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REPUBLIC OF MOLDOVA NATIONAL COMMISSION FOR FINANCIAL MARKETS ANNUAL REPORT 2014 National Commission for Financial Markets’ activity and non-banking financial market functioning
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REPUBLIC OF MOLDOVA
NATIONAL COMMISSION FOR FINANCIAL MARKETS
ANNUAL REPORT 2014National Commission for Financial Markets’ activity
and non-banking financial market functioning
Chisinau 2015
Annual report on NCFM activity and non-banking financial market functioning in 2014Approved within the meeting of NCFM Council of Administration on May 23, 2015 and submitted to the Parliament, President of the Republic of Moldova and Government in accordance with the provisions of the Law No. 192 - XIV of 12.11.1998 "On the National Commission for Financial Markets" with further amendments.The annual report emphasizes the events in calendar year 2014 and reflects the situation as of December 31, 2014.Reproduction of this publication is prohibited and use of data in various papers is permitted only if the source is acknowledged.
National Commission for Financial MarketsMD 2012, Stefan cel Mare Bd., No.77, Chisinau,Phone: +373 22 859 401 Fax +373 22 859 504Internet: www.cnpf.mdE-mail: [email protected]
CONTENTS
2
Message of the Council of the National Commission for Financial Markets 8Chapter I. ACTIVITY OF THE NATIONAL COMMISSION FOR FINANCIAL MARKETS (NCFM)
10
I. Mission, management and organization of NCFM 101.1. Mission and activity’s objectives 101.2. Organizational structure and professional training 171.3. Budget and financing in 2014 191.4. Information Technologies development 221.5. Information transparency 23II. Achievement of NCFM objectives 262.1. Regulation of non-banking financial market 262.2. Authorization and licensing of non-banking financial market participants 312.3. Monitoring and control of non-banking financial market participants’ activity
36
2.4. Protection of the rights of non-banking financial market participants 422.5. Legal activity 442.6. Certification of non-banking financial market specialists 482.7. Financial stability2.8. Internal institutional cooperation
4849
2.9. International cooperation 502.10. Preventing and combating the money laundering and terrorism financing on the non-banking financial market
55
Chapter II. ORGANIZATION AND FUNCTIONING OF THE NON-BANKING FINANCIAL MARKET
57
I. Securities market’s evolution 571.1. Primary market of securities 591.2. Secondary market of securities 591.3. Participation of foreign investors in transactions on securities market 681.4. Financial results of Joint Stock Companies’ activity 701.5. Activity of professional participants on the securities market 71II. Insurance market development 812.1. Insurance companies’ activity 812.2. Activity of insurance and/or reinsurance intermediaries2.3. Street victims protection fund and Compensation fund
9494
III. Microfinance sector’s evolution 953.1. Activity of savings and credit associations 963.2. Activity of microfinance organizations 107IV. Activity of credit history bureau Annexes
110112
ANNEXES
3
Annex nr. 1 Organizational structure of the National Commission for Financial Markets
116
Annex nr. 2 Regulatory decisions of the National Commission for Financial Markets approved in 2014
117
Annex nr. 3 Recordings made in the Register of licenses issued, re-issued, suspended and withdrawn in 2014
119
Annex nr. 4 Authorizations of reorganization issued to Joint Stock Companies in 2014
134
Annex nr. 5 Public offers on the secondary market registered and developed in 2014
136
Annex nr. 6 Transactions under public offering prospectus 137Annex nr. 7 Information on contraventions detected on the non-banking
financial market in 2014 138Annex nr. 8 Legal and normative acts examined by NCFM at the request of
other authorities with issuance of notifications139
Annex nr. 9 List of the Joint Stock Companies which issued incorporation shares in 2014
141
Annex nr. 10 List of Joint Stock Companies which have performed supplementary issues in 2014
142
Annex nr. 11 List of Joint Stock Companies which have registered changes in the Securities State Register in 2014
145
Annex nr. 12 Transactions with securities of Joint Stock Companies included in the listing of Moldova Stock Exchange in 2014
149
Annex nr. 13 Free float ratio for issuers included in the listing of MoldovaStock Exchange as per 31.12.2014
150
Annex nr. 14 List of Joint Stock Companies which registered securities issues with foreign capital participation in 2014
151
Annex nr. 15 Purchases and sales of securities made by foreign investors depending on the home country in 2010-2014
152
Annex nr. 16 List of Joint Stock Companies which submitted the annual financial report on securities for 2013
153
Annex nr. 17 Results of economic and financial activity of Moldova Stock Exchange at the end of 2014
179
Annex nr. 18 Results of economic and financial activity of the National Securities Depository of Moldova at the end of 2014
179
Annex nr. 19 Results of economic and financial activity of non-banking brokers/dealers at the end of 2014
180
Annex nr. 20 Information on the amount of transactions carried out via non-banking brokers/dealers in 2014
181
Anexa nr. 21 Amount of transactions with corporate securities carried out via commercial banks in 2014
182
Anexa nr. 22 List of independent registrars who provided issuers’ register keeping services in 2014
183
Anexa nr. 23 Results of economic and financial activity of independent 1844
registrars at the end of 2014Anexa nr. 24 Economic and financial situation of the investment funds in
process of forced liquidation at the end of 2014185
Anexa nr. 25 Economic and financial situation of investment funds in process of liquidation on own initiative at the end of 2014
186
Anexa nr. 26 Economic and financial situation of trust managers at the end of 2014
187
Anexa nr. 27 Concluded contracts and services provided by companies evaluating securities and assets related to them
188
Anexa nr. 28 Results of economic and financial activity of companies evaluating securities and assets related to them at the end of 2014
189
Anexa nr. 29 Information on the consulting and investment consulting activity provided by professional participants of the non-banking financial market in 2014
191
Anexa nr. 30 Subscribed insurance premiums in 2014 192
Anexa nr. 31 Insurance compensation and claims paid in 2014 193
Anexa nr. 32 Balance sheet of insurance companies at the end of 2014 194
Anexa nr. 33 List of insurance companies with foreign capital 195
Anexa nr. 34 Placement of insurance reserves and minimum solvency margin according to the situation at the end of 2014
196
Anexa nr. 35Anexa nr. 36
Information on subsidized agricultural insurance in 2014Report on reinsurance operations
197199
Anexa nr. 37 Main indicators of insurance companies’ activity at the end of 2014
200
Anexa nr. 38 Financial results of insurance and/or reinsurance brokers 201Anexa nr. 39 General information on economic and financial situation of
savings and credits associations at the end of 2014204
Anexa nr. 40 Key indicators on the activity of microfinance organizations at the end of 2014
217
Main Acronyms and Abbreviations Used
5
SCA Savings and Credit Association
TA Trust Manager
IRB Insurance and/or reinsurance broker
CB Commercial Bank
EBRD European Bank for Reconstruction and Development
WB World Bank
NBMI National Bureau of Motor Insurers
NBM National Bank of Moldova
NBS National Bureau of Statistics
MSE Moldova Stock Exchange
IC Insurance Company
CNA National Anticorruption Centre
ICEEC Integration Committee of the Eurasian Economic Community
TC Trust Company
JIC Joint Insurance Company
NCFM National Commission for Financial Markets
NCFS National Committee for Financial Stability
CIS Commonwealth of Independent States
NSD National Securities Depository
CEE Central and Eastern Europe
FATF
NNIF
Financial Action Task Force
Non-mutual Non-specialized Investment Fund
IMF International Monetary Fund
IAIS International Association of Insurance Supervisors
ICURN International Credit Union Regulators’ Network
6
IOSCO International Organization of Securities Commissions
IOPS
FCC
International Organization of Pension Supervisors
Foreign Capital Company
JV Joint Venture
MMoU
MO
Multilateral Memorandum of Understanding
Microfinance Organization
GDP Gross Domestic Product
RISP Rural Investment and Services Project
RM Republic of Moldova
SSR Securities State Register
JSC Joint Stock Company
AIPS
ML/TF
Automated Interbank Payment System
Money Laundering and Terrorism Financing
CS Commercial Society
IFRS
IMS
International Financial Reporting Standards
Informational Management System
LLC Limited Liability Company
USA United States of America
EU European Union
USAID United States Agency for International Development
WOCCU World Council of Credit Unions
Message of the National Commission for Financial Markets’ Board
7
The prior activity of the NCFM’s agenda for 2014 was the enforcement of the Law No.35 of 03.03.2011 "On approval of the Strategy for non-banking financial market development 2011-2014 and the Action plan to implement the strategy for non-banking financial market development for 2011-2014". A retrospective analysis of the performance of the main policy document and the evolution of its indicators characterizing the non-banking financial market creates the framework for identifying new opportunities and resources to determine the future development trend.
