR) and financed by Netherlands Capacity Development Partnership Program.
- Objectives: (i) review available source data for deposit takers (DTs) and other sectors including other financial corporations (OFCs); and (ii) review current FSIs compiled by the NBM for methodological consistency with the IMF’s FSI Compilation Guide 2006 (FSI Guide).
- Outcomes: Mission delivered objectives in collaboration with NBM staff and agreed an action plan to improve FSIs in Moldova to enhance policy analysis and decision-making by the NBM.
- Current reporting: NBM compiles and reports FSIs on a quarterly basis to STA including 11 of 12 core and 7 of 13 encouraged indicators for DTs, sectoral financial statements (FS2 template), institutional coverage (FS1 template), and metadata (FSM template).
- Historical issues: Q3 2015 data were distorted by three major banks whose licenses were withdrawn in October 2015; mission recommended excluding data on these three banks starting from Q3 2015 from FSIs calculations.

### Key methodological findings
- Capital measurement:
  - NBM uses balance sheet capital for certain indicators (e.g., NPLs net of provisions to capital; net open position in foreign exchange to capital; capital to assets; large exposures to capital).
  - 2019 FSI Guide prescribes use of regulatory capital according to Basel III; Moldova adopted Basel III in 2018.
  - Mission recommended using regulatory capital in line with the 2019 FSI Guide.
- Loan loss provisions:
  - NBM currently includes both general and specific provisions.
- Inconsistencies:
  - Discrepancies between FSD and FS2 often arise from differences among reporting and supervisory standards (e.g., total gross loans should exclude advances per FSI Guide).
- Metadata: Identified deviations from FSI Guide will be documented in the metadata accordingly.

### Feasibility and expansion of indicators and coverage
- New and unreported FSIs feasible to compile (source data available):
  - Two currently not reported but feasible: sectoral distribution of loans to total loans; spread between reference lending and deposit rates.
  - Four of six new FSIs for DTs introduced in the 2019 FSI Guide can be compiled: CET-1 capital to risk-weighted assets; Tier 1 capital to assets; provisions to NPLs; credit growth to private sector.
  - Liquidity coverage ratio and net stable funding ratio (NSFR) among the new FSIs noted but not explicitly stated as currently feasible.
- OFCs coverage and new FSIs:
  - Current FS1 coverage mainly includes insurance companies, microfinance institutions (MFIs), and to a significantly lesser extent non-deposit-taking SCAs.
  - NCFM is starting data collection for leasing companies which will expand OFCs coverage.
  - For new OFC FSIs, insurance companies are relevant for Moldova; pension funds and investment funds (including MMFs) do not operate meaningfully.
  - NCFM indicated required source data already available to compile new FSIs for insurance companies.

### Priority recommendations (action plan excerpts)
- Target Date: December 2019
  - Finalize and regularly report to STA for posting on the IMF’s FSI webpage:
    - the FSIs (FSD template) and the sectoral financial statements (FS2 template) for DTs for all quarterly data in 2018;
    - the FSI institutional coverage (FS1 template) for annual data for 2018;
    - the FSI metadata (FSM template) for Q3 2018.
  - Responsible Institution: NBM [FSD]
- Target Date: March 2020
  - Revise and submit to STA for review:
    - FSD and FS2 for DTs for historical quarterly data, and FS1 for annual data between 2012 and 2017.
  - Responsible Institution: NBM [FSD]
- Target Date: September 2020
  - Expand the coverage of the OFCs sector to include the non-bank credit organizations (microfinance institutions and leasing companies) in collaboration and coordination with the NCFM.
  - Responsible Institutions: NBM [FSD] and NCFM

### Background and context
- HQ-based remote TA: STA had provided HQ-based remote TA to address methodological shortcomings (definition of underlying series in FSD; discrepancies between FSD and FS2); some shortcomings remained prior to the mission.
- Banking sector events in 2015:
  - Three major banks had licenses withdrawn in October 2015 (two large, one medium); liquidation still under way.
  - Data for September 2015 for those banks showed a sharp increase in NPLs and negative capital, causing negative capital for the entire banking system and large fluctuations in income/expense and sectoral balance sheet series.
  - STA suggested Q3 2015 and Q4 2015 data not be disseminated on the IMF FSI webpage, creating a historical data gap.

