## 1mdaea2026004 ## Source details **Canonical URL:** [1mdaea2026004](https://www.imf.org/-/media/files/publications/cr/2026/english/1mdaea2026004.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1mdaea2026004.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1mdaea2026004.pdf.json) --- ### Institutional framework for macroprudential policy — key findings - The National Bank of Moldova (NBM) is central to the framework—supervising banks and non-bank lenders after the 2023 twin-peaks reform—while the National Commission for Financial Markets (NCFM) oversees capital markets. - Consolidation under the NBM has enhanced oversight and regulatory consistency; both NBM and NCFM are operationally independent and legally tasked with preserving financial stability. - The Law on the NBM (LNBM) assigns equal weight to financial stability and support of government policy without a clear hierarchy, creating potential ambiguity when objectives conflict. - The National Committee for Financial Stability (NCFS) is the formal macroprudential authority and high-level inter-agency forum with comply-or-explain powers. - Coordination and communication improvements: Financial Stability Working Group (FSWG), frequent Board discussions, annual Financial Stability Report (since 2019), quarterly Financial Stability Assessment Report (since 2024), a macroprudential policy strategy, and NBM website publications. - Institutional gaps and recommendations: - Revise the LNBM to include a precise hierarchy between the objectives of price stability, financial stability and support of government policies (Recommendation 1). - Consider amending the Law on the NCFS to strengthen the link between the comply-or-explain mechanism and financial stability outcomes (Recommendation 2). - Enhance intra-agency and inter-agency cooperation arrangements and formalize FSWG meetings (Recommendation 3). ### Systemic risk monitoring, data gaps, and recommendations - Current monitoring and tests: - Financial Stability Department (FSD) maintains a wide dashboard, synthetic indicators, and solvency, liquidity, and contagion stress tests; top-down macroprudential stress tests conducted quarterly with a two-year horizon. - Stress tests complemented by targeted interbank contagion and large-debtor-group default analyses; liquidity stress tests based on LCR scenarios and evolving maturity-bucket analysis. - Data status and gaps: - New reporting standards for non-bank credit organizations (NBCOs) since July 2024; reporting discipline outside banking—especially savings and loan associations (SLAs)—remains weaker. - Central credit registry is loan-level and includes DSTI at origination since 2022, but reporting constraints arise from informality and voluntary reporting by insurers, SLAs, and some retail companies. - Corporate data from the National Bureau of Statistics (NBS) lack key variables (e.g., interest expenses, EBIT) and could be better integrated; NBM should incorporate corporates’ foreign debt already available at the NBM. - Real estate data improved (offered prices for Chisinau since 2019; quarterly house price series) but transaction prices, rents, vacancy rates for commercial property, and share of buy-to-let versus owner-occupied housing remain lacking. - Climate risk data series mostly span 2017–present; limitations include lags in CO2 data, insufficient energy mix information, and no forward-looking climate impact studies. - Data and monitoring recommendations: - Strengthen monitoring with a structured, forward-looking methodology to analyze the financial cycle (Recommendation 5). - Continue improving and expanding stress-testing framework and quantitative toolkit as data quality improves (Recommendation 6). - Broaden and leverage household and corporate indebtedness data; develop a joint NBM-NBS action plan to improve data quality (Recommendation 7). - Assist NBFIs in improving reported data and consider sanctions for non-filers as reporting improves (Recommendation 8). - Suggested registry enhancements: preserve DSTI at origination, capture borrower employment status and type of income, automated flagging of inconsistencies, and consent-based income verification (e.g., via tax data). ### Macroprudential tools — deployment, adequacy, and refinements - Recent tool deployment and settings: - Countercyclical capital buffer (CCyB) raised to 0.5 percent in response to rapid credit growth since 2023 and a turning cycle. - Structural cushions: Capital Conservation Buffer (CCoB) at 2.5 percent; surcharges for systemically important institutions (O-SII); Systemic Risk Buffer (SyRB) set at 1 percent for domestic exposures (broad system-wide SyRB after household-specific SyRB withdrawal). - Household SyRB introduced in 2022 and withdrawn in October 2023. - Borrower-based measures (BBMs) introduced in 2022 for banks and NBCOs: binding LTV and DSTI caps, amortization limits, tighter parameters for FX loans; SLAs exempted. - Liquidity and funding: banks hold sizeable HQLA, LCR around 300 percent system-wide; NSFR applied at 100 percent since July 2025; a 3 percent leverage-ratio requirement becomes binding in January 2026. - FX risk mitigation: limits on FX lending, net open positions, differentiated reserve requirements, currency-specific DSTI caps. - Suggested refinements and calibrations: - Consider adopting a positive-neutral CCyB (PnCCyB) to absorb losses from mild shocks even without visible imbalances; stress-test results suggest a neutral setting of about 1.5 percent (Recommendation 9). - Focus SyRB to target remaining structural systemic vulnerabilities not addressed by other buffers (Recommendation 9). - Tighten and expand BBMs: extend DSTI to instalment purchases, review NBCO exemptions, align the state-sponsored “Prima Casa” program with the BBM framework, adopt differentiated LTV limits by borrower type (first-time buyer, second/subsequent buyer, buy-to-let vs owner-occupied) (Recommendations 10, 11, 12). - Improve macroprudential liquidity toolkit: expand monitoring of funding risks from deposit concentration (Recommendation 13). - Deepen interconnection risk analysis by including more granular bank/non-bank funding information (Recommendation 14). - Monitor sovereign-bank nexus and incorporate available-for-sale portfolios into stress tests (Recommendation 15). ### Stress testing, calibration of capital buffers, and quantitative findings - Stress testing framework: - Top-down quarterly tests over two-year horizon with baseline and adverse scenarios; model developed by FSD; solvency tests assume deposits increase under a rate-hike scenario generating credit growth. - Coverage gaps: NBCO stress tests limited; no stress tests of insurance companies. - Growth-at-Risk (GaR) and buffer calibration (Annex IV): - GaR model estimated on quarterly data from 2010Q1 to 2024Q4. - Under normal conditions, GaR(10) (10th percentile) of one-year-ahead GDP growth is around –4 percent. - Under normal conditions, GaR(5) (5th percentile) is around –7 percent. - A GaR(10) downturn would deplete banks’ aggregate capital adequacy ratio by about 1.2 percentage points. - A GaR(5) downturn would reduce the aggregate capital adequacy ratio by about 3 percentage points. - Neutral CCyB range implied by results: 1–3 percent of risk-weighted assets; assessment converged to a neutral buffer level of 1.5 percent. - SyRB calibration and real estate stress: - Empirical house-price overvaluation estimates: Dynamic OLS → around 21 percent; Standard OLS → around 33 percent (sample 2019Q1–2024Q4). - FSAP solvency stress simulation: 30 percent real estate price decline → system-wide capital depletion of about 1 percentage point. - Recommendation: calibrate SyRB at around 1 percent to cover real estate correction losses. - Illustrative stress-test implied numbers presented elsewhere: - Stress-test implied neutral CCyB setting: about 1.5 percent. - Illustrative calibration: about a 1-percentage-point capital depletion from a housing correction. ### Countercyclical Capital Buffer (CCyB) operational considerations - Current practice and limitations: - CCyB calibration currently relies primarily on the credit-to-GDP gap; credit-to-GDP gap “remained persistently negative since the aftermath of the global financial crisis and closed at the end of 2024.” - International practice favors composite indicators, stress tests, and expert judgment. - Synthetic index (Cyclogram) example and Moldova adaptation: - Cyclogram method: composite of multiple indicators mapped to buffer rates; Moldova could construct a similar composite using available inputs (current account deficit, output gap, real interest rates, bank credit series, loan-to-deposit ratio, corporate debt proxies). - Methodological suggestion: smooth variables with eight-quarter moving average; normalize components using empirical CDFs. - PnCCyB rationale and operational guidance: - PnCCyB maintains releasable capital when risks are “neither subdued or elevated”; useful for small open economies and environments with measurement uncertainty. - Operationalization: rely on continuous surveillance of EWIs and stress-test results; consider voluntary buffers and effects on credit provision when setting build-up speed; allow full release in stress with measured rebuilding pace. - Communication: - Clearly explain that a positive buffer in normal times is precautionary, publish indicators and methodologies, and communicate criteria and timelines for buffer replenishment. ### Borrower-Based Measures (BBMs), “Prima Casa”, and lending standards - BBM design and outcomes: - Introduced in 2022; LTV cap at 80 percent; DSTI cap at 40 percent; amortization limits 5 years for consumer loans and 30 years for mortgages. - Stricter DSTI for FX loans: 30 percent. - For floating rate loans (86 percent of mortgage loans as of 2024), stressed DSTI cannot exceed 55 percent. - For consumers with income at least twice the average monthly salary, DSTI can be as high as 55 percent and stressed DSTI up to 70 percent. - Outcomes: share of new loans with LTV < 80 percent rose from ~75 percent to 98 percent; share of newly issued high-LTV loans declined to around 6 percent and 2 percent in 2025Q1 and 2025Q2 respectively. Share of loans below the 40 percent DSTI increased from 60 to 70 percent per quarter. - Data and enforcement issues: - Income reported as “zero” for approximately 17 percent of consumer loans and 40 percent of credit card debt issued in 2023–24. - BBMs do not apply to purchase-by-instalments and some NBCO contracts; exemptions and loopholes remain. - “Prima Casa” program: - Introduced 2017 (Law N.293/2017); July 2024 amendments raised eligible property max value from MDL 1 million to MDL 2.5 million, increased government guarantee from 50 to up to 70 percent, and lifted allowable LTV from 95 to 100 percent. - Formal employment not required; beneficiaries must report official income and maintain DSTI below 70 percent though income definition is broader than standard regulatory framework. - Updated property threshold covers approximately 90 percent of mortgage loans issued in 2024. - Contributed to loosening lending standards, upward pressure on real estate prices, higher household debt burdens, and reduced affordability. - BBM policy recommendations: - Recalibrate and align “Prima Casa” with the general regulatory framework: harmonize LTV and DSTI limits, treatment of guarantees, and definition of income. - Introduce tiered LTV framework differentiated by borrower type and loan purpose; pair with calibrated, lender-level flow caps limiting share of new loans that may exceed limits. - Review NBCO exemptions under Law on Consumer Credit Agreements N.202/2013, Art 2(2). - Broaden BBM scope: require DSTI calculation for all “buy-now-pay-later” contracts; bring SLAs under BBM regime as SLA reform progresses. ### Liquidity, dollarization, interconnectedness, and sovereign-bank nexus - Key liquidity settings and metrics: - LCR phased to 100 percent by January 1, 2023; system-wide average LCR around 300 percent. - NSFR applied at 100 percent since July 2025. - Leverage reporting mandatory since 2021; 3 percent binding minimum leverage-ratio requirement becomes effective January 2026. - Reserve requirements high though reduced: peaks were 45 percent for FX deposits and 34 percent for MDL deposits in 2023; later reduced to 31 percent for FX deposits and 21 percent for local currency deposits. - Deposit dollarization/euroization as of end-2024: share of FX loans around 36 percent; share of banks’ FX deposits at 35 percent; dollarization/euroization of total deposits at 36 percent. - HQLA composition: central government assets 56.7 percent; central bank assets 23.6 percent; coins and banknotes 19.5 percent. - Vulnerabilities and recommendations: - Deposits shifting from term to sight deposits increases run sensitivity; deposit