The evaluation of the securities market parameters exceeds the monitoring indicators of the Strategy for non-banking financial market development with reference to both the primary market and the secondary market as well. On the insurance market, although all the indicators have increased as compared to 2013, the volume of subscribed insurance premiums, including life insurance, is below the forecasted level of monitoring indicators. To be noted that the volume of written insurance premiums has increased only by 0.39 percent in 2014 compared to 2013. With reference to the microfinance sector, an increase of 77.4 mil. lei of the volume of loans granted by savings and loan associations has been registered as compared to the previous year, although the indicator recorded is below the forecast for 2014, while microfinance organizations have reported considerable progress for both the reporting year 2013 as well as monitoring indicators.
Despite the fact that Moldova is on the last position among the countries of the region and comparable by territorial size and population number in terms of the amount of GDP, the aggregate level of penetration of all non-banking financial market segments in GDP registered in the period 2012-2014, is part of a positive trend, reaching the 2014 the level of 5.9 percent. According to the level of penetration in some sectors of the non-banking financial market, the Republic of Moldova is not on the top, while according to the volume of stock transactions of GDP it leaves behind countries like Latvia, Lithuania and Armenia.
The long term aspirations to meet the EU standards, values and regulations have been reflected in the Association Agreement between the Republic of Moldova, on the one hand, and the European Union and the European Atomic Energy Community and its Member States, on the other hand, the year 2014 being marked by the major event of its signing and ratification. The NCFM regulatory activity is included in the Republic of Moldova’s agenda of priorities. The Law amending certain legislative acts nr. 180 of 25.07.2014 refers to this chapter and includes amendments to the Law on the capital market, the Law on Insurance, Law on Compulsory Motor Third Party Liability Insurance, Criminal Code and Contravention Code.
Amendments to the Law on capital market are part of the activities assigned to the reform for securities holders’ registry keeping and are aiming to establish requirements that would ensure confidentiality, integrity of data contained in the registers of securities holders by creating a back-up of information.
Amendments to the Law on Compulsory Motor Third Party Liability Insurance and the Law on Insurance are aiming to improve the legal framework
8
regulating the activity of the National Bureau of Motor Insurers, and the activity of compulsory motor liability insurance.
The provisions of the Administrative Code and the Penal Code have been adjusted to the legislation on non-banking financial market in order to effectively protect the rights of securities market operators and to strengthen the regulatory and supervisory framework of the non-banking financial sector in accordance with best international and European practices.
A comprehensive approach in terms of harmonization of legislation with the acquis communautaire should target both the primary and secondary regulatory framework, which would provide the mechanisms for implementation of legislation. During 2014, 8 by-laws under the Law on capital market and 3 resolutions amending the normative acts subordinated to insurance legislation have been approved.
Having as a priority the support of both the borrowers and the savings and loan associations, due to the restrictions imposed by the Russian Federation to the import of food and wine from Moldova, the Resolution on certain provisory measures concerning the classification of loans provided to borrowers in the agricultural sectors by the savings and loan associations has been approved. The objective of these measures is to ensure the sustainable development of the sector of savings and loan associations, by extending the delayed recovery of overdue payments, the core business of which is the agricultural activity. Moreover, the above mentioned provision is of great importance, given that about 47.0 percent of loans provided by savings and loan associations are in agriculture.
All carried out activities and undertaken measures aimed at strengthening the capacity of the financial market professional participants to mitigate the operational and financial risks, to identify the existing vulnerabilities and best practices for improving the specific regulatory and supervisory activities of the three sectors of the non-banking financial market.NCFM will make continuous efforts to meet the challenges to insure the non-banking financial market stability and safety.
From this perspective, we wish you success and good professional achievements.
With respect and appreciation,Administrative Council of the National Commission for Financial Markets
Chapter I. ACTIVITY OF THE NATIONAL COMMISSION FOR FINANCIAL MARKETS
9
1. Mission, management and organization of NCFM
1.1. Mission and tasks of NCFM
NCFM, as an autonomous public authority responsible to the Parliament operates under the provisions of the Constitution of the Republic of Moldova, Law no.192-XIV of 12.11.1998 “On the National Commission for Financial Markets”, with further amendments and supplements, other laws and regulations, and the Regulation on organization and functioning of the National Commission for Financial Markets, approved by NCFM Decision no.48/5 of 27.09.2007 with further amendments.
NCFM is managed by the Administrative Council, which is a collegial body composed of 5 members, including the Chairman and two Deputy Chairmen of the Administrative Council. The Administrative Council members are appointed by the Parliament for a term of 5 years.
The nominal composition of the Administrative Council in 2014 was as follows:
Chairman – Artur Gherman Deputy chairman – Iurie Filip; Deputy chairwoman – Nina Dosca; Member – Aurica Doina; Member – Victor Captari.
MissionNCFM regulates and authorises the activity of non-banking financial market
participants and supervises their compliance to legislation.NCFM mission is to contribute to the stability and development of the non-
banking financial market and to strengthen the confidence into the market sectors and its professional participants.
Activity goalsBasic activity of NCFM aims to achieve the following objectives:
a) strengthening regulatory and supervisory system and its adjustment to international standards and aquis communautaire; b) strengthening financial stability and ensuring financial soundness by implementing financial supervision;c) strengthening institutional and operational capacities of NCFM; d) ensuring the process of capital market development to develop its infrastructure; e) strengthening the insurance market, including insurance/reinsurance intermediaries; f) sustainable development of microfinance sector; g) ensure the protection of rights and interests of non-banking financial market participants.
10
Supervised entitiesThe NCFM’ s authority extends over the financial market professional
participants (Table 1) and the non-banking financial services’ consumers - securities issuers, investors, insurance policyholders, members of savings and loan associations, clients of microfinance organizations.
Table 1. Evolution of the number of professional participants on the non-banking financial market
No. Supervised entities Situation as of:31.12.2010 31.12.2011 31.12.2012 31.12.2013 31.12.2014
1. Professional participants on securities market, including:
63 64 67 67 67
Moldova Stock Exchange 1 1 2 2 2National Securities Depository 1 1 1 1 1Independent registrars 12 13 12 12 121
Brokers/dealers 22 22 22 22 23Investment funds in the process of forced liquidation
9 9 9 9 9
Investment funds in the process of voluntary liquidation
9 9 9 9 9
Companies of fiduciary investments administration2
7 7 7 7 7
Companies for estimation of the value of securities and assets related to them
4 4 5 5 2
Authorized persons in the field of securities valuation
- - - - 2
2. Professional participants on insurance market3, including:
88 87 95 114 113
Insurance companies 24 20 18 16 15Insurance/reinsurance brokers 63 66 76 75 70Bancassurance agents - - - 22 27National Bureau of Motor Insurers
1 1 1 1 1
3. Professional participants in the microfinance sector, including:
442 440 431 425 406
Savings and credits associations 398 376 359 338 303Central association 1 1 2 2 2Microfinance organizations 43 63 70 85 101
4. Non-state pension funds 2 2 3 3 35. Manager of non-state pension
funds’ assets1 1 1 1 1
6. Credit history bureau 1 1 1 1 1TOTAL 597 595 598 611 591
Following the provisions of the Law No. 35 of 03.03.2011 "On approval of the Strategy of non-banking financial market development for 2011 -2014 and the Action Plan to implement the strategy of non-banking financial market development for 2011 -2014 ", many draft laws and regulations transposing EU
12 issuers of securities licensed for keeping the register of securities holders independently2 3 investment trust management companies are under liquidation3 insurance agents have been excluded from the table not being licensed by NCFM
11
Directives into national legislation and harmonizing the existing legislative framework with the acquis communautaire and undertaking the best regulatory and supervisory practices applied on European and international level were developed and promoted in 2014.