### Financial system structure and key statistics (as reported)
- National Bank of Moldova (NBM) total assets: 71,119 million Lei (34 percent of GDP) as of end 2018 (Table 2).
- Deposit Takers (DTs) — Commercial banks:
  - Total commercial bank assets: 83,024 million Lei across 11 institutions.
  - Domestically controlled banks: 45,928 million Lei, 4 institutions (29.6 percent of assets in DTs; 27.3 percent of FCs sector).
  - Foreign controlled banks: 37,096 million Lei, 7 institutions (24.0 percent of assets in DTs; 22.1 percent of FCs sector).
- DT-SCAs:
  - Total assets: 796 million Lei, 64 institutions (0.5 percent of assets in DTs; 0.5 percent of FCs sector).
  - DT-SCAs account for 1 percent of DTs’ total assets and are excluded from FSIs coverage due to insignificant size and different regulation.
- Banks in liquidation:
  - Seven banks in liquidation hold total assets of 2.6 billion Lei (total liabilities amount to 29.2 billion Lei); not included in FSIs calculation.
- Financial Corporations (FCs) sector totals:
  - Total FCs assets: 168,085 million Lei as of end 2018.
  - Other Financial Corporations total assets: 13,093 million Lei across 1,090 institutions (7.8 percent of FCs sector).
- OFCs composition:
  - Insurance corporations total assets: 2,997 million Lei, 14 institutions (composite: 899 million Lei; non-life: 2,098 million Lei).
  - Microfinance Institutions total assets: 7,819 million Lei, 176 institutions.
  - Leasing companies: 1,427 million Lei (figures as of 2017; only total fixed assets available), 26 institutions.
  - Payment service providers total assets: 564 million Lei, 6 institutions.
  - NDT-SCAs: 138 million Lei, 204 institutions.
- GDP reference: GDP is 176.8 billion Lei for 2017 (source: IMF World Economic Outlook).
- Note: Since Q1 2019, one domestically controlled bank became foreign controlled.

### Regulatory system and institutional responsibilities
- NBM responsibilities:
  - Regulates and supervises commercial banks, foreign exchange bureaus, and financial payment services providers including electronic money issuers.
  - NBM’s roles and functions are stipulated in the law of the NBM.
- NCFM responsibilities:
  - Regulates non-bank financial institutions (NBFIs): insurance companies, MFIs, SCAs (deposit-taking and non-deposit-taking), brokers and agents, securities dealers, and stock exchanges.
- Non-Bank Credit Organizations (NBCOs) law:
  - Enacted October 2018; NBCOs comprise MFIs and leasing companies.
  - NBCO law empowers NCFM to regulate and supervise MFIs and leasing companies, previously not under supervision.
  - Re-registration at NCFM Registry of authorized NBCOs required by end March 2019.
  - NCFM plans to receive pilot data by Q1 2020 and start regular data collection by Q2 2020.

### New FSI Compilation Guide (2019 FSI Guide) implications
- Updated guide published in 2019 to align FSIs with post-crisis needs and Basel III.
- New DT FSIs include six new indicators:
  - CET-1 capital to risk-weighted assets;
  - Tier 1 capital to assets;
  - Provisions to NPLs;
  - Liquidity coverage ratio;
  - Net stable funding ratio (NSFR);
  - Credit growth to private sector.
- New OFC FSIs expand coverage and include measures for money market funds (sectoral distribution and maturity), insurance corporations (capital adequacy, efficiency, profitability, combined ratio), and pension funds (investment efficiency and liquidity adequacy).