concentration risk significant and not currently analyzed in liquidity stress tests. - Recommend expanding monitoring of deposit concentration risks and complementing liquidity stress tests with scenarios assessing potential withdrawals by largest depositors. - Consider counting reserve requirements as part of HQLA given averaging and non-segregation features. - NBCOs lack liquidity safeguards; 2025Q1 funding structure: around 60 percent from long-term loans and 35 percent from own equity; about 65 percent of long-term loans obtained in foreign currency in 2025Q1. - Sovereign-bank nexus: - Public debt about 38 percent of GDP. - Domestic sovereign securities held by banks were 13.7 percent of their total assets and 104.2 percent of their regulatory capital in December 2024. - Four banks hold approximately 5.5 percent of their total assets and 42.4 percent of their capital as available-for-sale. - Recommendation: strictly monitor sovereign-bank nexus and incorporate available-for-sale portfolios into stress tests; use Pillar II add-ons if excessive concentration observed. - Interconnectedness: - Currently limited but may grow; lack of granular funding relationship data between banks and NBCOs hinders contagion analysis; recommendation to obtain more detailed cross-sectoral exposure data. ### Systemic institution designation and concentration - D-SIB framework and current calibration: - NBM designates D-SIBs using a scoring/bucketing methodology based on size, substitutability, cross-border activity, interconnectedness, and retail volume. - As of May 2025, four banks designated systemically important, representing approximately 83 percent of total banking sector assets. - Capital surcharges calibrated: 1.5 percent for the largest bank, 1 percent for the second-largest, and 0.5 percent for the two smaller O-SIIs. - Surcharge range available: 0.25–3 percent; NBM can impose higher buffers if warranted. - Recommendation: - Continue improving analysis of interconnection risks as NBFIs grow; enhance assessment of interconnectedness through lending-funding relationships, cross-holdings, and common exposures. - Improve transparency on bucketing thresholds and consider international expertise to review adjustments to scoring. ### Key statistics and timelines (preserve exact values from source) - CCyB raised to 0.5 percent. - Stress-test implied neutral CCyB setting: about 1.5 percent. - NSFR applied at 100 percent since July 2025. - Leverage-ratio requirement of 3 percent becomes binding in January 2026. - Household SyRB introduced in 2022 and withdrawn in October 2023. - Illustrative calibration: about a 1-percentage-point capital depletion from a housing correction. - LTV limits: 80 percent for new residential loans; temporary exception up to 15 percent of total new real-estate loans in previous 3 months. - DSTI limits: 40 percent (general); 30 percent for FX-denominated household loans unless income in foreign currency; up to 55 percent exception if income at least twice the average nominal monthly wage. - CCoB set at 2.5 percent. - Public debt about 38 percent of GDP. - Domestic sovereign securities held by banks: 13.7 percent of total assets and 104.2 percent of regulatory capital in December 2024. - Four D-SIBs account for approximately 83 percent of total banking sector assets (as of May 2025). - HQLA composition: central government assets 56.7 percent; central bank assets 23.6 percent; coins and banknotes 19.5 percent. - Dollarization metrics as of end-2024: share of FX loans around 36 percent; share of banks’ FX deposits at 35 percent. - Recommended timing legend used in text: I: Immediately; ST: short-term = less than 1 year; MT: medium-term = 1–5 years. *Source: Republic of Moldova — International Monetary Fund: Executive Summary* ### EXECUTIVE SUMMARY __________________________________________________________________________ 6 ### EXECUTIVE SUMMARY ### Institutional framework for macroprudential policy — key findings - The National Bank of Moldova (NBM) is central to the framework—supervising banks and non-bank lenders after the 2023 twin-peaks reform—while the National Commission for Financial Markets (NCFM) oversees capital markets. - Consolidation under the NBM has enhanced oversight and regulatory consistency; both NBM and NCFM are operationally independent and legally tasked with preserving financial stability. - The Law on the NBM assigns equal weight to financial stability and support of government policy without a clear hierarchy, creating potential ambiguity when objectives conflict. - The National Committee for Financial Stability (NCFS) is the formal macroprudential authority and high-level inter-agency forum with comply-or-explain powers. - Coordination and communication improvements: internal mechanisms (Financial Stability Working Group—FSWG—and frequent Board discussions) and external outputs (annual Financial Stability Report since 2019, quarterly Financial Stability Assessment Report since 2024, a macroprudential policy strategy, and NBM website publications). - Institutional gaps identified: - Revise the LNBM to include a precise hierarchy between the objectives of price stability, financial stability and support of government policies (Recommendation 1). - Consider amending the Law on the NCFS to strengthen the link between the comply-or-explain mechanism and financial stability outcomes (Recommendation 2). - Enhance intra-agency and inter-agency cooperation arrangements and formalize FSWG meetings (Recommendation 3). ### Systemic risk monitoring — key findings and data gaps - The Financial Stability Department (FSD) has built a solid framework aligned with good international practice: a wide dashboard of macro-financial indicators, synthetic indicators, and solvency, liquidity, and contagion stress tests. - Progress on financial-cycle indicators to guide buffer calibration, but constraints include short time series, evolving financial structure, and limited crisis history. - Data improvements since July 2024: new reporting standards for non-bank credit organizations (NBCOs) improved data quality; reporting discipline outside banking—especially savings and loan associations (SLAs)—remains weaker. - Credit registry provides detailed borrower-level data but is constrained by widespread informality and technical issues affecting reporting of DSTI ratios. - Corporate data coverage from the National Bureau of Statistics (NBS) could be broader and better integrated into systemic risk analysis. The NBM should incorporate corporates’ foreign debt, already available at the NBM, into financial stability analysis. - Real estate monitoring has improved but still faces data issues: need for transaction prices, rents, vacancy rates for commercial property, and share of buy-to-let versus owner-occupied housing. - Recommendations summarized: - Strengthen the monitoring framework with a more structured and forward-looking methodology to analyze the financial cycle (Recommendation 5). - Continue improving stress-testing framework and refine quantitative toolkit as data quality improves (Recommendation 6). - Broaden and leverage existing data on household and corporate indebtedness and debt servicing capacity; develop a joint NBM-NBS action plan to improve data quality (Recommendation 7). - Assist NBFIs in improving reported data and consider sanctions for non-filers as reporting improves (Recommendation 8). ### Macroprudential tools — deployment, adequacy, and suggested refinements - Recent macroprudential actions and toolset: - Countercyclical capital buffer (CCyB) raised to 0.5 percent in response to rapid credit growth since 2023 and a turning cycle. - Structural cushions in place: capital conservation buffer for all banks, surcharges for systemically important institutions (O-SII), and a system-wide Systemic Risk Buffer (SyRB). The household SyRB introduced in 2022 was withdrawn in October 2023 as conditions eased. - Borrower-based measures (BBMs) introduced in 2022 cover banks and NBCOs: binding LTV and DSTI caps, amortization limits, and tighter parameters for FX loans. These improved lending standards, but exemptions and loopholes remain, and a state-backed home ownership program is fueling elevated real estate valuations. - Liquidity and funding: banks hold sizeable high-quality liquid assets and maintain comfortable LCRs; NSFR at 100 percent applied since July 2025; a 3 percent leverage-ratio requirement becomes binding in January 2026. - FX risks are mitigated despite high dollarization via limits on FX lending, net open positions, differentiated reserve requirements, and currency-specific DSTI caps. Bank–nonbank interconnectedness remains limited. - Suggested refinements and calibrations: - Consider adopting a positive-neutral CCyB (PnCCyB) to absorb losses from mild shocks even without visible imbalances; stress-test results suggest a neutral setting of about 1.5 percent (Recommendation 9). - Focus SyRB to target remaining structural systemic vulnerabilities not addressed by other buffers (Recommendation 9). - Illustrative calibration: about a 1-percentage-point capital depletion from a housing correction, noting limited history may understate second-round effects. - Tighten and expand BBMs: adopt draft regulation extending DSTI to financing of installment purchases, review NBCO exemptions, align the state-sponsored “Prima Casa” homeownership program with the BBM framework, and adopt differentiated LTV limits by borrower type (first-time buyer, second/subsequent buyer, buy-to-let vs owner-occupied) (Recommendations 10, 11, 12). - Improve macroprudential liquidity toolkit: expand monitoring of funding risks from deposit concentration (Recommendation 13). - Deepen analysis of interconnection risks by including more granular bank/non-bank funding information (Recommendation 14). - Monitor the sovereign-bank nexus and incorporate available-for-sale portfolios into stress tests (Recommendation 15). ### Key statistics and timelines (preserve exact values from source) - CCyB raised to 0.5 percent. - Stress-test implied neutral CCyB setting: about 1.5 percent. - NSFR applied at 100 percent since July 2025. - Leverage-ratio requirement of 3 percent becomes binding in January 2026. - Household SyRB introduced in 2022 and withdrawn in October 2023. - Illustrative calibration: about a 1-percentage-point capital depletion from a housing correction. - Recommended timing legend: I: Immediately; ST: short-term = less than 1 year; MT: medium-term = 1–5 years. *Source: Republic of Moldova — International Monetary Fund: Executive Summary* ### 5. Overall, Moldova’s institutional setup is broadly sound and provides adequate ### 5. Overall, Moldova’s institutional setup is broadly sound and provides adequate ### Institutional framework and mandates - The NBM and the NCFM are granted operational independence by the legislation (while being accountable to Parliament), and each has a financial stability objective alongside its sector-specific responsibilities. - According to Moldova’s macroprudential policy strategy, macroprudential policy is implemented by the competent authority within the limits of its supervisory mandate, and the NCFS is the designated macroprudential authority responsible for coordinating the implementation of macroprudential policies. - The NCFS has a dual mandate: (i) crisis prevention (coordinating – though not implementing – macroprudential policy) and (ii) crisis management and resolution. Its objectives are: (i) to safeguard financial stability, (ii) to propose measures to prepare for crisis situations, and (iii) to propose actions in the event of a financial crisis. (Law N.209/2018 on the National Financial Stability Committee, Art 6.) ### NBM financial stability objective: clarity and hierarchy - Recent amendments to the Law on the NBM (LNBM), effective August 2024, clearly give the NBM a financial stability objective in line with best practices. (Law N.458/1995 on the National Bank of Moldova, Art 4(2).) - De facto, this financial stability objective is subordinated to the NBM’s primary mandate of price stability. - The LNBM places safeguarding financial stability on par with supporting the government’s economic policy, without establishing a clear hierarchy between these objectives. - Risks identified from this ambiguity: - Potential conflict when objectives clash. - Operational ambiguity that could make the central bank “face difficulty in resisting political pressure.” - Challenges with accountability and communication. ### Role of the NBM in macroprudential policy - In line with best practices, the NBM plays a crucial role in developing and implementing macroprudential policy. - As secretary to the NCFS, the NBM is required to elaborate the macroprudential policy strategy (which is approved by the NCFS) and to implement it over the entities