In this context, by adopting the Law nr.180 of July 25, 2014 on amending some legislative acts by assuming the Government’s responsibility to the Parliament have been adopted the following laws regulating the NCFM activity and the non-banking financial market:
- Law amending the Capital Market Law no. 171 of 11.07.2012, that aims at establishing requirements to ensure confidentiality and data integrity in the securities holders registries by creating a backup copy of the information;
- Law amending some legislative acts (Law no. 414-XVI of 22.12.2006 on compulsory motor third party liability insurance for damages caused by vehicles and Law no.407 - XVI of 21.12.2006 on insurance). The respective amendments have been developed to improve the legal framework of the NBMI activity and the motor third party liability insurance activity and refers especially to getting the membership of the NBMI, suspension and withdrawal of license, calculation of membership and entry contribution, selection of management boards and decision taking procedure, as well as licensing of compulsory motor third party liability insurance;
- Law amending the Contravention Code and Penal Code, aimed at adjusting them to the provisions of legislation regulating the non-banking financial market to ensure the efficient protection of the rights of capital market participants and the consolidation of the regulatory and supervisory framework of the non-banking financial market in accordance with the best international and European practices.
Furthermore, NCFM has finaluized and promoted other legislative acts which have to be adopted by the Parliament in final reading, including:
- Draft Law nr. 160 of 17.04.2014 amending some legislative acts (Law on NCFM – art.22, 23; Administrative Law – art.17; etc.) developed by NCFM together with the IMF experts following the FSAP recommendations. The draft law aims to ensure a balance in decision making process for regulation and supervision of non-banking financial market by empowering NCFM with clear competences for timely implementation of its actions and to reflect the procedure of appeal and suspension of the NCFM acts in order to ensure market stability and to prevent or timely remedy excessively risky and fraudulent practices. The draft law has been approved in the first reading in the Parliamentary session of 19.06.2014 and is being finalized for approval in second reading;
- Draft Law nr.222 of 11.06.2014 amending the Law on Joint Stock Companies nr.1134-XIII of 02.04.1997. The draft law sets out provisions regarding the organizing and conducting the general meeting of shareholders held in Moldova and supplements the provisions regarding general meetings convened repeatedly as well as provisions on the election of the company's board. The draft law has been approved in the first reading in the Parliamentary session of 04.07.2014 and is being finalized for approval in second reading;
12
- Daft Law nr.259 of 14.06.2013 on voluntary pension funds, which aims at ensuring compliance with EU regulations and best international practices in the field, contributing to the pension fund sector development and promoting public confidence in these institutions. The draft law was approved in the I reading in the Moldovan Parliament session of 22.11.2013 and is being examined for approval in the second reading.
In order to enforce the provisions of the Capital Market Law no. 171 of 11.07.2012, in force since 14.09.2014, NCFM has made considerable efforts to develop the necessary regulatory framework to enforce the law. In this context, 8 by-laws were approved and entered into force, the rest being finalized as a result of public consultations with interested authorities and institutions.
Following the implementation of the State Automated Information System on motor third part liability insurance (RCA Data) significant progresses have been registered to discipline the insurance market professional participants and to reduce the cases of fraud in this area.
Measures to achieve the objectives of the Strategy of non-banking financial market development for 2011-2014 were directed to the improvement of conditions of activity for financial market operators, development of market infrastructure and implementation of modern information technologies.
Table 2. Evolution of indicators for Strategy monitoringNr. Monitoring indicators 2010 2011 2012 2013 2014
estimate2014
effective1. Amount of securities` issues, mil. lei 857,4 1389,3 1106,0 950,1 1000,0 1249,62. Amount of securities transactions, mil.
lei559,1 1940,0 1251,5 1711,6 1200,0 1307,8
3. Amount of stock exchange transactions,- mil. lei- reported to total amount of securities
transactions, %- reported to GDP, %
267,947,9
0,37
241,912,5
0,29
623,349,8
0,72
822,048,0
0,80
800,065,0
-
708,654,2
0,644. Amount of foreign investments attracted
through securities` issues,- mil. lei- reported to total amount of securities
issues, %
460,954,0
760,155,0
428,338,7
489,651,5
600,060,0
843,267,5
5. Amount of underwritten insurance premiums,- mil. lei- reported to GDP, %
914,71,27
1000,01,22
1089,31,24
1198,91,20
1500,01,88
1203,61,08
6. Amount of life insurance premiums,- mil. lei- reported to total amount of
underwritten insurance premiums, %53,85,9
65,56,6
68,66,3
73,56,1
150,010,0
80,06,7
7. Amount of insurance reserves, mil. lei 515,6 722,3 841,9 1042,2 650,0 1143,68. Insurance companies’ equity, mil. lei 1081,7 1192,4 1241,8 1068,9 1000,0 1130,59. Savings and credit associations’ loan
portfolio,- mil. lei- reported to GDP, %
244,20,34
254,20,31
273,90,31
331,90,33
600,00,75
409,30,37
13
10. Rate of loans granted by savings and credit associations financed from deposits, % 38,2 40,8 69,1 69,9 22,0 47,5
11. Microfinance organizations’ loan portfolio,- mil. lei- reported to GDP, % 1191,5
1,661440,81,75
1590,11,81
1897,01,9
1800,02,25
2427,52,17
Assessment of implementation of the main policy document on the non-banking financial market – the Strategy for non-banking financial market development for 2011-2014 is made based on monitoring indicators. Indicators registered on the capital market have exceeded the forecasted amounts both in terms of issues and securities transactions. An increase of 72 % has been recorded for the indicator foreign investments attracted through securities issues from 489.6 mil. lei in 2013 to 843.2 mil. lei in 2014. At the same time there has been recorded a slight decrease in the volume of stock transactions.
On the insurance market, although increases of all indicators were recorded as compared to 2013, the volume of insurance gross written premiums, including life insurance is below the forecasted level of monitoring indicators. The prudential requirements established for insurance companies have conditioned the increased volume of insurance reserves. The volume of insurance gross written premiums rose only by 0.39 % in 2014 compared to 2013.
The evolution of the microfinance sector indicators show an increase in the volume of loans granted by SCA by 77.4 mil. lei compared to the previous year, although the recorded indicator is below the expectations planned for 2014. With regard to microfinance organizations, their portfolio increased by 530.5 million lei or 28 % compared to 2013. Note that the rate of loan financing from deposits of savings and loan associations of B category decreased by 22.4 %, which shows a significant decrease of internal source of financing and the financial dependence on external sources.
In accordance with the Strategy of non-banking financial market development for 2011-2014, NCFM, together with the Ministry of Finance are the authorities responsible to draft amendments to the tax legislation related to the non-banking financial market.
Given that fiscal levers are some of the few tools that would encourage the development of all non-banking financial market segments, NCFM has developed and repeatedly submitted respective proposals to the Ministry of Finance. Although assurances were given regarding the examination of proposals related to the development of draft laws related to fiscal policy objectives for the last years, they have not be included in any draft law until now.
Making a comparative analysis of indicators that characterize the financial market of the countries from the region and those with economies comparable to Moldova reveals that although Moldova's economy rebounded strongly in 2013 after the 2012 decline caused by drought, our country is on the last position among the countries of the region and those comparable by territorial dimensions and the population number in terms of GDP volume registered during 2012 - 2013 (Table 3).