*Source: IMF mission report to the National Bank of Moldova, March 18-29, 2019.*

### 18. In addition to new indicators, the new 2019 FSI Guide will introduce new reporting

### 18. In addition to new indicators, the new 2019 FSI Guide will introduce new reporting

### DETAILED TECHNICAL ASSESSMENT AND RECOMMENDATIONS — Institutional Coverage and Consolidation Basis

- Institutional Coverage findings:
  - FSIs compiled by the NBM cover all 11 commercial banks operating in the country, including four domestically-controlled banks and seven foreign-controlled banks.
  - DT-SCAs are currently excluded from the reporting population of DTs due to its insignificant size—less than 1 percent of commercial banks’ total assets.
  - DT-SCAs under the NCFM’s supervision comply with different regulations from commercial banks regulated by the NBM.
  - Banks in liquidation are excluded from the compilation of FSIs; banks in liquidation comprise three major banks whose banking licenses were withdrawn by the NBM in October 2015 and four significantly smaller banks; all those banks are still in a liquidation process to date.
  - Including data for September 2015 for those three major banks significantly affects some key FSIs for the entire banking system including the capital adequacy ratio.
  - The NBM separately disseminates key financial information including on income and expense statements and balance sheet data for those individual three banks on a quarterly basis, dating back to Q4 2015 on its webpage. Prior to September 2015, more detailed information for those individual three banks are also available on a monthly basis.

- Recommended action (institutional coverage):
  - Exclude Q3 2015 data and onwards for three delicensed major banks from the compilation of FSIs for STA’s review; and resume reporting of FSIs for Q3 2015 and Q4 2015.
  - Reclassify foreign bank branches as domestically incorporated foreign controlled banks in FS1 for 2011 to 2014; and update and submit FS1 for 2015 to 2018.

- FS1 template and submission:
  - FS1 is a template to describe institutional coverage of FSIs for DTs and OFCs and includes: (i) number of entities, branches, and subsidiaries; and (ii) total assets by several categories.
  - Ownership matrix distinctions in FS1: for DTs only—government controlled or privately controlled; for DTs and OFCs—domestically incorporated domestically controlled, domestically incorporated foreign controlled, or foreign bank branches.
  - Template covers 11 types of DTs and four subsectors for OFCs, and records inclusion/exclusion of DTs and whether DTs are in distress or in receivership.
  - Since the most recent submission of FS1 is data for 2014, FS1 needs to be updated; submit FS1 for 2015 to 2018 and correct misclassification of banks.

- Consolidation basis:
  - NBM uses a “domestic consolidation” (DC) basis: stocks and flows are aggregated for all commercial banks to obtain sectoral income statement, sectoral balance sheet, and memorandum series.
  - DC basis consolidates resident (domestic and foreign controlled) DTs with their resident DT subsidiaries, and includes resident branches of foreign banks; excludes foreign DT subsidiaries, and resident and nonresident non-DT subsidiaries.
  - Moldova’s resident DTs do not have resident DT subsidiaries; no consolidation needed for that aspect.
  - Compiling FSIs for DTs using the DC basis is appropriate given Moldova’s banking system structure.
  - CBCSDI and DCCBCS bases are discussed in the FSI Guide as alternatives; note one bank owns a leasing company (MAIB-Leasing JSC) which is a non-DT financial subsidiary and accounts for only about 1 percent in relation to the whole banking industry.

### DETAILED TECHNICAL ASSESSMENT AND RECOMMENDATIONS — Regulatory and Accounting Frameworks

- Regulatory framework findings:
  - Regulatory framework underlying FSI data for DTs is the Basel Committee on Banking Supervision (BCBS) standards.
  - In 2018, the NBM changed its regulatory framework from Basel I to Basel III; since then all banks started adopting Basel III for supervisory data including capital adequacy.
  - All commercial banks have adopted the IFRS for financial data reporting, including income statements and balance sheet data used for compiling FSIs.
  - NBM adopted COREP in conjunction with Basel III in July 2018 and introduced revised FINREP reflecting the shift from IAS 39 to IFRS 9 in January 2018.
  - NBM uses FINREP, COREP, and national supervisory standard report forms for compiling FSIs: FINREP includes income and expense statements and balance sheet data; COREP includes detailed regulatory capital (Tier I and Tier II); national forms provide classification of assets by type and counterpart including loan quality.