it supervises. (Law N.458/1995 on the National Bank of Moldova, Art 5(1).) - The NBM closely monitors systemic risks—through analysis and stress tests—and has the power to use a wide range of macroprudential tools to mitigate systemic risks. - Centralizing macroprudential policy within the central bank enables leveraging knowledge of the financial system and better management of policy tradeoffs. ### NCFM role and scope - The NCFM has a financial stability objective and supervises non-bank financial market participants (voluntary pension funds, collective investment schemes, brokers) and regulates capital markets; the law gives the NCFM responsibility for preventing systemic risks. (Law N.192/1998 on the National Financial Markets Commission, Art 3.) - The sector under NCFM supervision is very small: market capitalization only about 3.5 percent of GDP, limited liquidity, few listed stocks and brokers, and only one newly established voluntary pension fund. - Assigning a financial stability objective to the NCFM aligns with best practices to ensure consistency, collective responsibility, and cooperation in risk assessment and mitigation. ### NCFS composition, formats, and decision mechanics - The NCFS is not a legal entity but a committee of its members’ institutions. - NCFS compositions: - Normal committee (5 members): (i) Governor of the NBM (Chair), (ii) Minister of Finance, (iii) Minister of Economic Development and Digitalization, (iv) Chairman of the NCFM, and (v) Director of the Deposit Guarantee Fund (DGF). (Law N.209/2018 on the National Financial Stability Committee, Art 5(1).) - Extended committee (9 members): normal committee plus three NBM Deputy Governors and the Director of the NBM’s Financial Stability Department (FSD). Meetings of the extended NCFS take place once a quarter according to a set schedule. (Law N.209/2018 on the National Financial Stability Committee, Art. 5(2).) - The NCFS is chaired by the Governor of the NBM in both formats. - Meetings of the NCFS are convened at the request of any committee member; extended NCFS meets quarterly. (Law N.209/2018 on the National Financial Stability Committee, Art 5(1), Art. 5(2).) - In the extended NCFS, NBM representatives form a majority and recommendations are approved by simple majority vote; however, extended committee meetings may be deliberative if 2/3 of members with voting powers are present. (Law N.209/2018 on the National Financial Stability Committee, Art 5(5).) ### Internal NBM governance, units, and processes - The Financial Stability Department (FSD) is the lead unit for macroprudential analysis and policy implementation and reports directly to the Executive Committee (EC). - FSD staffing and structure: - FSD comprises 16 staff members. - Organized into three divisions: Macroprudential Policy Division, Systemic Risk Analysis Division, and Economic Modelling Division. - Reporting lines: - The FSD reports to a different Deputy Governor than those responsible for supervision and for monetary policy. (NBM organigram details.) - FSD responsibilities: - Develop the NBM’s macroprudential strategy (including selection of intermediate objectives). - Identify and monitor systemic risk and propose policy actions. - Prepare systemic risk analyses, conduct stress tests, develop quantitative tools, and formulate policy recommendations and proposals for the EC—in cooperation with the Banking Supervision Department (BSD). - Monitor implementation of macroprudential policies together with the BSD. - Serve as secretary of the NCFS and ensure operation of the Financial Stability Working Group (FSWG). - Present analyses to the EC during annual FSR or quarterly FSAR. ### Financial Stability Working Group (FSWG) - The FSWG is a consultative body aimed at improving coordination among different NBM departments and identifying systemic and institution-specific risks. - Governance and membership: - Chaired by the Deputy Governor in charge of financial stability. - Comprises directors of banking supervision, financial markets, payments systems and non-bank supervision, regulation and authorization, reporting and statistics, and financial stability departments (each with voting rights). - Monetary policy department participates as an observer; other members can be invited by the chair. - Functions and procedures: - Focuses on systemic institutions and market segments (FX, sovereign bonds, etc.). - Can issue recommendations by simple majority vote to heads of relevant departments and EC members overseeing those departments. - Meetings convened by chairman or at the request of a member, at least every six months. - Meetings categorized by urgency (low, moderate, high). (NBM regulation N. 194/2024, Art. 18.) ### Executive Committee (EC) practices and frequency - The EC meets quarterly to analyze the financial cycle and determine calibration of the countercyclical capital buffer (CCyB). - Frequency of related meetings: - D-SIB designation meetings are held annually; SyRB reviewed every two years. (NBM Regulation on Capital buffers N.110/2018.) - Since 2024, quarterly meetings are organized to discuss the FSAR. - Overall, EC meetings are held quite frequently (at least once a month, and often weekly). - Agendas prepared by the EC’s secretariat based on proposals from EC members or department heads. ### Powers and ability to act - Best-practice powers for macroprudential authorities typically include: (i) activating and calibrating macroprudential instruments; (ii) designating systemically important institutions; and (iii) collecting data to close information gaps. - The NCFS has the authority to issue recommendations under a “comply or explain” principle: - NCFS may submit recommendations to the Government and to regulatory authorities; recommendations delivered in writing with justification. - Competent authorities must comply or justify non-compliance. - Semi-hard powers should be reserved for issues strictly related to financial stability. - Regulators’ “hard” powers: - The NBM Law authorizes the NBM to license, regulate, and supervise banks, financial market infrastructures, payment service providers, insurance companies, savings and loan associations, and non-bank financial institutions. (Law N.458/1995 on the National Bank of Moldova, Art 5, d), f), m), p).) - The NBM can issue normative or individual acts imposing capital buffers, leverage limits, and other macroprudential measures. (Law N.458/1995 on the National Bank of Moldova, Art 5 2(1).) - Laws governing banks and non-banks recognize the NBM’s authority to roll out and calibrate macroprudential instruments. (Law N.202/2017 on the Activity of Banks, Art. 63 1; Law N.139/2007 on Savings and Loans Associations, Art. 8(2) h); Law N.1/2018 on Non-Bank Credit Organizations, Art. 23(4) f); Law N.92/2022 on Insurance and Reinsurance, Art. 115(9).) - Legislation allows the NBM to impose on branches of foreign banks the same prudential measures as apply to domestic banks unless equivalent home-state requirements exist. (Law 202/2017 on the activity of banks, Art.24(4) and Art.24(9).) - Regulators can impose sanctions or corrective measures for non-compliance. (Law N.458/1995 on the National Bank of Moldova, Art 44, 49 1, 75, 75 2; Law N.192/1998 on the National Financial Markets Commission Art 1, Art 9, j); Regulation N.110/2018 on capital buffers of banks, Chapter VI.) - Specific legal authorities: - NBM empowered to set capital requirements stricter than those mandated by bank law. (Law N,458/1995 on the National Bank of Moldova, Art 5 1(1).) - 2018 bank capital buffers regulation introduced additional capital surcharges for systemically important banks; O-SII list is reviewed at least annually and methodology/results are published on the NBM’s website. (Regulation N.110/2018 on Capital Buffers of Banks, Chapter IV.) - There is currently no legal provision to designate non-bank financial institutions as systemically important. ### Recent policy actions and evaluations - Examples of NBM action: - May 2022: adopted a positive systemic risk buffer for resident households (released October 2023). - 2022 actions included introducing debt service to income (DSTI) limits and loan to value limits (LTV), progressively tightening capital surcharges for systemic institutions, and improved measures to tackle liquidity risks. - Prohibition on the provision of virtual assets introduced proactively. - Monitoring and evaluation: - Regulators and NCFS are tasked with reviewing and monitoring effectiveness of macroprudential policies. - NBM routinely evaluates the impact of borrower-based and liquidity measures—such as DSTI, LTV, and reserve requirements—and publishes findings in the annual FSR and quarterly FSAR. - The law requires the NCFS to periodically analyze and review macroprudential instruments, though in practice this is fulfilled through NBM-led presentations and discussions. (Law N.209/2018 on the National Financial Stability Committee, Art 8.d).) ### Identified gaps and considerations - Lack of clear legal hierarchy between price stability, financial stability, and supporting government economic policy in the LNBM could: - Create operational ambiguity and accountability/communication challenges. - Expose the central bank to political pressure. - No legal mechanism exists to designate non-bank financial institutions as systemically important; not critical now given sector size but may be needed if sector grows. - NCFS recommendations operate under a “comply or explain” framework; semi-hard powers should be reserved for strictly financial stability matters to avoid overreach. *Source: IMF staff assessment as presented in the provided chapter text.* ### 21. Information collection powers are well established in legislation. The LNBM stipulates ### 21. Information collection powers are well established in legislation. The LNBM stipulates ### Information collection and legal mandates - The LNBM stipulates that the NBM is entitled to collect any information necessary to fulfill its objectives – not only from the entities it supervises, but also from government institutions and other legal or natural persons. - Legal provisions require banks (under obligation) to furnish any documents or data the NBM deems necessary for effective supervision. - There are no specific limits on the type of information the NBM may request from supervised entities; the NBM is bound to maintain the confidentiality of sensitive data. - The NCFM’s law contains similar provisions obliging the NCFM to: - monitor the financial condition of its market participants, - maintain the information network needed for their supervision, and - define reporting requirements for non-bank financial entities. - Relevant legal citations as presented: - Law N.458/1995 on the National Bank of Moldova, Art 72(1); Art 44(c); Art. 47(1). - Law N,202/2017 on the Activity of Banks, Art. 84-86. - Law N.192/1998 on the National Financial Markets Commission, Art 8.f, 8.i, 8.j, 9.e. ### Access to information by the NCFS - The legislation grants the NCFS the right to access information: - Ahead of each meeting, members receive relevant data on financial sector developments, systemic risk assessments, and ongoing macroprudential policies. - All members of the NCFS and its extended format may request any data necessary to fulfill their responsibilities, including from institutions not represented on the Committee. - All members are bound by confidentiality obligations in handling such information. - Legal citation: Law N.209/2018 on the National Financial Stability Committee, Art. 12. ### Effective coordination (intra- and inter-agency) - Intra-agency: - Effective cooperation across different NBM departments is essential for sound systemic risk assessment; macroprudential assessments should incorporate microprudential information and vice versa. - Current practice: FSD communicates informally with banking and non-bank supervision departments; shares stress test results with BSD; supports banks’ stress tests for ICAAP and ILAAP; interacts with non-bank supervision on data quality and availability. - Supervision departments mostly share SREP exercise results. - Formal interactions occur through the Financial Stability Working Group (FSWG). The FSWG, established in 2024, met twice so far; charter mandates meetings at least twice a year. - Recommendation: More regular FSWG meetings, possibly aligned with FSR or FSAR production, to enhance systemic risk discussions. - Inter-agency: - NCFS is designed to ensure cooperation across government and regulators. - Legal provisions require both the NBM and the NCFM to be consulted when another government agency issues regulation touching their authority; the NBM can submit opinions on draft laws upon Parliament request, though the NBM opinion can be dismissed without justification. - The NBM has