Current situation and trends in the Moldovan banking sector
The bank fraud in 2014 has changed the sector significantly. It has shrunk, as banking assets in relation to GDP decreased from 84% in 2014 to 54% in 2016.
Concentration increased – the three largest banks now have a market share of 65% of total assets, in 2013 the share was 50%. A regional comparison, however, shows that the smaller size and the higher concentration do not pose a problem. Still, the banking scandal had harmed confidence in the sector.
Most indicators show, however, that confidence is recovering. The temporary “flight” to foreign currencies is over and the dollarisation is now at 45%, which is the same level as prior to the bank fraud. After the liquidation of the three insolvent banks, the capital adequacy ratio is now higher than prior to the crisis and the ratio of non-performing loans is increasing only due to stricter regulation. Additionally, the effort of the National Bank to increase transparency is bearing fruits. Shares in the largest banks have been blocked and are partly reissued.
At the same time, the problem of weak crediting of the private sector remains unsolved. The reasons are to be found on the supply as well as on the demand side: On the one hand there is a lack of qualified projects; on the other hand banks have little incentive to provide loans, as interest rates on government bonds and certificates of the National Bank are high. In this situation the sale of the blocked shares of the largest banks to international strategic investors would help stimulate the credit business.