### DETAILED TECHNICAL ASSESSMENT AND RECOMMENDATIONS — Methodological Issues

- Overall assessment:
  - Compilation of FSIs for Moldova is broadly in line with the FSI Guide methodology, with a few minor deviations originating from differences among IFRS, national supervisory standards, and the FSI Guide.
  - Deviations are documented in the metadata.

- NPLs and loan classification:
  - NPLs are defined in line with the FSI Guide using the 90-days past due criterion or evidence to classify a loan as nonperforming even in the absence of a 90-day past due payment.
  - Rule: any loan for which a debtor has not made scheduled payments of principal or interest for at least 90 days must be classified as nonperforming.
  - Banks may classify a loan as nonperforming if they have evidence payments will not be made (e.g., debtor bankruptcy).
  - Loans are classified by five categories: (i) standard, (ii) supervised, (iii) substandard, (iv) doubtful, and (v) compromised. NPLs include loans classified as substandard, doubtful, and compromised.

- Loan loss provisions:
  - Loan loss provisions are not distinguished between general and specific provisions; this treatment is consistent with IFRS and FINREP and national supervisory standards.
  - Provisions in FS2 calculated from FINREP include both general and specific provisions, deviating from the FSI Guide which recommends distinguishing the two types.
  - Slight discrepancy exists between IFRS and national supervisory standards because calculation of loan loss provisions is stricter for national standards than for IFRS; this leads to discrepancy in NPLs net of provisions between FSD (national supervisory data) and FS2 (FINREP/IFRS).

- Capital measurement for supervisory indicators:
  - NBM uses balance sheet capital to calculate some supervisory indicators: NPLs net of provisions to capital, net open position in foreign exchange to capital, capital to assets, and large exposures to capital.
  - Two indicators (NPLs net of provisions to capital and capital to assets) are in line with the current FSI Guide allowing balance sheet capital as proxy for regulatory capital.
  - Other two indicators (net open position in foreign exchange to capital and large exposures to capital) deviate from the current FSI Guide which disallows use of balance sheet capital as prescribed in the 2007 Amendments.
  - The new 2019 FSI Guide prescribes use of regulatory capital in line with Basel III for all those indicators.

- Recommended action (capital measurement):
  - Use appropriate measures of regulatory capital for relevant supervisory FSIs in line with the 2019 FSI Guide instead of balance sheet capital.

- Table of recommended measures (as presented in source):
  - Financial Soundness Indicator — NBM 2006 FSI Guide — 2019 FSI Guide
    - NPLs net of provisions to capital — Balance sheet capital — Total regulatory capital; or balance sheet capital for a DC basis — Total regulatory capital only
    - Net open position in foreign exchange to capital — Balance sheet capital — Total capital; or Tier 1 capital* — Total regulatory capital only
    - Capital to assets — Balance sheet capital — Balance sheet capital; or Tier 1 capital for cross-border consolidated data — Tier 1 capital (this indicator is changed to Tier 1 capital to assets)
    - Large exposures to capital — Balance sheet capital — Total capital; or Tier 1 capital* — Tier 1 capital only
  - * The 2007 Amendments to the FSI Guide prescribe the measurement of capital as such instead of providing a choice of balance sheet capital.

### DETAILED TECHNICAL ASSESSMENT AND RECOMMENDATIONS — Source Data and Compilation Framework

- Source data collection and storage:
  - Source data for FSIs for DTs are collected from 11 commercial banks in the form of FINREP, COREP and national supervisory standard report forms.
  - Data are submitted using electronic forms and stored in the centralized database managed by the Department of Reporting and Statistics (DRS).
  - FSI compilers at Financial Stability Division (FSD) download required data into the bridge table to compile FSIs.

