NBM: Moldova’s financial system in 2020 showed resilience

The financial system of the Republic of Moldova in 2020 showed resilience, the economic and social conditions influenced by the effects of the COVID-19 pandemic being characterized by nonuniform evolutions and materialization of risks within the economic segments of the Republic of Moldova. According to the National Bank of Moldova’s financial stability report for 2020, the nonbank lending sector tempered its expansion evolution in all the subcomponents. Even if the interest rates applied by banks witnessed nonuniform evolutions, the bank interest margin increased, IPN reports.

Despite all the challenges witnessed in the analyzed period, the banking sector continued to have a satisfactory performance, maintaining its solid positions of profitability and solvability, noted the NBM.

According to the report, amid the unfavorable economic context and the restrictions related to the COVID-19 pandemic, the bank’s loan portfolio maintained the growth pace. The non-performing loans decreased in value primarily due to the growth of the whole portfolio. The credit risk continued to represent the most significant threat to the stability of the banking sector.

The analysis of the credit risk shows the efficiency of the prudential risk management policies pursued by banks, which managed to maintain sufficient capital positions amid the unprecedented crisis conditions for absorbing the potential losses estimated even under the most pessimistic scenarios associated with the deterioration of the quality of assets.

Even if the interest rates applied by banks witnessed nonuniform evolutions, the bank interest margin rose. The open currency positions of the banks matched the prudential limits, while the impact of the sector’s direct exposure to the volatility of the exchange rate was reduced. The liquidity of the baking sector was maintained at significantly higher levels than the regulated requirements. Despite the restrictions imposed in the course of the year, the banks managed to maintain current liquidity at the pre-pandemic level, including to further minimize the risk related to the maturity and coin discrepancies between assets and bonds.

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