signed cooperation agreements with relevant domestic institutions; cooperation with the NCFM is codified in legislation and a bilateral MoU. A new agreement is being drafted to establish principles, modalities and information to be shared. - Current MoU content focuses mainly on transactions with non-residents and assets of professional participants; a more complete MoU should include market information and detailed information about possible risks in market participants as the non-banking sector grows. - Legal citations: Law N,458/1995 Art 8(3); Law N.192/1998 Art 5. At. 7. ### Communication practices and transparency - NBM’s communication strategy for financial stability is aligned with best international practice: - NBM informs the public about macroeconomic analysis and health of financial markets as required by law and serves as the main vehicle for communicating macroprudential policies and strategy. - Key documents: Macroprudential Policy Strategy (developed by NBM and approved by NCFS in 2023), annual FSR (published since 2019), quarterly FSAR (started in 2024), and the NBM’s annual report. - Macroprudential Policy Strategy: summarizes operational framework, rationale and objectives, intermediate goals, institutional responsibilities, decision-making process, and classifies macroprudential instruments according to intermediate objectives (but does not discuss instruments’ transmission mechanisms). - FSR and FSAR: summarize macroeconomic and financial developments, assess health of banking and non-bank sectors, evaluate potential risks; FSR includes analysis from periodic surveys and summarizes NCFS meeting discussions and decisions. - Annual Report: summary of financial sector developments, regulatory activities, brief review of financial stability risks, and description of macroprudential policy stance. - Online and stakeholder communication: - NBM publishes full texts of laws, regulations, EC decisions, and recommendations on its website in line with legal requirements. - Regular press releases announce regulatory changes and EC meeting outcomes; dedicated section for NCFS meeting press releases (NBM acts as NCFS secretary). - NBM gauges private sector sentiment through surveys; law mandates public consultations prior to introducing new regulations or individual acts, enabling stakeholder engagement when introducing macroprudential instruments. - Administrative acts based on existing regulations can be taken swiftly and do not require public consultations. - Legal citations: Law 239/2008 on the transparency of the decision-making process; Article 112 of Law N,458/1995 on the National Bank of Moldova; Law N,458/1995 Art, 11(3). ### Transparency gaps and suggested improvements - NBM publishes extensive institution-level data and summary indicators of vulnerabilities and stress-test results (solvency, liquidity, contagion). - Identified improvements: - Publish additional details on stress test results and underlying scenarios, and technical notes on stress-test models as suggested by the IMF Central Bank Transparency Code Review (CBTCR) mission. - In the medium term, consider conducting and publishing ex-post evaluations of macroprudential measures. - Implement CBTCR recommendations, including improving disclosure of stress testing methodologies and results, broadening FSR dissemination and outreach (including press conferences), and improving disclosure of NCFS activities. - Relevant citations: BNM Reports Generator; IMF Central Bank Transparency Code Review mission. ### Recommendations (institutional and legislative) - Clarify the NBM mandate: - Amend the LNBM to clarify the hierarchy of objectives between price stability, financial stability, and support of other government policies to ensure safety and soundness of the financial system is senior to supporting economic policies of the government. - Amend the Law on the NCFS: - Consider strengthening the link between the comply-or-explain mechanism and financial stability outcomes: explicitly mandate that comply-or-explain applies only to recommendations relevant for financial stability. - Clarify that NCFS should have only soft powers where expected impact on financial stability is not sufficiently substantiated; maintain comply-or-explain for recommendations with demonstrated systemic relevance. - Improve institutional collaboration: - Institutionalize FSWG meetings with a regular schedule aligned with key analytical outputs or EC meeting calendar to enhance intra-agency coordination. - Finalize and strengthen the MoU with the NCFM; as capital markets develop, revise the MoU to include more market-related information and market participants to monitor non-bank financial sector risks effectively. *Source: IMF staff assessment and recommendations as presented in the provided content.* ### 40. The NBM has made substantial progress in strengthening its stress testing framework. ### 40. The NBM has made substantial progress in strengthening its stress testing framework. ### Stress testing framework and practices - Top-down macroprudential stress tests are conducted quarterly, using a two-year horizon and incorporating both a baseline scenario and an adverse stress scenario. - Tests are underpinned by a quantitative model developed by the FSD, enhancing the forward-looking dimension of systemic risk assessments. - The stress test assumes that deposits increase under a scenario where the NBM raises its policy rate due to inflationary pressures, generating credit growth. - Solvency stress tests are complemented by targeted analyses of interbank contagion and the potential impact of the default of large debtor groups. - Liquidity stress tests are based on the Liquidity Coverage Ratio (LCR), simulating adverse conditions such as: - reduced inflows (e.g., from loan repayments), - increased outflows (e.g., deposit withdrawals), - heightened haircuts on liquid assets. - Ongoing enhancements include incorporating maturity bucket analysis to better capture liquidity mismatches over different time horizons. - Stress testing coverage gaps: - Work is ongoing to improve stress tests of non-bank credit organizations (NBCOs), currently limited to quarterly sensitivity analysis and reverse stress tests. - No stress tests of insurance companies are conducted. ### Qualitative inputs and surveys integrated into risk assessment - The FSD incorporates qualitative information and expert judgment into its risk assessment processes. - Supervision department provides insights from evaluations of banks' business models and strategies. - FSD-administered surveys: - Semi-annual systemic risk survey across all banks to evaluate current risk levels, impacts on the financial system, and potential future trends. - Annual debt burden survey among individuals to gather data on individuals' financial situations and debt levels. - Quarterly lending conditions surveys summarizing banks' practices and expectations regarding credit standards, lending and funding conditions, and demand for credit. - Results from qualitative analysis, expert judgement, and quantitative tools are well integrated into the NBM’s risk assessment process. - Information dissemination: - Findings are presented in the annual FSR and, since 2024, in a new quarterly financial sector report covering vulnerability indices, sectoral heatmaps, loan volumes and credit quality, bank lending survey findings, real estate developments, stress test results, and macroprudential policy assessments. - Systemic risk evaluations are summarized across seven risk categories, assigned severity levels—low, moderate, elevated, or severe—based on the underlying analysis. ### Data availability, coverage, and gaps - Electronic reporting and inter-agency data sharing: - Since 2019, all supervised institutions must submit data electronically to the NBM. - In July 2024, enhanced templates for NBCOs were introduced for more comprehensive data on financial statements and lending activities; smaller entities such as savings and loan associations (SLAs) follow simplified reporting regimes. - The NBM has signed Memoranda of Understanding (MoUs) with the Deposit Guarantee Fund (DGF), the National Bureau of Statistics (NBS), and the NCFM to facilitate data exchange. - Reporting obligations can be adjusted in response to emerging risks; banks may be sanctioned for non-compliance or low-quality submissions, while penalties do not currently apply to non-bank entities except during on-site supervision. - Quality and completeness: - Bank data are granular and of high quality; validation checks ensure minimum standards. - Compliance among NBCOs is incomplete due to capacity constraints. - Data from SLAs are especially weak with poor coverage and quality. - Data quality for insurers is expected to improve with the introduction of Solvency II. - Cross-sectoral data gaps: - Credit portfolio data of banks and NBCOs are sufficiently granular by asset class, currency and counterparty, but liabilities data are only available in aggregated form. - Assets and liabilities of SLAs and insurance companies are available at aggregated level. - Data on deposits per bank per insurance company and NBCO are needed for contagion analysis. - Central Credit Registry: - The central credit registry is a comprehensive database held by the NBM based on reports filed monthly by banks and—with new reporting requirements in July 2024—NBCOs with quarterly frequency. - The database is at loan level and includes: type of loan, currency of denomination, value of collateral, type of interest rate, maturity (at origination and remaining), sector of exposure, renegotiations of terms, provisions and loan classification, etc. - Since 2022, when BBMs were introduced, it includes information about the income of the borrower and the DSTI at origination. - Debt service data rely on credit history bureaus; banks, non-bank lending organizations, and crowdfunding service providers are mandated to report. Reporting is voluntary for insurance companies that provide loans, SLAs, and retail companies, resulting in low coverage. - Household income and debt service limitations: - Assessment of households’ debt service burden remains incomplete due to a large share of informal economy and underreporting of income. - At loan origination, lenders are allowed to use only official documents to verify income, but the share of banks that do not report income in the credit registry can be somewhat large (and potentially larger for NBCOs). - Lenders are required to regularly update income fields; when updating, lenders may base reassessment on self-reported income and sometimes overwrite original DSTI ratios. - Suggested registry enhancements include adding fields to preserve DSTI at origination, information on borrower employment status and type of income, automated flagging of inconsistencies, and consent-based income verification (e.g., via tax data). - Corporate and household data coverage: - NBS collects annual data on all registered non-financial companies including income statements and balance sheet information, but key variables such as interest expenses and EBIT are missing and dataset completeness is limited due to non-compliance. - Linking NBS corporate data with the credit registry via tax identification number is possible; expanding and improving NBS corporate dataset would support granular analysis of corporate indebtedness and external debt vulnerabilities. - For households, expanding the annual household survey could provide a more complete view of household assets and liabilities; detailed borrower-level data would improve stress test calibration. - Real estate data: - FSD collects offered house prices for Chisinau city and region since 2019 and has developed a quarterly house price series. - No comprehensive data on rents as the State Tax Service does not collect data on property type or rent payments. - A real estate registry by the Agency for Geodesy, Cartography, and Cadaster is being upgraded following establishment of a real estate price registry; it will contain transaction prices, rental contracts, and detailed property information to monitor prices by regions and dwelling types. - NBM monitors building permits, new construction activity, transaction volumes (published by cadaster), real estate exposures, lending standards, and has monthly construction cost data. - Key gaps: occupancy rates for commercial real estate properties and share of owner-occupied versus buy-to-let properties. - Climate risk data: - FSD conducted an analytical report assessing climate-related risks using datasets covering real GDP, trade volumes (including agricultural products), total agricultural output, and credit to legal entities and agricultural sector; most series span 2017 to present, some back to 1995. - Limitations include lags in national CO2 emissions