14
Table 3. Share of non-banking financial market indicators in GDP
Nr. Country’s name Population GDP (euro)
Market capitalization
(euro)
Stock Exchange
transactions / GDP
Underwritten Gross
Premiums / GDP
Total assets of
SCA/GDP
20121 Moldova 3 559 519 5 507 150 205 252 549 524 0,72% 1,26% 0,39%2 Romania 20 058 035 128 061 724 066 1 208 810 000 0,79% 1,45% 0,03%3 Croatia 4 267 558 42 697 949 280 16 298 877 921 - 2,80% - 4 Latvia 2 034 319 21 449 385 013 846 000 000 0,08% 2,11% 0,09%5 Estonia 1 322 696 17 131 303 571 1 770 000 000 0,80% 2,51% 0,08%6 Lithuania 2 987 773 32 011 307 316 4 690 533 494 0,62% 1,63% 1,86%7 Albania 2 898 782 9 332 340 953 - 0,69% 0,83%8 Macedonia 2 105 575 7 239 725 102 1 831 763 770 1,26% 1,57% 0,05%9 Armenia 2 969 081 7 528 313 135 236 470,37 0,15% 0,88% 4,19%
10 Georgia 4 490 700 11 979 776 330 708 870 954 - 0,49% 5,82%2013
1 Moldova 3 558 566 5 770 880 789 310 277 242 0,80% 1,17% 0,39%2 Romania 19 981 358 137 318 889 495 1 797 502 000 2,21% 1,32% 0,03%3 Croatia 4 255 700 41 903 285 746 - 1,19% 2,85% - 4 Latvia 2 012 647 22 416 049 974 948 000 000 0,10% 2,10% 0,10%5 Estonia 1 317 997 18 016 048 659 1 880 000 000 1,04% 2,90% 0,10%6 Lithuania 2 957 689 33 259 797 691 4 977 894 484 0,48% 1,69% 1,87%7 Albania 2 895 947 9 357 847 518 - - 0,65% 0,76%8 Macedonia 2 107 158 7 382 594 086 1 603 179 540 0,71% 1,58% 0,05%9 Armenia 2 976 566 7 554 038 308 115 441 372 0,56% 0,86% 5,01%
10 Georgia 4 487 200 11 687 169 442 - 0,00% 0,52% 6,18%
According to data provided by NBS, in 2013 GDP grew by 8.9 % compared with 2012, which is determined by the recovery of domestic demand as a result of higher household disposable income, the positive development of the agricultural sector, as well as currency depreciation compared to the currencies of major trading partners by exports and domestic consumption channel (Figure 1).
Figure 1. Gross Domestic Product in 2013, mil. euro
15
Cro
atia
Lithuania
Latvia
Estonia
Geo
rgia
Alb
ania
Arm
enia
Mace
donia
Mold
ova0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000 41,903
33,260
22,416
18,016
11,6879,358
7,554 7,383 5,771
With reference to market capitalization indicator, Moldova is one of the last places in the ranking, leaving behind Armenia and Albania. Although market capitalization increased in 2013 compared to 2012 by 22.9 %, the stock market still faces the existence of low interest for operations with securities.
The share of stock exchange transactions in GDP registered in Moldova is comparable to values achieved in the region.
Figure 2. Share of stock exchange transactions in GDP in 2013
Roman
ia
Croati
a
Estonia
Mold
ova
Mac
edon
ia
Armen
ia
Lithuan
ia
Latvia
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2.21%
1.19%1.04%
0.80% 0.71%0.56% 0.48%
0.10%
Although in the mentioned period there has been a decrease in the level of insurance penetration in GDP in practically all countries of Central, Eastern and South-eastern Europe due to improper performance recorded by the domestic economic environment and the unfavourable international financial situation, the Republic Moldova exceeded Albania and Georgia, registering the amount of 69.49 mil. euro or 1.26 % of GDP in 2012, and respectively, 67.64 mil. euro or 1.17 % of GDP in 2013 (Figure 3).
Figure 3. Share of gross written premiums in GDP in 201316
Est
onia
Cro
atia
Latv
ia
Lith
uania
Mace
donia
Rom
ania
Mold
ova
Arm
enia
Alb
ania
Geo
rgia
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
2.90% 2.85%
2.10%
1.69% 1.58%1.32%
1.17%0.86%
0.65%
0.52%
With reference to the share of assets of savings and loan associations in GDP reveals that the largest share is recorded in Lithuania (1.87%) and the lowest in Romania (0.03%).
Figure 4. Share of SCA’s assets in GDP in 2013
Lithuania Albania Moldova Latvia Estonia Macedonia Romania0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
2.00% 1.87%
0.76%
0.39%
0.10% 0.10% 0.05% 0.03%
1.2. Organizational structure and professional trainingDuring 2014, NCFM achieved its objective of strengthening the regulatory
and supervisory capacity by implementing continuous training and professional development of all employees and by optimizing organizational structure of the institution. During the reporting period, NCFM operated under the organizational structure approved by NCFM Decision no. 49/9 din 18.10.2013 (Annex 1).
According to the staff approved for 2014, personnel of the NCFM have been at 122 staff units. At the end of 2014 the number of employees was 115 persons. The structure of the subdivisions reflects the institution’s activities necessary to achieve the established objectives and is presented in Figure 5.
Figure 5. Structure of subdivisions
17
Administrative Council; 4.35%Executive General
Division; 15.65%
Legal Assis-tance Gen-eral Divi-
sion; 8.70%
Securities Market
Supervi-sion Gen-eral Divi-
sion; 13.91%
Issuers Monitoring Division; 7.83%
Insurance Supervision General Di-
vision; 15.65%
Collective Placements and Micro-
finance General
Division; 15.65%
Economic, Financial
and Admin-istrative General
Division; 11.30%
Information Technologies Division; 3.48% Territorial Representatives; 3.48%
The educational level of the personnel as of 31.12.2013 is presented in Table 4.
Table 4. Educational level of NCFM’s staffNr. Indicators Period of activity
2012 2013 2014persons share, % persons share, % persons share, %
1. Higher education, including:
106 100 115 100 106 100
- economics 66 62,3 66 57,4 69 65,1- law 26 24,5 33 28,7 23 21,7- others 14 13,2 16 13,9 14 13,2
2. Postgraduate studies:
33 31,1 46 40,0 43 40,6
3. Scientific titles: 4 3,8 4 3,5 4 3,8
During the reporting year, NCFM continued to apply the system of assessing the professional potential and conduct of its staff, which aims to use the advanced practices of human resource management and to stimulate the qualified employees.
In accordance with the Regulation on the form, conditions and remuneration system of employees approved by the NCFM Decision no. 39/1 of 13.09.2010, with further amendments, the motivational system was used which consists of establishing differentiated bonuses for professional competence, the degree of achievement of objectives and work intensity, which would contribute to the increase of the individual and collective performance of employees.
NCFM made efforts to provide training and professional development of its staff through participation in seminars, conferences, roundtables and other activities organized in the country and internationally, and internal professional
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development sessions. The knowledge and experience accumulated by NCFM staff during 2014 shall be applied to further strengthening and developing the institution.
Table. 5. Level of participation in trening activities and professional development
Forms of training
Anul 2012 Anul 2013 Anul 2014
Number of activities
Average number of
trained personnel
Number of activities
Number of activities
Average number of
trained personnel
Number of activities
Internal trainings 6 25 33 18 16 24National trainings
3 31 13 35 5 10
International trainings
38 79 37 60 36 42
In 2014, based on the resources of the NCFM and the support of international organizations, the NCFM employees had the opportunity to participate in 36 international training activities, including seminars, workshops, conferences and other major events for professionals in finance. At the internal level there were organized 5 training activities, including topics related to the implementation of risk based supervision in insurance, methodology BION applied for insurance market supervision, requirements on information disclosure by issuers and investors’ protection, capital market abuses and supervision of transactions, licensing of financial market participants in the context of EU Directives, risk management etc.
During the reporting period there were organized 4 study visits to similar authorities from Germany, Great Britain, Romania and Macedonia. The purpose of these visits was to establish cooperation and to get experience related to relevant regulatory and supervisory practices applied to financial markets. The exchange of experience made during the study visits helped to understand the main regulatory and supervisory principles applied internationally, resulting in improved procedures of licensing, regulation and supervision, contributing to the NCFM institutional development.
