Role of a central bank in ensuring financial stability is fundamental, governor

The emerging economies need a special approach as they represent a very dynamic and volatile environment, with many changes, developments and simultaneous shocks. This way, the role of a central bank in ensuring economic growth is fundamental as the volatility and shocks generate costs, inefficiency and hamper economic growth, National Bank governor Octavian Armașu stated in a roundtable meeting staged by the Bank in partnership with institutions with economic analysis duties representing civil society, IPN reports.

Octavian Armașu said the monetary policy decisions are a very important response to economic shocks and the discrepancies caused by these. The operations on the monetary market or the currency interventions are immediate. The modification of the bank’s mandatory reserves takes effect in a month, while the changes of the base rate have an impact on the economy in several months.

The governor noted the achieved results are due to the major reforms done in the banking sector with the assistance of the foreign partners and a separate role here was played by the rule of law. Now the done reforms should be maintained and this is the biggest challenge of the National Bank when the authorities and the state do not realize the particularities of the central bank’s supervisory function.

Mugur Isărescu, the governor of the National Bank of Romania, said the major objective of a central bank of European type is to follow the stability of prices in the national economy. After the crisis of 2008, it became more evident that the ensuring of financial stability is not incompatible and is even beneficial for achieving the key objective that essentially depends on the political, juridical, functional independence of the central bank. The National Bank of Romania will continue to support the National Bank of Moldova in its efforts to meet the European practices and standards.

IMF Resident Representative in Moldova Rodgers Chawani noted that the governance elements are appropriate in the case of Moldova, but they were subject to political pressure. Even so, considerable progress has been made. But the NBM continues to be subject to political attacks by Parliament and sometimes by the executive. The fight against money laundering is a worrisome moment, even if there is a solid framework and the authorities addressed these vulnerabilities. There are yet particular deficiencies, like the involvement of politicians and identification of final beneficiaries. It is very important to ensure the functionality of the NBM and to offer legal protection to the bank’s personnel.

World Bank Country Manager for Moldova Anna Akhalkatsi said the independence of the central banks is very important for the government as this creates confidence and facilitates investments in the country. Also, the role of the central banks is very important in times of crisis, when the countries experience financial problems. “Moldova needs to keep the progress made the past few years – the restoration of confidence in the sector – and the NBM will continue to play an important role in maintaining the financial systems and attracting investments. These priorities should remain the basic stresses when Moldova recovers after the pandemic,” stated Anna Akhalkatsi.

The Head of the EU Delegation to Moldova Peter Michalko said the financial sector of Moldova was unfortunately affected significantly by the bank fraud of 2014. This happened due to high-level corruption, due to particular interests. “We hope the investigations into the bank fraud will be resumed, continued. The European Union always lays emphasis on the investigation of the bank fraud that represents an appropriate factor in the fight against corruption, for improving the justice sector in Moldova. The state institutions should have the capacity to efficiently investigate corruption. It is important to make significant progress in recovering assets as a result of this fraud in a transparent way,” stated the official. According to Peter Michalko, even if a lot was done to clean the banking system, the evolution of the sector is followed in continuation by the EU and the necessary reforms should be continued, while the banking sector of Moldova should remain financially stable, transparent, reliable   and attractive to foreign investment.

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