- Source data adequacy:
  - Source data are adequate in coverage, granularity, frequency and timeliness for compiling FSIs for DTs.
  - Most data are reported on a monthly basis within eight working days after the end of the reference period—15 calendar days for quarterly and semi-annual data.
  - Balance sheet data are disaggregated by type of financial instrument and by counterpart sector; income and expense data are disaggregated by type.

- Mapping and compilation issues:
  - The mission reviewed NBM compilation spreadsheets and bridge tables linking source data to FSI templates (FS2 and FSD) and found some errors in the bridge tables for income statements and balance sheet data of FS2 summarized in Table 4.
  - An EBA Guidance Note provides guidance to FSI compilers of EEA countries on compiling FSIs for DTs using FINREP and COREP under EBA ITS; NBM would benefit from assessing consistency of its FSD templates with the EBA Guidance Note.

- Mapping errors and recommended corrections in FS2 (Table 4 summary):
  - Gains or losses on financial instruments (line 4(ii)): include Gains/losses on financial assets/liabilities (code 287), and exchange rate valuation changes (code 310).
  - Other income (line 4 (iv)): include Gains/losses on derecognition of non-financial assets, net (code 330).
  - Other expenses (line 6 (ii)): exclude Gains/losses on financial assets/liabilities (code 287) and gains/losses on derecognition of nonfinancial assets, net (code 330).
  - Loan loss provisions (line 7.1): Impairment/reversal of impairment on financial assets at amortized cost (code 491) includes provisions unrelated to loans (e.g., interbank placements) which should be excluded by using chart of accounts for individual banks.
  - Nonfinancial assets (line 14): reclassify Mandatory minimum reserve on financial means attracted in freely convertible currency (code 184), Investments in subsidiaries, joint ventures and associates (code 260), and tax assets (code 330) as currency and deposits (line 17 of FS2), shares and other equity (line 20 of FS2) and other assets (line 22 of FS2), respectively.
  - Loans (line 25): Financial liabilities held for trading, other financial liabilities (code 060) and Financial liabilities designated at fair value through profit or loss, other financial liabilities (code 100) should be reclassified as other liabilities (line 27 of FS2).
  - Note: The numerical impacts of the errors were not assessed during the mission; the revised FSIs may change after the corrections.

- FSD mapping and consistency with FS2:
  - Mapping of source data to the FSD template is appropriate; however, mapping for some underlying FSD series can be improved by directly linking to FS2 instead of source data to ensure consistency.
  - Direct mapping recommendations (Table 5 summary):
    - Total regulatory capital (S010) — Linked to line 36 of Annex 4
    - Risk-weighted assets (S020) — Linked to line 37 of Annex 4
    - Regulatory Tier 1 capital (S030) — Linked to line 32 of Annex 4
    - Risk-weighted assets (S040) — Linked to line 37 of Annex 4
    - Liquid assets (S190) — Linked to line 40 of Annex 4
    - Total assets (S200) — Linked to line 14 of Annex 3
    - Capital (S250) — Linked to line 32 of Annex 4
    - Total assets (S260) — Linked to line 14 of Annex 3
    - Value of large exposures (S270) — Linked to line 38 of Annex 4

- Remaining discrepancies:
  - Remaining discrepancies between FSD and FS2 mostly appear during the period prior to Q1 2012 where different reporting forms for FS2 (non FINREP based) were used.
  - Discrepancies could be attributed to source data revisions which had never been reflected in FS2.
  - A list of underlying data providing identified reasons for discrepancies is in Appendix III.