1.3. Budget and Financing in 2014According to the Parliament Decision no.298 of 12.12.2013 on approval of
the National Commission for Financial Markets budget for 2014, NCFM budget for 2014 was approved on revenues of 18805,0 thousand lei and on expenditures of 27269,1 thousand lei. The Financial Report for 2014 shows the following:
Table 6. Balance Sheet for 2014A S S E T S At the end of the current
reporting year (2014), thousands lei
At the end of the previous reporting year
(2013), thousands lei19
Intangible assets 9 868,4 9 838,2Depreciation of intangible assets (1 918,6) (1 280,6)Intangible assets in course of execution - 161,2Lands 1 505,4 1 505,4Fixed assets 17 309,7 17 137,3Wear and depletion of long term tangible assets (8 662,0) (8 279,6)Stocks of things and goods 417,5 516,3Low cost and short term goods 28,7 192,1Short- term receivable beside commercial bills 26,0 153,3Short-term advance payments - 0,4Short-term receivables on budget settlements 0,3 -Short-term receivables on personnel - -Short-term receivables on estimated revenues 1281,8 1 241,1Other short-term receivables 9,1 81,6Short-term investments in non- connected parts - 10 645,1Cash 0,2 0,4Current accounts in national currency 5 163,6 1 255,5Current accounts in foreign currency 38,2 133,3Other funds 31,7 56,0Other short-term assets 141,4 124,8TOTAL ASSETS 25 241,4 33 481,8
LIABILITIES At the end of the current reporting year (2014),
thousand lei
At the end of the previous reporting year
(2013), thousands leiOther reserves - 24 924,0Correcting the results of previous periods 2 554,6 (24,7)Uncovered loss of previous tears (4 252,5) -Net loss of the reporting period (7 519,9) (4 227,9)Subventions 7 572,3 -Other long-term liabilities calculated - 10 825,8Other short-term financial liabilities 46,3 - Debts on commercial bills - 1,3Advance payments received 693,5 542,4Debts related to labour payments 969,5 1 082,0Debts on insurance 255,7 281,0Debts to founders and other participants 24 848,6 -Other short term liabilities 73,3 77,9TOTAL ASSETS 25 241,4 33 481,8
NCFM budget for 2014 was executed on the revenue level at 97.3% compared to the approved annual figures. The structure and the amount of revenues approved and executed are provided in the table below:
Table 7. Structure and volume of revenues approved and effectively executed in 2014Indicators Plan,
thousands leiExecuted,
thousands leiLevel of
execution, %Fees received from transactions with securities 9 660,0 9 481,2 98,1Payments of insurance companies and insurance brokers 6 466,6 6 362,6 98,4
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Payments of savings and loan associations 432,8 693,3 160,2Licensing fees 345,6 267,1 77,3Amounts of sanctions and penalties for administrative contraventions applied in accordance to legislation
300,0 361,9 120,6
Revenues from the interest earned on current accounts and placements in government securities
1200,0 660,4 55,0
Revenues from the rent of publicly owned real estate 234,3 269,1 114,8Other legal revenues 165,7 210,8 127,2Total revenues: 18 805,0 18 306,4 97,3
In the structure of revenues effectively executed in 2014, the taxes received from securities market represent 51.8%, collected insurance payments - 34.8%, payments collected from the savings and loan associations - 3.8%, other payments (sanctions for administrative contraventions, interest related to cash balances, payments for rent etc.) – 9.6%.
Structure and volume of consumption and effective costs in 2014 are provided in the table below:
Table 7. Structure and amount of expenditures approved and effectively executed in 2014Indicators At the end of the current
reporting year (2014),thousand lei
At the end of the previous reporting year (2013),
thousands leiConsumption and material expenditures 131,6 215,0Consumption and expenditures on services provided by third parties
174,6 237,3
Depreciation of long-term assets 1 851,1 1 451,0Staff payments 16 368,7 15 849,5Contributions on state social insurance and compulsory medical insurance
4 248,2 4 049,2
Other consumption and operational costs 3 680,7 3 545,0Total consumption and expenses: 26 454.9 25 347,0
Total expenditures were executed at 92,0% of budget provisions approved for 2014, being provided some savings as a result of an efficient and effective internal policy of budgetary management.
The structure of expenditures was dominated by those related to the payments to personnel (salary payment, mandatory social insurance contributions and compulsory health insurance), which represented 82.8%. Operational costs of the institution (electricity, gas, water, security, telecommunications and other maintenance expenses) represented 10.6%, the cost of consolidating material and technical base – 4.0%, expenses on business trips – 1.6% and expenses related to membership fees to international organizations – 1.0%.
1.4. Information Technologies development (IT)
Providing of information is a priority objective of NCFM for a transition to an activity under the principles of risk-based supervision and proper performance of
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the functions determined by law, including the provision of electronic services for professional participants and prompt information offering to the public. Within the institutional and operational strengthening component with support of development partners, the modernizing of technical concepts and information systems for use of information technology and infrastructure development was managed by creating modern systems for information management.
Among the most important projects launched and implemented in the reporting period are:
- development of RCA Data System and ensuring its connection to other national registries, which allowed the formation of an official information resources according to the needs of insurance companies, providing them with technical and informational support. The main task of the system is the centralized conclusion of insurance contracts, registration, collection, accumulation, updating, monitoring and analysis of information on insurance contracts, MTPL and "Green Card" policies, injured persons, damage files and insurance compensations. In 2015 the system will be developed by introducing the bonus-malus block, which allows the calculation of the insurance premium for each car owner according to caused damages;
- NCFM, in collaboration with NBM has taken steps to develop the information system that integrates the NSD in AIPS with the possibility of NCFM and NBM to monitor the settlements in securities transactions in order to minimize the risks in the system. Currently all settlements in securities transactions are conducted through this system, and in order to monitor online all the transactions were established secure connections to NSD and MSE and monitoring is performed by the NCFM in real time;
- It was developed and implemented the system of registration and evidence of data from independent registrars with the establishment of secure connections between independent registrars and NCFM backup server.
Regarding maintenance of information systems security policies and protection of personal data were conducted the following activities:
- it was implemented the system of security and business continuity (RCADATA) by creating the backup server of database with on-line replication (synchronization) of information;
- it was implemented the backup system of servers and workstations. Also it was installed a centralized antivirus program which allows monitoring and preventing virus attacks, therefore being possible the strengthening of the NCFM IT infrastructure and to extend the core functions, respectively to increase the performance and reliability of information systems through the implementation of effective mechanisms for information processing and analysis tailored to the current needs of the NCFM in prudential supervision.
1.5. Informational Transparency
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Transparency in decision processIn the process of the fulfilment of the goals set by law, and according to the
established competence, the Administrative Council of the NCFM approved 583 resolutions in 2014, including decisions, ordinances and registration protocols for the regulation and supervision of the non-banking financial market (Table 9). In accordance with legal provisions, the NCFM submitted for publication to the Official Gazette of the Republic of Moldova all decisions, which according to the law, are under this regime (decisions and ordinances).
Table 9. Number of NCFM Council of Administration meetings and structure of decisionsNr. Indicators Period of activity
2012 2013 20141. Number of Meetings of the Council of Administration 55 62 652.
Number of adopted resolutions 340 423 3583. Number of adopted ordinances 64 52 404. Number of registration protocols 141 165 185
The NCFM’s activity plan for 2014 was developed based on the competences provided by Law no. 192-XIV of 12.11.1998 "On the National Commission for Financial Markets", according to the provisions of the main policy documents and the Strategy for non-banking financial market development for 2011-2014 and was approved by the NCFM Decision no. 61/9 of 27.12.2013, being placed on the NCFM official website.
In order to ensure information transparency in the development of legislative and regulatory framework and to conduct public consultation of the regulatory initiatives, the NCFM offered to the non-banking financial market participants and other interested parties the opportunity to participate in the decision making process and regulatory legal framework development. Prior to approval, all regulations proposed by NCFM are published on the official website for consultations and public comments.
The NCFM collaboration with the Council of Experts, which is composed of representatives of the professional participants on the non-banking financial market and trade unions, professional practitioners and experts in the field, ensured a dialogue for consultation of draft legislative and normative acts.
The measures through which information transparency was provided are presented in the table below:
Table 10. Indicators on ensuring the information transparencyIndicators Period of activity
2012 2013 2014Number of press releases 51 50 55Number of articles on NCFM activity and non-banking financial market development
61 91 17
Number of monthly and quarterly bulletins 14 15 15Number of interviews in newspapers and magazines 11 9 6Number of participations in TV shows 17 20 11Number of participation in radio programs 10 10 0
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Total: 164 195 102
Organization of press conferences, round tables and seminarsIn 2014 NCFM organized a seminar on "Strategic value of credit information
exchange for credit market development and financial stability" with the support of the International Finance Corporation (IFC), attended by representatives of over 20 entities, and representatives of the Ministry of Finance, Ministry of Justice, the American Chamber of Commerce. The goal of the event was to address topics such as: the importance for financial sector regulators of credit information exchange for development of financial sector, credit market and facilitation of the access to credit; improving prudential supervision and financial stability. Also, were discussed methods and requirements for consumer protection, and application of credit information sharing in financial sector monitoring. The objective of the seminar was to explain the premises for the development of a market based on credit information and the role of both the international standards and the regulatory approaches of credit information exchange in the financial sector.