data, insufficient information on energy production mix, limited data on energy and carbon intensity across sectors, and lack of data on banks’ exposures to physical and transition climate risks. - No studies have been conducted to assess forward-looking impact of climate change on the financial system. - NBM is collecting additional data and developing the structure for a quantitative climate risk assessment model. ### Recommendations to strengthen monitoring, stress testing, and data - Adopt a more structured and forward-looking approach to analyzing the financial cycle: - Continue developing the financial conditions index and advance efforts to identify early warning indicators (EWIs). - Assess relevance and coherence of candidate indicators using cross-country experience, expert judgment, and cooperation with supervision departments; consolidate into a streamlined early warning system (EWS). - Integrate EWS into the Financial Stability Report and complement with visual tools such as heatmaps to monitor risks across credit, liquidity, solvency, and macroeconomic conditions. - Enhance quarterly lending conditions surveys with information on constraints on lending and consider extending surveys to NBCOs. - Continue improving the stress-testing framework: - Bank solvency stress tests should be conducted using static balance sheet assumption. - Develop more comprehensive assessment of risk transmission through funding linkages and common exposures by obtaining more detailed cross-sectoral exposure data between banks and NBCOs. - Prioritize development of robust, scenario-based stress testing models for NBCOs as data quality and reporting standards improve. - With micro data on households and corporates, expand stress test calibration using borrower-level models. - Improve information on household and corporate indebtedness and the real estate sector: - Broaden coverage of credit history bureaus by mandating reporting by SLAs, leasing companies and retail companies that issue instalment purchases (“buy-now-pay-later”). - Expand the credit registry to include information on DSTI (e.g. at origination, point in time, based on official income,...) and possibly other borrowers’ information (e.g. employment status). - Improve corporate data by expanding and integrating corporate datasets with credit exposure and external statistics to enable more granular analysis of corporate indebtedness and vulnerabilities, including external debt. - Keep investing in closing real estate data gaps and develop models of real estate overvaluation, focusing on transaction prices, property characteristics, buy-to-let versus owner-occupied mortgages, rents and rent coverage ratios. - For commercial real estate, collect data on vacancy rates, rental rates, delinquency rates and foreclosure rates. - As data quality improves and more data points become available, invest in developing models for real estate valuation and measures of housing affordability. - Develop a joint NBM-NBS action plan to tackle data quality and coverage issues. - Strengthen data quality: - Continue supporting NBFIs to improve reporting and data quality. - Consider introducing sanctions outside of on-site supervision for nonreporting entities as NBFI reporting improves. - Develop a joint NBM-NBS action plan to address data quality and coverage. ### Macroprudential stance and capital measures - Macroprudential toolkit: - Moldova’s macroprudential toolkit is relatively comprehensive, operationalizing financial stability through intermediate objectives including prevention of excessive credit growth, leverage, illiquidity, and concentration. - The toolkit is in line with peer countries. - Recent sectoral developments: - Banking sector remains well-capitalized and profitable, though profitability has been declining; banking sector reports low levels of non-performing loans (NPLs). - NPLs are higher among NBCOs, though these institutions appear adequately capitalized and profitable. - Recent marked credit growth accompanied by a sharp increase in real estate prices; the credit to GDP gap closed and turned positive from the beginning of 2025. - Stress test results suggest that, under severe but plausible scenarios, capital buffers could be substantially eroded with some banks potentially requiring recapitalization, and liquidity strains may emerge in foreign exchange markets. - Financial sector interconnectedness is currently limited but may increase as the system becomes more complex. - Macroprudential policy stance is appropriate; recent rapid increase in credit motivated tightening of the countercyclical capital buffer (CCyB). - Capital-based tools aligned with international standards (via Regulation No. 110 (2018) transposing the Capital Requirement Directive IV): - Countercyclical Capital Buffer (CCyB): - Aimed at addressing cyclical systemic risks. - Calculated as the weighted average of buffers applied in Moldova and other relevant jurisdictions. - It can range from 0 to 2.5 percent, set in 0.25 percentage point increments, and is reviewed quarterly. - A 12-month phase-in period applies, unless exceptional circumstances justify a shorter period. - The buffer is currently set at zero, although in July this year decision was taken to increase it to 0.5 percent. - Systemic Risk Buffer (SyRB): - Designed mirroring the EU framework to address structural, long-term systemic risks or sectoral risks not covered by other buffers. - Must be reviewed at least every two years and calibrated based on assessment of risk, effectiveness, and proportionality, supported by an impact analysis. - Decisions must be published detailing buffer rate, application date, and rationale. - SyRB is currently set at 1 percent of risk-weighted assets for domestic exposures and aims at mitigating non-cyclical systemic risks arising from rising household vulnerabilities in the context of adverse macroeconomic developments, inflationary pressures, and geopolitical uncertainty. - Capital Conservation Buffer (CCoB): - Set at 2.5 percent to ensure banks build up capital during normal times. - Falling below this buffer triggers automatic restrictions on distributions of dividends. - The CCoB was temporarily relaxed after the COVID pandemic. *Source: 1mdaea2026004 - 40. The NBM has made substantial progress in strengthening its stress testing framework.* ### 58. The calibration of the CCyB in Moldova currently relies primarily on the credit-to-GDP ### The calibration of the CCyB in Moldova currently relies primarily on the credit-to-GDP gap ### Calibration challenges and the move toward broader indicators - The calibration of the CCyB in Moldova currently relies primarily on the credit-to-GDP gap, consistent with the Basel Committee’s guidance (BCBS, 2010). - Practical limitations cited: - Frequent revisions to national accounts data, structural breaks, and the evolving nature of Moldova’s financial system. - The credit-to-GDP gap "remained persistently negative since the aftermath of the global financial crisis and closed at the end of 2024." - International practice: many authorities have moved away from relying solely on the credit-to-GDP gap and instead use a broader set of indicators in line with ESRB (2014) recommendations and emerging best practice (e.g., Herz and Keller, 2023). - Typical final CCyB activation decisions are based on a combination of: - Early warning scorecards, systemic risk dashboards, or synthetic indices; - Stress testing results; and - Expert judgment. - The NBM is considering introducing a systemic cyclical risk index to improve on current practice. ### Synthetic indices and the Cyclogram example - Cyclogram (Národná banka Slovenska) overview: - Purpose: composite indicator to track the financial cycle and inform macroprudential policy where credit-to-GDP gap is misleading. - Mapping: a Cyclogram at its peak corresponds to the maximum 2.5 percent CCyB (based on historical loss analysis, e.g., losses from 2008–2010). - Frequency: published each quarter with an implied CCyB rate suggestion; not applied mechanically—NBS exercises judgment. - Construction: 14 variables including aggregate measures (credit-to-GDP gap, output gap, unemployment rate, economic sentiment index), sectoral indicators (household credit growth, debt service ratio, indebtedness; corporate credit, corporate debt-to-revenue, default rates), banking metrics (NPL dynamics), housing metrics (residential real estate price growth, housing affordability index). - Method: each variable is standardized into a 0, 1 indicator based on historical distribution; the Cyclogram is the sum of these indicators. Core indicators (aggregate credit, lending activity, macro variables) are given priority in interpretation. - For Moldova, a similar composite indicator could be constructed despite data gaps: - Existing usable inputs: macro imbalances (current account deficit, output gap, real interest rates), credit developments (bank credit to non-financial corporations and households), banking metrics (loan-to-deposit ratio), corporate debt-to-GDP from annual survey as a proxy for private sector debt servicing. - Methodological note: smooth variables using an eight-quarter moving average; express credit variables relative to trend GDP; normalize components using empirical cumulative distribution functions (CDFs). - Suggested improvements: include non-bank financial institution lending, broader private sector leverage measures, and more extensive real estate data. ### Positive Neutral CCyB (PnCCyB): rationale and operational considerations - Rationale for a PnCCyB in Moldova: - Maintains releasable capital in times when financial risks are "neither subdued or elevated" (Lang and Menno, 2023). - Particularly useful for small open economies exposed to external shocks and for environments with substantial uncertainty in financial cycle measurement (citing BoE, 2019). - PnCCyB can mitigate uncertainty, minimize costs of building buffers, insure against a wider spectrum of shocks, and help against "inaction bias" (ECB/ESRB, 2025). - Operationalizing the PnCCyB: - Activation, build-up, and release decision points should rely on continuous surveillance of early warning signs and stress test results. - Consider banks’ voluntary buffers and the potential effects on credit provision when setting build-up speed. - The buffer can be fully released in stress and subsequently rebuilt at a measured pace. ### Calibration approaches and stress-test–based methods - Typical calibration methods used across jurisdictions: - (i) average historical losses during standard business cycle downturns or commodity price shocks; - (ii) stress test results; - (iii) structural or reduced-form models; - (iv) cross-country benchmarking. - For Moldova, the report recommends piloting a stress test–based approach because past banking distress episodes were not driven by typical financial cycle risks. - Practical calibration approaches discussed: - Estimate potential tail risks to GDP under different macro-financial conditions and map results via stress testing into capital needs and implied CCyB rates (Couallier and Scalone, 2024). - Alternatively assume capital needs under stress could reach the maximum buffer of 2.5 percent and calibrate the PnCCyB as a function of the relative severity of more moderate (“median risk”) scenarios (see Box 3). ### Quantitative findings, stress-test results, and recommended PnCCyB level - Growth-at-Risk (GaR) estimates (see Annex IV) indicate: - Under benign macro-financial conditions, GDP contraction could range between 4 and 7 percent. - Under stressed conditions, GDP contraction could almost double. - Stress test outcomes: - Under the 5th percentile and 10th percentile of the mild scenario, systemwide capital depletion would range between 1.2 to 3 percentage points. - Buffer sizing considerations: - Authorities could add an indicative margin, e.g., 0.5 percentage points, to reflect banks’ tendency to hold extra headroom above regulatory minimums. - In the Euro Area, about 17 out of 30 countries have adopted a PnCCyB; buffer amounts differ, ranging from 0.5 to 2 pp. - The report’s assessment: "a PnCCyB of around 1.5 percent would be sufficient to have comfortable buffers for a mild shock." - Final guidance: - The calibration of the CCyB should follow guiding principles, rely on a combination of a broad set of indicators and expert judgment, and be supported by periodic stress testing and supervisory judgment. *Source: IMF staff analysis from the Moldova chapter on CCyB calibration (content unit 1mdaea2026004).