*Source: 1mdaea2019001 - 18. In addition to new indicators, the new 2019 FSI Guide will introduce new reporting*

### 38. Recommended action: Revise the bridge table mapping source data to FSD and FS2

### 1mdaea2019001 - 38. Recommended action: Revise the bridge table mapping source data to FSD and FS2

### Recommended bridge-table and template consistency actions
- Revise the bridge table mapping source data to FSD and FS2 templates consistent with EBA guidance note; and revise links between FSD and FS2 templates to ensure their consistency where applicable.
- Priority action in mission’s plan: "Revise the bridge table mapping from source data to FSD and FS2 templates and links between FSD and FS2 templates to ensure their consistency where applicable with data for 2018." Target completion: Benchmark September 2019. Priority: H.

### Income and expense statement reporting
- Current practice: Income and expense statements are reported on a non-cumulative flow basis in FS2. The NBM uses FINREP to report income and expense statements for DTs in FS2.
- Issue identified: The NBM transforms cumulative flow data of FINREP into non-cumulative flow data by taking a difference of data in adjacent periods in reporting FS2.
- Recommended change: Report income and expense statements in FS2 on a cumulative basis.
- Rationale: Data in FINREP originally on a cumulative basis can be reported in FS2 without transformation; annual data for any year are taken from the last quarter of that year so the NBM would not need to additionally report cumulated quarterly data as annual data.
- Mission recommendation and timetable: Report income and expense statements in FS2 on a cumulative basis. Target completion: December 2019. Priority: M.

### GDP use for OFC FSI (assets to GDP) and historical updating
- Current practice: NBM uses annual GDP data for any given year because the NBS does not publish seasonally adjusted nominal GDP data with the quarterly frequency.
- Identified problem: Due to a reporting lag of one quarter, the NBM uses the previous year’s data for the first three quarters and the current year’s data for the fourth quarter when they become available, without replacing the previous year’s GDP data for Q1–Q3. This results in a gap between Q3 and Q4 of GDP data series within the same year.
- Suggested approach: Replace the previous year’s GDP data for the first three quarters with the current year’s GDP data when they become available.
- Recommended action: Update historical data for FSIs as the latest GDP data become available.

### Expansion of FSIs — Deposit Takers (DTs)
- Current coverage: NBM currently compiles and reports 11 of 12 core and seven of 13 encouraged FSIs for DTs.
- Feasible additions (source data available): two FSIs currently not reported to STA:
  - sectoral distribution of loans to total loans (FSI)
  - spread between reference lending and deposit rates (FSI)
- Mission recommendation: Compile and regularly report these additional two FSIs for DTs to STA for posting on the IMF’s FSI webpage.
- Timeline in action plan: Compile and regularly report additional two FSIs for DTs. Target completion: March 2020. Priority: M.
- Additional new 2019 FSI Guide FSIs feasible with available source data (four of six): 
  - CET-1 capital to risk-weighted assets
  - Tier 1 capital to assets
  - provisions to NPLs
  - credit growth to private sector
  - Note: Tier 1 capital to assets replaces the encouraged FSI capital to assets; liquidity coverage ratio and net stable funding ratio scheduled to be introduced in Moldova starting from 2020.

### Expansion of FSIs — Other Financial Corporations (OFCs)
- Current OFC coverage in FS1: insurance companies, MFIs, NDT-SCAs, securities dealers, and a stock exchange. Leasing companies currently excluded.
- Leasing companies: rapidly expanding OFCs subsector; NCFM developing report forms and projects to start regularly collecting data for leasing companies by Q2 2020.
- MFIs: coverage not currently universal; could be expanded under new regulatory law as MFIs required to re-register and report to the NCFM.
- Recommended action: Expand the coverage of the OFCs sector to include the NBCOs (MFIs and leasing companies) in collaboration and coordination with the NCFM.
- Timeline in action plan: Expand coverage of OFCs to include NBCOs. Target completion: Benchmark September 2020. Priority: H.
- Relevance to MFS: Inclusion of leasing companies would result in almost full coverage of the OFCs sector for the MFS.
- Feasibility to compile new FSIs for OFCs per 2019 FSI Guide: only insurance companies are relevant for Moldova currently; NCFM indicated source data would enable compilation of all six additional indicators for insurance companies.