During the reporting period NCFM representatives participated in 11 TV shows dedicated to informing the public on NCFM activity. There have also been organized two press conferences on "Annual report on the NCFM activity and non-banking financial market development in 2013" and "Stimulation of the non-banking financial market development through fiscal instruments."
During the reporting period 55 press releases related to NCFM activity and events on the non-banking financial market have been drafted and placed on the official NCFM website and in Capital Market newspaper.
Providing access to public information on requestIn order to ensure the public access to collections of laws and regulations,
periodicals and specialized literature on the non-banking financial market, the NCFM has created a library , and for citizens seeking public information or advice regarding the financial market – an audience room. Also, the NCFM applies internal procedures for providing information in the requested format, including in electronic format via the email address [email protected].
The NCFM hotlines offer advice on the procedure of liquidation of investment funds, shareholders' rights, rights and obligations of governing bodies of joint stock companies, savings and loan associations’ activity and other aspects.
Public information through official web pageAn effective tool for communication and public information in the process of
regulation and supervision of the non-banking financial market is the official website (www.cnpf.md), through which the NCFM consults the opinion of the financial market participants, citizens and other interested parties in the decision making process and develops a flow of information with a high degree of complexity, with messages for specific categories of users. A number of draft laws and regulations related to the non-banking financial market were presented to the public attention, as well as useful information on the participants on the non-
24
banking financial market, statistical and analytical information and other public information.
January
Febru
ary
March
AprilMay
JuneJuly
August
Septem
ber
October
November
December
0
5000
10000
15000
20000
25000
30000
Figure 6. Dynamics of accessing the NCFM's web-page in 2014
Unique visitors Number of visitors
The NCFM’s future work in this area includes developing permanent dialogue with professional participants, public authorities, the civil society and other participants on the matters concerning the development of the non-banking financial market and the services offered on this market. In this context, the NCFM will use existing communication channels and trainings and will identify new opportunities to increase transparency and development of the non-banking financial market, product promotion and protection of financial services’ consumers.
II. Achievement of Activity Objectives of the National Commission for Financial Markets
II.1. Regulatory activity
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During 2013, the NCFM ensured the implementation and the improvement of the current legal framework and normative acts by amending them (Table 11).
Table 11. Regulatory activities Indicators Activity period
2012 2013 2014Drafts of legislative acts or drafts on amending the legislative acts 8 10 9Normative acts approved or amended, total, including: 21 15 20- regulations on internal organization and functioning of NCFM 5 5 5- regulations on general principles of the non-banking financial market activity
2 - 2
- in the field of securities 7 2 9- in the field of insurance 6 7 3- in the field of credit history bureau’s activity - - -- in the field of savings and credit associations - - 1- in the field of microfinance 1 1 -Revoked normative acts, total 4 6 2
In view of the considerable development of financial services used in the remote payment system, through the progressive mobility of citizens to recourse to new payment schemes that would not involve the simultaneous physical presence of the supplier and the consumer, It was necessary to create a legislation adapted to existing forms of remote banking service, which enables an adequate degree of flexibility in implementation. In this context, aimed at developing the legal framework for the protection of economic interests of consumers by setting conditions for consumer information before and after the conclusion of distance contracts for consumer financial services and to create legal conditions to minimize the risks of suppliers for the provision of such services, NCFM in collaboration with the Ministry of Economy and other interested institutions participated in the working group on elaboration and approval of Law no. 157 of 18.07.2014 on the conclusion and execution of distance contracts for consumer financial services.
In order to adjust the current provisions of the Contraventional Code and of the Criminal Code to the provisions of the new legislative framework in the field of non- banking financial market to ensure effective protection of the rights of operators on the securities market and strengthening the regulation and supervision of the nonbank financial sector in accordance with best international and European practices, NCFM developed and promoted a draft law amending and supplementing the Criminal Code and Contraventional Code. Above-mentioned project was approved by Law No. 180 of 07.25.2014 on amending and supplementing of liability legislation by the Government to the Parliament.
In accordance with Law no. 190-XVI of 26.07.2007 on preventing and combating money laundering and terrorist financing, taking into account the recommendations of the Financial Action Task Force (FATF 40 + 9), and FATF Guidance on risk-based approach to combat money laundering customers terrorist financing and other international documents related field, through NCFM Decision No. 49/17 of 10.09.2014 were drafted and approved recommendations on the risk-
26
based approach to customers by the reporting entities to prevent and combat money laundering and financing of terrorism. These recommendations provide financial market professional participants methodological guidance in the process of creating effective internal mechanisms for identification and risk assessment of clients, activities and transactions (operations), in order to prevent and combat money laundering and terrorist financing.
The regulatory activity continued prioritizing the development of the regulatory framework and rules for its implementation, solving problems faced by market participants (Annex No. 2).
Regulations on organization and functioning of NCFM In order to ensure the efficient activity of the NCFM in accordance with legal provisions, the following regulations were approved: - Amendments to the NCFM Decision no.13/12 of 01.04.2010 „On the Expert
Council under the National Commission for Financial Markets ” (NCFM Decision no. 9/11 of 31.01.2014);
- Amendments to the NCFM Decision no.38/14 of 08.08.2013 „On the approval of the structure of certification commission for professional participants on the financial market ” (NCFM Decision no. 12/4 of 14.02.2014)
- Amendments and completion of the Regulation regarding the form, terms and system of remuneration of employees of the NCFM, approved by NCFM Decision No.39 / 1 of 13.09.2010(NCFM Decision no. 21/12 of 04.04.2014)
- Amendments to the NCFM Decision no. 13/9 of 01.04.2010 “On the inspectors activity on surveillance and control of stock market securities activities ” (NCFM Decision no. 39/7 of 08.08.2014).
- Approving the Practical Guide to detect fraud, abuse, financial market manipulation (NCFM Protocol no. 60/17 of 12.12.2014)
- Approving the Activity Plan of the National Commission for Financial Markets for 2015 (NCFM Decision no. 63/9 of 23.12.2014).
Regulations in the securities field In accordance with Law No.780-XV of 27.12.2001 on legislative acts was
developed and approved Law no. 180 of 25/07/2014 amending and supplementing certain acts by which was amended Law no. 171 of 11.07.2012 on the capital market.
The main amendments related to the amendment of Law no. 171 11.07. 2012 on capital market covers:- exhaustive establishment of criteria for determining public interest entities in context of the provisions of the Directive 2003/71/EC of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading, Directive 2012/30/EU of 25 October 2012 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty on the Functioning of the European Union, in respect of
27
the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent.- strengthen the function of maintenance of the registry of holders of corporate securities, in accordance with the recommendations outlined in the report of the World Bank “Efficiency and Integrity of the Securities Registration System and Possibilities for Reform” of June 2013;- sending registers of securities holders of public interest entities from independent registrars (companies register) to the central depository;- gradualization of information disclosure by public interest entities depending on the market on which the securities are admitted thereof;- establishing requirements that would ensure confidentiality, integrity of data contained in the registers of securities holders in the transition process;- reforming the system of of corporate securities ownership evidence according to the policy action „Strengthening of financial market stability, promoting transparency and imoproving access to financiang” from the Matrix of Moldova Second Development Policy Operation in the field of competitiveness – 2013”.
In order to execute the Action Plan of the Strategy for the non-banking financial market development for 2011-2014, respectively, for the implementation of the Concept on general trading mechanism of government securities with a maturity greater than one year on the stock exchange, by NCFM Decision no.16 / 6 of 13.03.2014 has been approved the Regulation on the procedure and conditions for the admission to trading on the stock exchange of government securities with a maturity greater than one year. This regulation establishes rules and procedures for the admission to trading on the stock market of government securities with a maturity greater than one year, to ensure the development of the secondary market of government securities, increasing investors access to these financial instruments.