* ### 63. The introduction of a PnCCyB does not fundamentally alter the structure of the CCyB ### 63. The introduction of a PnCCyB does not fundamentally alter the structure of the CCyB ### Interaction between a Positive-Neutral CCyB (PnCCyB) and the CCyB framework - Peak capital requirements for the CCyB remain the same; the PnCCyB increases the average level of capital over the cycle. - Quarterly calibration of the CCyB continues to be based on forward-looking assessments of systemic risks. - Possible CCyB actions given risk changes: - Reduction of risks may justify a cut in the CCyB, though still keeping it above the neutral rate. - More severe deterioration (e.g., tightening credit conditions or signs of systemic stress) would warrant a release below the neutral level. - Lending-survey indicators showing capital constraints can complement broader risk metrics when considering releases. - Rebuilding following a release: - Timing should avoid procyclical effects and minimize costs for the sector. - Ideally align buffer rebuilding with periods of strong bank profitability and internal capital generation. ### Communication and implementation - Given added complexity, clear and consistent communication is essential. - Key communication elements used by authorities: - Explain that a positive buffer in normal times is a precautionary measure—not a signal that risks are already elevated. - Use press releases, publication of indicators, and methodologies for activation/calibration. - Communicate criteria and timelines for buffer replenishment after a release to anchor banks’ expectations and strengthen willingness to use released capital. ### Box 4 — Slovenia’s operational approach (illustrative case) - Slovenia developed a forward-looking, structured, and model-supported approach to macroprudential policy, including a PnCCyB. - Challenges addressed: - Timely detection of systemic risk given lagging financial cycle indicators. - Insufficiency of credit-to-GDP gap in an economy with volatile capital flows and external shocks. - Balancing resilience building with avoiding undue capital constraints. - Operational practice highlights: - Gradual build-up strategy with early and moderate activation in anticipation of cyclical risk. - Use of composite indicators: a synthetic financial cycle indicator and a financial stress index (FSI) constructed using principal component analysis. - PnCCyB calibration chosen at 1 percent based on average expected losses from a range of stress tests. - Activation guided by a structured, rule-based framework anchored in the financial cycle indicator: - Composite indicator includes GDP, loans to households and real estate prices. - Indicator deviations within ±1 standard deviation → CCyB at its neutral level. - Logistic mapping function translates indicator values into buffer rates for smooth, gradual adjustments. - Release signals combine expert judgment and quantitative models: - Binary logit model for predicting onset of systemic stress. - Growth-at-Risk (GaR) model to estimate lower tail of GDP growth distribution. - Final decisions are not rule-bound; transparency via publication of background analysis and model results is emphasized. ### Moldova’s Systemic Risk Buffer (SyRB) — use and history - SyRB provides flexibility to target residual vulnerabilities not addressed by other capital buffers. - Introduction and application history: - SyRB introduced in Moldova in 2018. - Until 2022, a 2 percent buffer applied to banks based on majority shareholder ownership. - From May 2022 to October 2023, a 2 percent SyRB applied to all exposures to resident households—excluding individual entrepreneurs. - Since then, SyRB lowered to 1 percent but broadened to cover system-wide exposure. - Activation requires demonstrating that exposure poses a substantial systemic risk. - SyRB can be applied to specific banks or exposures. ### Stress tests, real estate exposures, and SyRB calibration - Real estate and lending context: - Indirect exposures through loans collateralized by real estate amount to approximately 43 percent of total loans. - Stress test: 30 percent real estate price correction used in sensitivity analysis. - Stress test results: - System-wide capital would decrease up to 0.9 percentage points as a result of the shock. - Effects are heterogeneous across institutions. - Conclusion: a sectoral SyRB of about 1 percent should be sufficient to cover capital depletion from real estate-related risks at this stage. - Policy implications and interactions with CCyB: - With CCyB maintained at a positive neutral level, overlap with SyRB may arise. - Authorities should clearly distinguish objectives: - CCyB targets cyclical, system-wide risks. - SyRB addresses structural or sector-specific vulnerabilities not covered by other buffers. - Calibration considerations: - If residential real estate vulnerabilities are already reflected in the CCyB, then SyRB should be adjusted downward or CCyB deducted to avoid double counting. - Activation and release principles: - Early introduction can prevent buildup of vulnerabilities while minimizing costs and procyclicality. - Release strategy depends on shock nature: - Sector-concentrated shock → release SyRB first. - Broader systemic shock → CCyB should be primary releasable buffer. - Simultaneous release of both buffers could maximize stabilizing effect but risks premature action if vulnerabilities persist. ### Dollarization, prudential measures, and stress-testing - Dollarization status as of the end of 2024: - Share of FX loans in the banking sector and non-banking sector stood at around 36 percent. - Share of banks’ FX deposits at 35 percent. - Measures adopted by NBM to contain dollarization and currency-induced credit risks: - Limits on FX loans. - Limits on net open FX positions. - Differentiated reserve requirements. - Caps on debt service to income ratios differentiated by currency. - Regulation and supervisory practices: - Regulation requires banks to address risk from FX exposure to unhedged borrowers through a Pillar II capital add-on assessed in ICAAP. - Stress test results indicate current prudential measures are effective in limiting credit risks from exchange rate depreciations. ### Recommendations (capital buffers and calibration) - The overall resilience of the system could be greatly enhanced by the introduction of releasable capital buffers and a more robust calibration method: - The NBM should consider adopting a more comprehensive method to calibrate the CCyB, beyond the simple credit-to-GDP gap. - The CCyB framework could include a positive-neutral setting. Calibration of the PnCCyB could be informed by stress test results under a scenario where systemic risks are not elevated. - The recently approved tightening of the CCyB, motivated by accelerating credit growth, is welcomed. Over time, such increases could be “locked in” during the release phase to maintain the CCyB at its neutral level—possibly including via a reallocation from the SyRB. - SyRB calibration: - Consider introducing a regular stress-test metric to calibrate the SyRB. - With a CCyB neutral setting, the existing SyRB should remain as a defense against risks not covered by other buffers. - The NBM should adopt separate and tailored periodic stress tests to analyze the need to introduce a SyRB. ### Borrower-Based Measures (BBMs) and lending standards - Rationale and design: - BBMs (LTV, DTI, DSTI) curb excessive household borrowing and reduce systemic risk. - BBMs apply only to new loans and can have immediate impacts; therefore they may require more gradual tightening than capital-based tools. - BBMs should apply broadly across banks and nonbanks and be supported by maturity limits and consistent enforcement to minimize regulatory arbitrage. - Moldova’s BBM design and calibration: - Introduced in 2022; regulations include “responsible lending” and set limits for LTVs and DSTIs applying to banks and NBCOs (SLAs exempted). - Amortization limits: 5 years for consumer loans and 30 years for mortgages. - LTV limits set at 80 percent; DSTI limits set at 40 percent. - Stricter DSTI limits for FX loans: 30 percent. - For floating rate loans (which accounted for 86 percent of mortgage loans as of 2024), stressed DSTI cannot be higher than 55 percent. - For consumers with income at least twice larger than the average monthly salary, DSTI can be as high as 55 percent and stressed DSTI up to 70 percent. - Impact on lending and standards: - After BBM introduction, bank activity slowed in affected segments (simultaneous with rising interest rates). - LTV outcomes: - Before measures: approximately 75 percent of new loans issued in a quarter had an LTV below 80 percent. - After implementation: that share rose to 98 percent. - Share of newly issued loans with high-LTV declined to around 6 percent and 2 percent in 2025Q1 and 2025Q2 respectively. - DSTI outcomes: - Share of loans below the 40 percent threshold increased from 60 to 70 percent per quarter. - Collateral and income assessment rules: - LTV: banks base assessment on market prices; only price increases from capital investments may be taken into account. - DSTI: assessment must be based on official income (i.e., confirmed) and verified through comprehensive credit reports; income flows must be regular over a six-month period prior to application (but not older than twelve months). - Debt burden calculation must include all debt obligations outstanding at time of disbursement plus the amount being disbursed. - Borrower income data availability: - Income reported as “zero” for approximately 17 percent of consumer loans and 40 percent of credit card debt issued in 2023–24. - These loans tend to be relatively small, with loan amounts clustering at the lower end of the distribution. *Source: 1mdaea2026004 - 63. The introduction of a PnCCyB does not fundamentally alter the structure of the CCyB (PDF).* ### 76. While the BBMs are tailored to Moldova’s specifics, the regime allows for certain ### 76. While the BBMs are tailored to Moldova’s specifics, the regime allows for certain exceptions. ### Design and scope of DSTI and LTV calculations - The calculation of income for the application of the DSTI ratio reflects local labor market conditions, including widespread informality and seasonal employment. - Regulation permits lenders to consider irregular income or income of uncertain sustainability, provided it is appropriately discounted. - Where borrowers cannot demonstrate official income, the DSTI is capped at 40 percent of the national minimum wage established annually by law. - For loans from NBCOs, the DSTI limit is set at 40 percent of the borrower’s average monthly debt service payments over the past six months, provided these payments were made in at least three of those months. - BBMs do not apply to purchases through installments, and some loan contracts issued by NBCOs (Law on Consumer Credit Agreements N.202/2013, Art 2(2)). - LTVs calculation allows for the deduction of state guarantees from the loan value, thereby reducing the effective LTV. ### Distribution of loans without reported income (Table 3 highlights) - Auto: Total Loans 62; >0 0; Missing > 0 0 or missing Zero Income No DSTI Auto 62; Shares (% Loans) 0.0; Income (N. Loans) 58; DSTI (N. Loans) 4; 6.5 - Credit Card: Total Loans 52,407; >0 31,129; Missing 21,278; Zero Income 0; No DSTI 34,467; Shares (% Loans) 40.6; Income (N. Loans) 34.2; DSTI (N. Loans) 17,940 - Consumer: Total Loans 195,592; >0 161,379; Missing 34,213; Zero Income 0; No DSTI 167,977; Shares (% Loans) 17.5; Income (N. Loans) 14.1; DSTI (N. Loans) 27,615 - Leasing: Total Loans 173; >0 173; Missing 0; Zero Income 0; No DSTI 172; Shares (% Loans) 0.0; Income (N. Loans) 0.6; DSTI (N. Loans) 1 - Renovation: Total Loans 33,464; >0 31,057; Missing 2,407; Zero Income 0; No DSTI 22,434; Shares (% Loans) 7.2; Income (N. Loans) 33.0; DSTI (N. Loans) 11,030 - Residential: Total Loans 9,631; >0 9,456; Missing 175; Zero Income 0; No DSTI 9,483; Shares (% Loans) 1.8; Income (N. Loans) 1.5; DSTI (N. Loans) 148 ### Effects of expanded state programs: “Prima Casa” - “Prima Casa” program introduced in 2017 (Law N.293/2017) provides partial government guarantees, interest rate subsidies, and permits higher LTV ratios. - Legislative amendments in July 2024 broadened eligibility and changed parameters: - Raised maximum value of eligible properties from MDL 1 million to MDL 2.5 million. - Increased government guarantee from 50 to up to 70 percent. - Lifted allowable LTV ratio from 95 to 100 percent. - Formal employment is not required; beneficiaries must report official income and maintain a DSTI ratio below 70 percent, though the definition of income is broader than under the standard regulatory framework. - Updated property threshold covers approximately 90 percent of mortgage loans issued in 2024. - The scheme contributed to a general loosening of lending standards amid rapid mortgage credit expansion. - Resulting upward pressure on real estate prices has increased household debt burdens and reduced affordability, particularly for low- and middle-income households. - Debt