### Expansion of FSIs — Other sectors (NFCs, Households, Real estate)
- Current status: NBM does not compile FSIs for nonfinancial corporations (NFCs), households (HHs), and real estate markets due to lack of source data.
- NFCs: Financial data for individual NFCs are available on an annual basis from the NBS. Mission suggested NBM review individual NFCs data to investigate feasibility of aggregating to compile FSIs for NFCs.
- Households: Data not readily available; frequency likely annual and details unknown. Coordination with NBS needed to explore collection.
- Recommended actions:
  - Review existing data on individual NFCs to assess feasibility of compiling FSIs for NFCs. Target completion: September 2020. Priority: M.
  - Investigate availability of source data to compile FSIs for households. Target completion: September 2020. Priority: M.

### Revisions of historical data and approach
- Source data for FSIs are available in three different reporting frameworks for different time periods.
- Latest reporting forms used for data starting from Q1 2018 (revised FINREP based on IFRS 9 introduced January 2018).
- Reporting forms prior to Q1 2018 are used for data starting from Q1 2012 (when FINREP initially introduced).
- Historical FSIs compiled starting from Q1 2009; source data prior to Q1 2012 are not readily available.
- Mission recommendation:
  - First revise relevant FSI templates with the latest reporting forms so regular reporting to STA can continue.
  - Revise historical FSIs prior to Q1 2018 to reflect changes in the bridge table and methodologies identified by mission.
  - Start historical data revisions with the latest two periods while investigating feasibility for periods prior to 2012.
- Specific recommended actions and timelines:
  - Revise and report to STA for posting: FSD and FS2 templates for DTs for quarterly data in 2018; FS1 for annual data for 2018; FSM for Q3 2018. Target completion: Benchmark December 2019. Priority: H.
  - Revise and submit to STA for review FSD and FS2 for DTs for historical quarterly data, and FS1 for annual data between 2012 and 2017. Target completion: Benchmark March 2020. Priority: H.
  - Finalize revisions and start regular reporting of FSD and FS2 for DTs for historical quarterly data, and FS1 for annual data between 2012 and 2017. Target completion: Benchmark June 2020. Priority: H.
  - Once revision of historical data from 2012 and onwards is complete, investigate feasibility to revise historical data between 2011 and 2009 for FSD, FS2 and FS1. Target completion: September 2020. Priority: M.

### NBM’s FSIs and methodological differences with IMF FSIs (selected numerical differences as of Q4 2018)
- Capital to risk-weighted assets: IMF 26.5, NBM 26.5.
- Tier 1 capital to risk-weighted assets: IMF 26.3, NBM 26.3.
- NPLs net of provisions to capital*: IMF 10.2, NBM 13.7. (Methodological note: IMF’s capital uses balance sheet capital (to be replaced by regulatory capital following the mission’s recommendation).)
- NPLs to total gross loans*: IMF 12.5, NBM 12.5. (Methodological note: IMF’s gross loans include advances.)
- Return on assets: IMF 2.0, NBM 1.9. (IMF’s assets are averaged over monthly observations while NBM’s assets are averaged over daily observations.)
- Return on equity: IMF 11.6, NBM 11.6.
- Interest margin to gross income: IMF 50.2, NBM 41.1. (NBM’s gross income does not exclude interest related expenses.)
- Non-interest expenses to gross income: IMF 71.6, NBM 55.4. (NBM’s non-interest expenses include income taxes and provisions; NBM’s gross income does not exclude interest related expenses.)
- Liquid asset to total assets: IMF 54.6, NBM 54.6.
- Capital to assets: IMF 17.2, NBM 13.0. (IMF’s capital uses balance sheet capital (to be replaced by Tier 1 capital following the mission’s recommendation).)
- Large exposures to capital: IMF 17.0, NBM 22.0. (IMF’s capital uses balance sheet capital (to be replaced by Tier 1 capital following the mission’s recommendation).)
- Foreign-currency-denominated loans to total loans: IMF 37.9, NBM 38.5. (IMF’s total loans include advances (sourced from FINREP).)
- Foreign-currency-denominated liabilities to total liabilities: IMF 42.1, NBM 42.1.
- Footnote: *Indicators are percentage, as of Q4 2018; *NBM’s term is non-performing credits debt in place of NPLs.