In order to implement the provisions of the Law on capital market no. 171 of 11.07.2012 and to ensure stability, transparency, reliability and efficiency of the capital market, the following resolutions were approved:
- NCFM Decision no.22/2 of 15.04.2014 on approval of the Provisional Regulation on the manner and conditions of securities circulation on the secondary market, which regulates the trading of securities in circulation on the secondary market during the transition from the provisions of the Law on securities market no. 199-XIV of 18.11.1998 to the rules established by the new legal framework;
- NCFM Decision no.32/2 of 16.06.2014 regarding the approval of the Regulation on Investor Compensation Fund, connected to the provisions of Directive 97/9/EC of the European Parliament and of the Council of 03.03.1997 on investor compensation schemes which aims to establish the conditions and principles of functioning of the Investor Compensation Fund, establishment and payment of contributions and payment of compensations, corresponding to European practices in the field;
- NCFM Decision no.41/10 of 22.08.2014 on the approval of the Regulation on registration of authorized persons for stock evaluation in the Register of
28
authorized persons, which regulates the registration procedure of persons qualified in evaluation in the Register of authorized persons kept by CNPF and refers specifically to the professional requirements that must be met by the applicant, the evaluation methods, content and compilation of evaluation reports made in accordance with international evaluation standards, terms of independence that the evaluator must meet and conditions for suspension or withdrawal of companies from the register of authorized persons;
- NCFM Decision no. 56/11 of 14.11.2014 on the approval of the Regulation on licensing and authorization on the capital market, which sets aut the conditions for granting, suspension and revocation of licenses and authorizations for operating on the capital market in line with the European practices in the field to ensure the control over the activity of licensed or authorized persons, and to protect investors' interests. Regulation attests provisions concerning the granting, updating, suspension and revocation of licenses and authorizations on the capital market as well as specific procedures for licensing and authorization of investment firms, market operators and regulated markets, multilateral trading facilities (MTFs), central depository and register companies. Also, refering to the activity of investment firms are included rules on the approval of delegated agents, approving of accepted persons - investment companies regulated and supervised in the EU Member States, as well as the procedure regarding the evaluation of persons with a qualified holdings in the investment firms, being applied to the market operator and the central depository.
Regulations in the field of undertakings for collective investment in transferable securities
- NCFM Decision no.49/14 of 09.10.2014 on the approval of the Regulation on approval establishment and functioning undertakings for collective investment in transferable securities by which were established rules and procedures on approval of undertakings for collective investment in transferable securities, as well as requirements for people with responsible positions of investment trust management company, investment company and depositary in order to ensure adequate protection of investors' interests;
- NCFM Decision no. 57/10 of 28.11.2014 on the approval of the Regulation on public offerings of participation titles of undertakings for collective investment in transferable securities, which establishes requirements for the issuing, sell to the public and redemption of fund units of the investment funds and shares of investment companies, NCFM registering of the public offer of the participation titles (shares or units), including the procedure for the issuance and cancellation for participation titles and pricing methods of placement and repurchase them.
Information about the essential characteristics of the UCITS prospectus included in the public offering of participation titles will be exposed so that investors will be able to understand the nature and UCITS risks and, therefore, to take investment decisions on an informed basis.
29
In this respect, the Annex to Regulation set the minimum content of the prospectus, simplified prospectus and the key investor information, which shall mandatory to the public before the subscription;
- NCFM Decision no. 62/20 of 20.12.2014 on the approval of the Regulation on transparency and advertising UCITS and SAFI activity, which sets out requirements for information disclosure of the UCITS activity and performance, including the set of specific annual, semi-annual and periodical reports to be prepared, presented and published according to the law, by SAFI both for own activity, and for UCITS managed by it.
Also, in the Regulation were included provisions concerning the principles which are to be observed in preparing the advertising of the UCITS structure and conditions of publication thereof;
- NCFM Decision no.62/21 of 20.12.2014 on the approval of the Regulation on prudential regulations towards the SAFI activities, which provisions relate to regulatory requirements and supervision of investment fiduciary management firms and imposing the development and implementation of a set of internal policies and procedures in order to protect the interests of the participation titles of UCITS, and referring to the internal organization of the activity, conformity assessment, internal audit, effective risk management, managing conflicts of interest, conduct of business rules.
Regulations in the insurance field In order to ensure compliance with the legislation in force in the insurance
sector to new market requirements and the application of the acquis communautaire in the field of insurance by Law No. 64 of 11.04.2014 amending and supplementing certain acts and Law No. 180 of 25.07. 2014 amending some legislative acts, there were made amendments to the Law No.243-XV of 08.07.2004 on subsidized insurance of production risks in agriculture and that Law No. 407-XVI of 21.12.2006 on Insurance and Law No. 414-XVI of 22.12 .2006 on compulsory motor third party liability insurance.
In order to comply with the provisions of the Law no. 407-XVI of 21.12.2006 “On insurance” and of the Law no. 414-XVI of 22.12.2006 on compulsory motor third party liability insurance, as well as with the aim of insuring stability, transparency, security and efficiency of the insurance market, the following decisions were adopted:
- NCFM Decision no. 7/6 of 24.01.2014 on amending and supplementing the Regulation on the conclusion of transactions by insurers (reinsurers), approved by NCFM Decision no. 10/9 of 15.03.2013, which lies in the need to verify compliance by insurers (reinsurers) of the prudential rules in respect of the solvency ratio and liquidity ratio at investing in this and aims to protect the interests of policyholders making investments by the insurer (reinsurer);
- NCFM Decision no.34/20 of 27.06.2014 on amending and supplementing the NCFM Decision no.50/8 of 30.11.2012 on electronic processing of compulsory motor third party liability insurance documents, which aims to ensure the
30
functionality of the State Automated System RCA Date through the concrete situations related to the administration nomenclatures System;
- NCFM Decision no.38/17 of 31.07.2014 on the approval of the register of guarantees, commitments and other obligations of insurers (reinsurers) not reflected in the balance sheet, which provides requirements for the Registry guarantees, commitments and other obligations of insurers (reinsurers) not reflected in the balance sheet and how their issue.
Regulations in the microfinance fieldTaking a priority focus on supporting both the debtors as well as savings and
loan associations, due to restrictions imposed by the Russian Federation on import of Moldovan wine and food, it was approved by NCFM Decision no. 44/3 of 05.09.2014 on certain interim measures concerning the classification of savings and loan associations of loans to borrowers in the agricultural categories. The NCFM Decision comes to ensure the sustainable development of the savings and loan associations, by extending the delayed recovery of overdue payments, which constitute the core business of agricultural work. Moreover, the rule in question is one of great importance, considering that about 47.0 percent of the savings and loan associations portfolio consists of loans in agriculture.Regulatory activity in 2014, is oriented towards strengthening the regulation and supervision of the nonbank financial sector, harmonization of the regulatory framework under the new legislation on the supervision of non- banking financial market with the acquis communautaire, included realization of the following actions: promoting the draft law on funds voluntary pension ,draft law on non-banking financial organizations, the draft law amending and supplementing Law no. -XVI 122 of 29.05.2008 on credit bureaus,the draft law for completing some legislative acts (Act no. 59-XVI from 28.04.2005 on leasing and Law no. 192-XIV of 12.11.1998 on the National Commission Financial Market).
II.2. Authorization and licensing activity
Through the authorization activity performed during 2013, the NCFM provided the execution by applicants of mandatory conditions and specific requirements of the non-banking financial market, as well as the verification of compliance in the development of its activity.
In accordance with laws and regulations, during the reference period the licensing and the authorization activity referred to:
- the registration of securities issued by joint stock companies of Moldova and granting authorization to their reorganization;
- the granting, withdrawal, suspension, reissuance of licenses and authorizations of professional participants (Annex No.3), granting authorization to their reorganization;
- issuing notices in cases established by law, on the attainment of qualified participations in the statutory capital of professional participants, on amendments to the foundation documents and in the State Register of Legal
31
Entities (state registration of professional participant, its branches and representative offices and in other cases);
- the registration of public offerings of securities on the secondary market, as well as their results;
- the confirmation of the administrators of savings and credit associations.Further information (office, administrators, contact details, type of activity,
etc) regarding professional licensed participants of the financial market is placed on the web pages of NCFM, in the section “Supervised entities”.
Authorization activity on the securities marketAccording to the Law on the securities market, during 2014 the NCFM has
registered:- shares placed on the establishment of 2 joint stock companies;- shares placed in 60 additional issues; - authorizations of reorganization by merger, dismemberment or
transformation of 21 joint stock companies (Annex No.4). - 1 public offering prospect on the primary market. As a result of the examination of applications submitted by 25 joint stock
companies in order to amend statutory capital, securities conversion, and 10 requests on changing the issuers name and address, there were made changes in the SSR. Securities of 41 companies were removed from the SSR.