service burden computation notes: - Median mortgage loan around 800’000 MDL, duration 20 years, interest rate as of 2024Q4. - Stressed interest rate computed by adding 4 percentage points to the interest rate. - Debt service burden for a loan under “Prima Casa” computed using mortgage of 2’500’000 MDL, terms and conditions as of 2025Q2. - No adjustments made to account for the possibility of “unofficial income”. ### Recommended recalibration of “Prima Casa” and BBM tightening - Recalibrate and align “Prima Casa” with general regulatory framework: harmonize LTV and DSTI limits, treatment of guarantees, and definition of income. - Introduce a tiered LTV framework differentiated by borrower type and loan purpose (e.g., tighter caps for buy-to-let mortgages and for borrowers with pre-existing secured debt). - Pair tiered system with calibrated, lender-level flow caps that place a hard upper limit on the share of new loans in any quarter that may exceed applicable regulatory limits. - Caution: tiering can create incentives for misreporting; careful supervision required and flow caps should be data driven. ### Recommendations on exemptions and scope of BBMs (paragraphs 79–82 and explicit recommendations) - Review exemptions applied to NBCOs according to the Law on Consumer Credit Agreements N.202/2013, Art 2(2). - Bring the “Prima Casa” program under the general framework for BBMs, including regarding the LTV and DSTI limits, the application of government guarantees, and the definition of income. - Introduce a tiered LTV system with differentiated binding LTV limits depending on loan riskiness (e.g., first-time owners, second/subsequent home buyers, buy-to-let investors). Pair with limited flow exemptions (subject to a cap). - Broaden BBMs scope: - Introduce the requirement that all “buy-now-pay-later” contracts be subject to calculation of DSTI. - In the future—as the reform of the SLA sector progresses—bring SLAs under the BBM regime. ### Liquidity measures implemented by NBM - Basel III liquidity coverage ratios (LCR) introduced in 2020; threshold after phase-in has been 100 percent since January 2023. - Regulation allows NBM to set limits on outflows in a significant currency that can be met via assets denominated in a different currency. - Since July 2025, NBM introduced Net Stable Funding Ratios (NSFR) with a limit of 100 percent; no transition period applied. - NSFR has replaced previous requirement on long-term liabilities (introduced in 2009). - Banks subject to reporting requirement on maturity mismatches monitored over five maturity buckets (less than one month; between one and three months; between three and six months; between six months and one year; and greater than one year), and banks are recommended to keep a ratio of one or above for each of them. - Leverage ratios: reporting mandatory since 2021 (NBM Regulation N. 274/2020); a 3 percent binding minimum requirement will be in place starting from January 2026. - Loan-to-deposit ratio monitored with reference level of 100 percent. ### Liquidity position and vulnerabilities - System-wide average LCR has consistently hovered around 300 percent, well above regulatory minimum. - Composition of HQLA: central government assets 56.7 percent; central bank assets 23.6 percent; coins and banknotes 19.5 percent. - Dollarization (or euroization) remains elevated at 36 percent of total deposits. - Deposits have increasingly shifted from term to sight deposits, reducing funding stability and increasing sensitivity to sudden withdrawals. - Deposit concentration risk: relatively large share of deposits likely belong to few depositors and held in a limited number of institutions; NBM currently does not include an analysis of deposit concentration risks in its liquidity stress tests. - Reserve requirements are substantial and do not count toward HQLA despite meeting several criteria for HQLA eligibility; reserves reached peaks of 45 percent for FX deposits and 34 percent for MDL deposits in 2023, and were later lowered but remain high at 31 percent for FX deposits and 21 percent for local currency deposits. ### Recommendations on liquidity monitoring and NBCOs - Expand monitoring of funding risks arising from deposit concentration by cooperating with the supervision department and the FSD; complement FSD liquidity stress tests with scenarios assessing potential withdrawals by the largest depositors. - Consider counting reserve requirements as part of HQLA given averaging and non-segregation features and recent reductions in penalties for shortfalls. - NBCOs currently lack liquidity safeguards; their funding structure in 2025Q1: around 60 percent from long-term loans and 35 percent from own equity; about 70 percent of long-term loans have maturity between 1 and 5 years and are mostly issued by resident commercial banks (40 percent) and non-resident NBFIs (60 percent); about 65 percent of such loans are obtained in foreign currency in 2025Q1, with net open position about 2 percent in 2025Q1. ### Structural measures, interconnectedness, and sovereign-bank nexus - Interconnectedness in the financial system is small but contagion risks might grow; analysis hindered by lack of granular data on funding relationships between banks and NBCOs. - Existing regulation limits exposure between financial institutions (Article 5^2 para.3, letter (g) of the Law on NBM no.548/1995; Regulation no.109/2019 on Large Exposures). - Sovereign-bank nexus: - Public debt about 38 percent of GDP. - Domestic sovereign securities held by banks were 13.7 percent of their total assets and 104.2 percent of their regulatory capital in December 2024. - Exposure varies between 0 to 26 percent of total assets across banks. - Most sovereign securities classified as held-to-maturity; four banks hold approximately 5.5 percent of their total assets and 42.4 percent of their capital as available-for-sale. - Absence of a liquid secondary market and concentrated holdings imply risks should be closely monitored and explicitly considered in stress tests and systemic risk assessment. *Source: IMF staff analysis as provided in the supplied content.* ### 93. Following international best practice, spillover risks from concentration are addressed ### 93. Following international best practice, spillover risks from concentration are addressed ### D-SIB framework and international practice - International practice regarding the calibration of capital add-ons for D-SIB varies and ranges from 0.5 to around - D-SIBs capital buffers are widely recognized as a central element in the architecture of financial stability. They help large banks internalize systemic costs, limit contagion effects, and promote market confidence. - Countries generally designate D-SIBs based on defined criteria, compute a score based on these criteria and decide on the particular capital add-on using a “bucketing” approach. ### NBM designation method and indicators - The NBM has the power to identify systemically important banks (Article 5 2 para.2 of the Law on NBM no.548/1995; Article 63 of the Law on the activity of banks no.202/2017; Chapter IV of the Regulation no.100/2018 on capital buffers of banks). - Methodology is modeled on the basis of the EBA guidelines and the list of D-SIBs is published as a press release on the NBM’s website. - The NBM employs a scoring system with bucketing. The score is computed as a weighted average of five indicators, measured as ratios to the total banking sector: - (i) size (proxied by total assets) - (ii) importance and substitutability (equally weighted average of value of domestic payment transactions, loans and deposits to and from the private sector) - (iii) cross-border activity (proxied by the value of OTC derivatives, and transnational assets and liabilities) - (iv) interconnectedness (measured by holdings of assets from or liabilities issued and held by other financial operators, and outstanding debt instruments issued) - (v) volume or retail loans and deposits, and number of subsidiaries - The NBM computes a “systemic relevance” coefficient associated to each indicator prior to calculating the overall score to include only relevant indicators; outliers are identified based on the 5th percentile and may receive a weight of zero. - The NBM has the power to consider other criteria besides the final score and has introduced adjustments to tailor calculations to the peculiarities of its financial system; these adjustments appear justified, but international expertise to review their calculations would be beneficial. - To improve transparency, the NBM could consider providing more details regarding the choice of thresholds for the buckets. ### Capital buffers for systemic institutions: calibration and application - Capital buffers for systemic institutions have been introduced in 2018. - These surcharges can range from 0.25 to 3 percent, with the possibility for the NBM to impose higher buffers when warranted. - In line with CRD V, the NBM amended its regulatory framework to ensure that the buffer for O-SII is applied additively to any potential systemic risk buffers. - The calculation of the O-SII score is performed on a quarterly basis, and the list of D-SIBs is reviewed once a year. - As of May 2025: - The NBM designated four banks as systemically important, representing approximately 83 percent of total banking sector assets. - Capital surcharges were calibrated at 1.5 percent for the largest bank, 1 percent for the second-largest, and 0.5 percent for the two smaller O-SIIs. - Observations on calibration: - The maximum surcharge applied seems slightly lower than what is suggested by the level of concentration in the Moldovan banking sector (left chart Figure 17). - Capital charges applied to the bank with the highest score is higher than the floors recommended by the ECB while they are at the floors for the others (right chart Figure 17). ### Concentration and sovereign-bank nexus (data highlights) - Figure 16: Banking Sector Concentration — Share of Banking Sector Assets of top four banks shows a series of values for 2015–2024 (chart source: NBM, Staff calculations). - Figure 15: Moldova: Sovereign-Bank Nexus — charts show public sector exposures and banks' exposure to public sector by entity and by instrument (sources: IMF MFS and Dehmej (2025)). - The text references a notable concentration: four D-SIBs account for approximately 83 percent of total banking sector assets (as of May 2025). ### Supervisory powers and transparency - The NBM publishes the list of D-SIBs as a press release and applies a methodology aligned with international best practice (EBA guidelines). - The NBM could benefit from international expertise to review adjustments made to the scoring calculations and could improve transparency by explaining threshold choices for buckets. ### Recommendations - As NBFIs grow and their interconnections with the banking system increase, the NBM should continue improving the analysis of interconnection risks. - Once key data gaps are addressed, the NBM could enhance its assessment of interconnectedness between banks and NBFIs through lending-funding relationships. - The analysis could be further refined by examining transmission of shocks through channels such as cross-holdings of financial assets and liabilities, and common exposures to similar asset classes. - The NBM should strictly monitor the sovereign-bank nexus and incorporate the effect of available for sale portfolios in its stress tests. - If needed, excessive concentration could be dealt with through Pillar II capital add-ons. *Source: Excerpt from IMF chapter on Moldova — “Following international best practice, spillover risks from concentration are addressed”* ### Chapter I, Section I, point 22, in force ### Chapter I, Section I, point 22, in force ### Macroprudential tools, scope, and legal basis - Liquidity Coverage Ratio differentiated by currency - Responsible authority: NBM - Perimeter: Soft Banks (NBM Soft Banks) - Legal basis: Regulation no.44/2020 on Liquidity Coverage Requirements for Banks, Chapter I, Section 3, point 12, in force until June 30th 2025; Regulation no.329/2024 on Liquidity, Title II, Chapter I, Section I, point 25, in force starting July 1st 2025 - Reserve requirements - Responsible authority: NBM - Perimeter: Hard Banks (NBM Hard Banks) - Legal basis: Regulation no.302/2019 on the regime of mandatory reserves, Chapter III, point 12 - Limit on net foreign exchange positions - Responsible authority: NBM - Perimeter: Hard Banks (NBM Hard Banks) - Legal basis: Regulation no.126/1997 on bank’s open foreign exchange position, Chapter V, point 5.1 - Net stable funding ratio (NSFR) - Responsible authority: NBM - Perimeter: Hard Banks (NBM Hard Banks) - Legal basis: Regulation no.329/2024 on Liquidity, Title III, Chapter I, Section 1, point 133, in force starting July 