### Metadata and documentation
- FSM for Moldova has not been updated since Q1 2012.
- Given major institutional change to adopt Basel III in 2018, mission recommended NBM update metadata as of Q3 2018 and include relevant information identified in the report.
- Recommended action: Revise and submit to STA the FSI metadata template (FSM template) as of Q3 2018. Priority action in plan: Revise the FSI metadata (FSM template) for Q3 2018 and submit. Target completion: Benchmark December 2019. Priority: H.

### NBM’s internal FSIs and alignment with IMF FSIs
- NBM compiles and disseminates another set of FSIs for banks on its webpage (NBM’s FSIs) including income and expense statements and balance sheet data for individual banks and aggregated banking system starting from December 2013.
- Major methodological differences with IMF FSIs include:
  - Definition of gross income (whether to exclude interest related expenses for interest margin to gross income and non-interest expenses to gross income).
  - Use of capital measure (regulatory capital vs balance sheet capital). Mission recommendation will resolve this upon implementation.

### Future technical assistance and capacity issues
- FSD capacity: FSD has resources to accomplish short-term objectives; one FSD staff member with two back-up staff members responsible for compilation of FSIs.
- Transition to the new 2019 FSI Guide: source data required by new guidelines are already available for currently reported FSIs; mapping into new templates will require new workflows but FSD deemed capable of transition without on-site TA.
- Training: None of current FSI compilers has participated in IMF-organized FSI training; participation in future IMF training courses recommended.
- NCFM challenges: Expanding OFCs coverage and implementing new FSI guidelines will require instructing and training reporting financial institutions, developing bridge tables, and mapping source data into new income statement and balance sheet templates. NCFM requested future training sessions on methodology and compilation for NCFM staff and reporting financial institutions.
- STA support: STA stands ready to provide remote TA from Headquarters; a follow-up on-site TA mission could be considered if requested and resources permit.

### Action plan highlights (selected items from mission’s recommendations)
- Revise and report to STA: FSD, FS2 (DTs quarterly 2018), FS1 (DTs annual 2018), FSM (Q3 2018). Target completion: Benchmark December 2019. Priority: H.
- Revise bridge table and links between FSD and FS2. Target completion: Benchmark September 2019. Priority: H.
- Exclude data from Q3 2015 onwards for three delicensed major banks from FSIs compilation; resume reporting Q3 2015 and Q4 2015. Target: September 2019. Priority: H.
- Report income and expense statements in FS2 on a cumulative basis. Target: December 2019. Priority: M.
- Revise and submit to STA historical FSD and FS2 for DTs (2012–2017) and FS1 annual data (2012–2017). Target submission benchmark: March 2020. Priority: H.
- Finalize revisions and start regular reporting of FSD and FS2 for DTs for historical quarterly data and FS1 for annual data 2012–2017. Target: June 2020. Priority: H.
- Investigate feasibility to revise historical data 2009–2011 once 2012+ revisions complete. Target: September 2020. Priority: M.
- Compile and regularly report two additional FSIs for DTs to STA. Target: March 2020. Priority: M.
- Expand OFCs coverage to include NBCOs (microfinance institutions and leasing companies) in collaboration with NCFM. Target: Benchmark September 2020. Priority: H.
- Review NFC individual data to assess FSI feasibility. Target: September 2020. Priority: M.
- Investigate availability of source data to compile FSIs for households. Target: September 2020. Priority: M.

*Source: Moldova Financial System Stability Assessment (selection of mission findings and recommendations).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1mdaea2019001.pdf_