1st 2025 - Capital surcharges for systemically important banks (SIBs) - Responsible authority: NBM - Perimeter: Hard Banks (NBM Hard Banks) - Legal basis: 1. Article 5 2 para.2 of the Law on NBM no.548/1995; 2. Article 63 of the Law on the activity of banks no.202/2017; 3. Chapter IV of the Regulation no.100/2018 on capital buffers of banks - Limits on the size of exposures between financial institutions - Responsible authority: NBM - Perimeter: Hard Banks; Both banks and NBFIs - Legal basis: 1. Article 5 2 para.3, letter (g) of the Law on NBM no.548/1995; 2. Item 5, definition of ”large exposure” and point 16 1 regarding reporting of 10 largest exposures on a consolidated basis to financial sector entities other than banks and Chapter IV provided in the Regulation no.109/2019 on Large Exposures ### Countercyclical and systemic buffers — settings and recent changes - Countercyclical Capital Buffer (CCyB) - NBM publishes decision following quarterly reviews; in normal times buffer expected to be 0. - Since August 3, 2018, the CCyB rate is 0 percent. - Last decision of the Executive Board of the NBM no.68 of July 24, 2025, increased the CCyB applied to credit exposures in the Republic of Moldova to 0.5 percent of the risk exposure amount. - The decision will enter into force 6 months after its publication on the Official Gazette of the Republic of Moldova (July 30, 2025). - Dates noted: July 30, 2018; March 28, 2025; July 24, 2025 - Systemic Risk Buffer (SyRB) - Framework in effect on July 30, 2018 (Decision No. 193 of the Executive Board of the NBM dated July 31, 2018). - SyRB must be met with Common Equity Tier 1 (CET1) capital and reviewed at least every two years. - Between August 3, 2018, and end-2022, SyRB rates ranged from 1 percent to 3 percent. - A 1 percent rate applied to all banks for exposures located in the Republic of Moldova, plus a further buffer of 2 percent maintained until December 31, 2021 (Decision 287 of December 24, 2020). - By Decision 268 of December 30, 2021, NBM preserved the 1 percent broad SyRB and applied another 2 percent buffer to banks whose major shareholders met at least one of specified criteria. - Decision No. 98 of May 12, 2022 (effective May 20, 2022) introduced a 2 percentage point SyRB add-on for banks’ exposures to credit risk from resident households (excluding entrepreneurial activity). - Decision No. 210 of October 26, 2023 repealed the household-specific SyRB add-on; the general 1 percent SyRB rate was maintained. - Dates noted: July 30, 2018; December 24, 2020; December 30, 2021; May 12, 2022; December 31, 2022; October 26, 2023 ### Capital buffers and SII settings - Capital Conservation Buffer (CCoB) - Set to 2.5 percent of the total amount of risk exposure and must be met with CET1 capital. - NBM allowed temporary use of the CCoB starting April 6, 2020; this was repealed by the Executive Board on December 16, 2021. - Date noted: July 30, 2018 - Capital Surcharges for Systemically Important Institutions (O-SII buffer) - Implemented effective July 30, 2018. Buffer range: 0.25–3. - Rate history: - From August 3, 2018, until March 27, 2019: one institution – 0.75 percent; two institutions – 0.50 percent; one institution – 0.25 percent. - Since March 28, 2019: one institution – 1.5 percent; two institutions – 1.0 percent; one institution – 0.5 percent. - Since April 9, 2024: one institution – 1.5 percent; three institutions – 1.0 percent. - Since May 22, 2025: one institution – 1.5 percent; one institutions – 1.0 percent; two institutions – 0.5 percent. - Dates noted: March 28, 2019; April 9, 2024; May 22, 2025 ### Leverage, lending, and borrower protection measures - Limit on Leverage Ratio - Regulation No. 274/2020 on leverage for banks transposed EU provisions effective March 30, 2021, but did not establish binding minimum leverage ratio. - Leverage ratio defined as bank’s capital (Tier 1 equity) divided by bank’s total exposure, expressed as a percentage. - Banks report leverage information to NBM. - NBM will introduce Basel III compliant leverage ratio limits starting January 2026. - Date noted: March 30, 2021 - Cap on Loan-to-Value (LTV) Ratio - Decision No. 101 of May 19, 2022 approved Regulation on Responsible Lending to Consumers by Banks; National Commission for the Financial Market Decision No. 20/5 of May 20, 2022 for non-bank lending sector. - Caps effective from July 1st 2022 for banks, and September 1st 2022 for NBCOs. - LTV for new residential real estate loans to households may not exceed 80 percent. - Regulation No. 101/2022 allows guarantees to be deducted when calculating LTV and permits temporary LTV above 80 percent if borrower commits to reduce the loan within up to three months for a purchase or twelve months for construction. - Exception limit (Regulation No. 101/2022) is up to 15 percent of the total new real-estate loans granted in the previous 3 months. - Date noted: May 19, 2022 - Cap on Debt-Service-to-Income (DSTI) Ratio - Same Decisions No. 101 (May 19, 2022) and No. 20/5 (May 20, 2022). - Caps effective from July 1st 2022 for banks, and September 1st 2022 for NBCOs. - DSTI must not exceed 40 percent of the borrower’s average net monthly income over the past six months. - As an exception under Regulation No. 101/2022, a higher DSTI limit of up to 55 percent is permitted if the borrower’s average net monthly income is at least twice the average nominal monthly wage approved by the Government for the year in which the credit decision is made. - Date noted: May 19, 2022 - Cap on DSTI Differentiated by Currency - Decision No. 101 (May 19, 2022) and Decision No. 20/5 (May 20, 2022) require DSTI for FX-denominated household loans to not exceed 30 percent unless income is also in foreign currency. - Date noted: May 19, 2022 ### Liquidity measures and transition to Basel standards - Liquidity Coverage Ratio (LCR) - Banks must hold liquid assets sufficient to cover net liquidity outflows under stress for a 30-day period. - Phased introduction: 1. 60 percent effective October 1, 2020; 2. 70 percent effective January 1, 2021; 3. 80 percent effective January 1, 2022; 4. 100 percent effective January 1, 2023. - Date noted: February 26, 2020 - Liquidity Coverage Ratio differentiated by currency - Banks may align currency denomination of liquid assets with distribution of net liquidity outflows by currency. - NBM may require limits on use of liquid assets not denominated in that currency for currencies subject to separate reporting where aggregate liabilities in that currency equal or exceed 5 percent of the bank’s total liabilities. - Date noted: February 26, 2020 - Liquid asset ratio (historical) - Principle II required a short-term liquidity ratio of at least 20 percent, effective from November 30, 1998 to December 31, 2021. - Replaced by LCR provisions effective January 1, 2022 per Decision No. 44, February 26, 2020. - Dates noted: January 1, 2011; February 26, 2020 - Core Funding Ratio / Principle I transition - Principle I long-term liquidity requirement previously in place; from July 1st 2025, Principle I replaced by Basel III net stable funding ratio (NSFR). - Dates noted: December 17, 2009; June 30, 2025; From July 1st 2025 ### Additional liquidity and FX constraints - Limits on Maturity Mismatches - Recommended since December 10, 2015, across maturity bands: up to 1 month, 1–3 months, 3–6 months, 6–12 months, over 12 months. - Definition of actual adjusted liquidity updated May 14, 2019. - Dates noted: December 2015; May 14, 2019 - Net Foreign Exchange Position limits - For individual currencies: long position ≤ +10 percent and short position ≥ −10 percent of own funds. - Aggregate across currencies: aggregate long position < +20 percent and aggregate short position > −20 percent of own funds. - Net balance sheet FX position must remain within ±25 percent of own funds (does not apply to banks whose FX assets and liabilities each represent less than 10 percent of own funds). - Date noted: February 27, 2004 - FX Loans exposure limit - Net exposure through loans denominated in Moldovan lei but indexed to foreign currency may not exceed 30 percent of total eligible capital (Tier I and the portion of Tier II not exceeding one-third of Tier I). - Applies to loans linked to exchange rate movements; excludes loans directly denominated in foreign currency. - Regulation No. 231 of October 27, 2011; effective January 1, 2012 regarding classification if borrower lacks foreign currency income. - Dates noted: November 3, 2011; January 1, 2012 ### Cross-country comparison highlights (selected entries from tabulation) - Countercyclical capital buffer: Moldova — Yes - Capital conservation buffer: Moldova — Yes - Limit on leverage ratio: Moldova — No (*) (Note in table: (*) Binding limit from January 1st 2026) - Net Stable Funding Ratio: Moldova — Yes (****) (Note in table: (****) Effective from July 1st 2025) - Liquid asset ratio: Moldova — No (***) (Note in table: (***) Replaced by the introduction of LCR) - Core funding ratio: Moldova — No (*****) (Note in table: (*****) Replaced by the introduction of NSFR) *Source: IMF, macroprudential database* ### Annex IV. Calibration of Capital Buffers ### Annex IV. Calibration of Capital Buffers ### Calibration of the Positive-Neutral Countercyclical Capital Buffer (PnCCyB) - Model and data: - Growth-at-Risk (GaR) model following Adrian et al. (2019). - Estimated on quarterly data from 2010Q1 to 2024Q4. - One-year-ahead real GDP growth regressed on its lag and indicators of: domestic financial conditions, foreign financial conditions, and external demand. - Domestic conditions proxied by a principal-components index capturing interest rate spreads, money market rates, exchange rates, and credit variables. - Foreign financial conditions represented by the Euro Area Composite Indicator of Systemic Stress (CISS). - Foreign economic conditions proxied by EU GDP growth. - Estimated discrete quantiles smoothed using a T-skew distribution. - Tail-risk distribution under “normal” macro-financial conditions computed by keeping regressors fixed at their historical average (formula: 푄̂(푦푡+ℎ, 휏 | 푋̅푡) = 훼̂휏 + 푋̅푡 휷′̂휏). - Key quantitative findings: - Under normal conditions, the GaR results indicate the 10th percentile of one-year-ahead GDP growth is around –4 percent. - Under normal conditions, the GaR 5th percentile is around –7 percent. - A GaR(10) downturn (10th percentile) would deplete banks’ aggregate capital adequacy ratio by about 1.2 percentage points. - A GaR(5) downturn (5th percentile) would reduce the aggregate capital adequacy ratio by about 3 percentage points. - The GaR recalculated under stressed conditions (approximated by two standard-deviation shocks to all regressors) produced a GaR(5) broadly comparable to the GDP decline assumed in the FSAP’s “severe but plausible” stress test. - Calibration decision and recommendation: - Neutral CCyB range implied by results: 1–3 percent of risk-weighted assets. - Calibration focused on the 10th percentile outcome (judged more realistic than the 5th percentile). - Allowing extra capital headroom above the recommended threshold, the exercise converged to a neutral buffer level of 1.5 percent. ### Calibration of the Systemic Risk Buffer (SyRB) - Risk focus and empirical approaches: - Calibration based on potential vulnerabilities in the real estate market due to rapid price increases and overvaluation concerns. - Two empirical estimates: - Dynamic OLS linking house prices to population, GDP per capita, mortgage interest rates, and construction permits → implied overvaluation of around 21 percent. - Standard OLS following Igan and Loungani (2012) → implied overvaluation of about 33 percent. - Data availability: limited sample 2019Q1–2024Q4; estimation uncertainty and continued price increases in early 2025 prompted cautious interpretation and use of a conservative midpoint. - Stress simulation and results: - FSAP solvency stress test models used to simulate a 30 percent decline in real estate prices (broadly consistent with eliminating the estimated overvaluation). - Single-factor shock transmitted to banks via higher probabilities of default and loss-given-default on mortgage loans and retail loans (to capture second-round effects), using satellite models from the FSAP solvency stress test. - Simulated correction led to a system-wide capital depletion of about 1 percentage point. - Calibration decision and recommendation: - Finding supports calibrating the SyRB at around 1 percent to ensure banks can absorb losses from a sharp real estate correction without breaching minimum capital requirements. - The SyRB provides a safeguard against structural vulnerabilities not addressed by other capital requirements. *Source: Annex IV. Calibration of Capital Buffers* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1mdaea2026004.pdf_