As of 31.12.2014, 44 entities have held licenses for carrying out professional activity on the securities market, including the MSE, the NDS, 10 independent registrars, 2 joint stock companies which keep independently shareholders’ register, 6 brokerage companies, 17 dealer companies, 4 companies for trust management, 2 companies of evaluation of securities and assets related to them. In the data of State Register of licenses issued, suspended and withdrawn there were made the following amendments:
Table No. 12 Information on amendments to the data of State Register of licenses issued on the securities market
Indicators 2012 2013 2014Licenses granted 2 2 3License reissued 5 3 3Licenses withdrawn 1 0 0Licenses excluded 1 0 0Licenses expired 0 2 5Licenses in force at the end of year 46 46 44
Similar to 2012 – 2013, in 2014 there were granted 3 licences of which one to the professional participant established in 2014 and 2 licences to the professional participant whose licence issued previously has expired.
In addition we note that, in accordance with article 23 par. (3) of the Law no. 171 of 11.07.2012 on the capital market and the Regulation on the registration of persons qualified in the assessment of operations in the register of authorized
32
persons, approved by NCFM Decision no. 41/10 of 22/08/2014, in 2014 in the register of authorized persons were registered 2 authorized persons in assessing securities.During 2014, there were registered 17 public offerings on the secondary securities market. (Annex no. 5).
The type of public offerings on the secondary securities market registered during the period 2012-204 is presented in the table below:
Table No. 13 Indicators on public offerings on secondary securities marketType of public offering
2012 2013 2014 2014 compared to 2013
units thousand MDL
units thousand MDL
units thousand MDL
thousand MDL
%
Total: 22 7078,2 17 18772,3 17 1582,8 -17189,5 -91,6According to voluntary / mandatory criteriavoluntary public offerings
12 2245,8 9 13373,6 6 993,7 -12379,9 -92,6
mandatory public offerings
10 4832,4 8 5398,7 11 589,1 -4809,6 -89,1
According to sale / purchase/ competitive criteriaselling public offerings
3 112,5 1 0 0 0 0 -
purchasing public offerings
19 6965,7 16 18772,3 17 1582,8 -17189,5 -91,57
competitive public offerings
0 0 0 0 0 0 0 -
The data above includes the transactions volume of 9 public offerings registered and completed in 2014 (Annex no. 6).
Despite the maintain of the number of registered public offerings in 2014 compared to 2013, the decrease of their volume was influenced by:
- completion in 2014 of only 9 of 17 registered public offerings compared with 20 public offerings completed in 2013;
- reduction of the number of outstanding securities pricing as a result of the concentration of the control packet in joint stock companies which meet the criteria set in art. 2 par. (2) of the Law on joint stock companies.
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2012 2013 2014
22
17 17
7.1
18.8
1.6
Figure 3. Evolution of public offerings on secondary market in the period 2012-2014
Numărul ofertelor publice pe piaţa secundară Volumul ofertelor publice pe piaţa secundară (mil. lei)
Thus, the transactions volume performed through the mentioned public offerings registered a decrease of 17189,5 thousand MDL or 91,6% compared to 2013.
In 2014, through registered public offerings there were traded securities of 17 companies with various types of activity, the prevailing issuers were operating in the field of services.
Authorization activity on the insurance market
In terms of the Law no.407-XVI of 21.12.2006 ”On insurance” insurance / reinsurance companies may obtain a license for an unlimited period. As of 31.12.2014, 85 entities have been licensed to carry out professional activity on the insurance market, including 15 insurance companies, 70 insurance and/or reinsurance brokers.
According to data of the State Register of licenses issued, suspended and withdrawn, within the insurance authorization activity there were made amendments, shown in the table below:
Table No. 14 Information on amendments to the data of State Register of licenses issued, suspended and withdrawn on the insurance market
Indicators2012 2013 2014
Licenses granted 16 26 20Licenses reissued 127 158 135Licenses withdrawn 5 9 10Licenses considered invalid 3 3 3License expired 3 16 13Entities licensed at the end of year 94 91 85
During the reporting period, the NCFM granted 20 licences for the right to carry out intermediation activity in insurance and/or reinsurance, withdrew licenses in the field of insurance activity of „EUROASIG GRUP” JSC and in the field of intermediation activity in insurance and/or reinsurance of BAR „IPSUS” Ltd, BAR
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„GAMMA BROKER” Ltd, BAR „EXCELENT BROKER” Ltd, BA „ROMASIG” Ltd, BAR „ALLIANCE ASIG” Ltd, BAR „MARKET DE ASIGURĂRI” Ltd, BA „ALFASIG” Ltd, BAR „PREMIUM BROKER” Ltd and BAR „UNIVERSAL ASIG” Ltd.
In cases set by law, the NCFM issued 32 prior notices under the Law on insurance no.407-XVI of 21.12.2006, including 21 notices for state registration of amendments to the founding documents and data contained in the State Register of legal entities,4 notices on the share capital increase, 3 notices for the acquisition, reduction or increase of qualifying holdings in the insurers’ statutory capital, 2 notices on conclusion of the contract the State Enterprise Publishing House "Statistica", 1 notice on contracting the loan and 1 notice on the approval of Methodology of general and administrative expenses allocation on activity fields “life insurance” and “general insurance”.
Authorization activity in the microfinance sectorIn accordance with the provisions of the Law on savings and credit
associations no. 139-XVI of 21.06.2007, in 2014, the NCFM issued 17 notices for state registration of the savings and credit associations statutes in new edition.
As a result of liquidation, 3 associations obtained the notice of the NCFM regarding the exclusion from the State Register of the legal person.
Also in accordance with art. 48 of Law No 139 of 21.06.2007 on savings and loan associations, by decision of 12.12.2014, NCFM requested from State Registration Chamber the initiation of the procedure for removal from the state register of legal entities 146 savings and loan associations that didn’t have license for their activity or they didn’t present to the NCFM specialized financial reports within one year from the date of state registration or obtaining business licenses and last while there has losses to the national budget.
As of 31.12.2014, 305 entities hold the license for savings and credit associations activity, of which: 242 associations - A category license, 61 associations - B category license and 2 central association.
According to the data of State Register of issued, suspended and withdrawn licenses, in the authorization activity of savings and credit associations there were made amendments according to the table below:
Table No. 15 License activity according to the State Register of issued, suspended and withdrawn licenses of savings and credit associations
IndicatorsActivity period
2012 2013 2014
Licenses granted 2 54 65
Licenses reissued 2 42 134 4 AEÎ, care anterior au deținut licență de categoria A, în anul 2013 în baza cererii depuse au obținut licență de categoria B și unei asociații de categoria B i-a fost acordată licență de categoria A.5 2 AEÎ, care anterior au deținut licență de categoria B, în anul 2014 în baza cererii depuse au obținut licență de categoria A, la 2 AEÎ care anterior au deţinut licenţă de categoria A li s-a acordat licenţă de categoria B şi la 2 AEÎ care anterior au deţinut licenţă eliberată de Camera de Licenţiere pentru activitatea asociaţiilor de economii şi împrumut a cetăţenilor li s-a acordat licenţă de categoria A.
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Licenses suspended 3 3 5
Licenses withdrawn 17 21 35
Licenses expired 1 - -
Licenses in force at the end of year 361 340 305
In accordance with the provisions of the Regulation on the requirements for the savings and credit associations’ administrators, approved by the NCFM Decision no. 63/6 of 25.12.2007, the NCFM has examined the requests of 21 savings and credit associations holding a B license, which have obtained the confirmation on the appointment of administrators as specified by the legislation.
II.3. Monitoring and control activityThe supervisory activity carried out by the NCFM aims to ensure the
protection for investors, the observance of the legislation, the prevention of abuse and fraud, the observance of prudential norms, the application of measures and sanctions for legislation violations, and the promotion of confidence in the non-banking financial market. In order to ensure the observance of the legislation by the non-banking financial market participants, the NCFM performed the following activities:
- the analysis and assessment of data and information from the supervised entities reports submitted in conformity with the legislation;
- on-site controls;- the control of licensing conditions observance;- the approval and the publication of decisions as results of controls;- the analysis of mass-media information in order to accurately report to
investors;- analyzing and resolving complaints from the non-banking financial market
participants;- prescribing measures regarding the unconditional observance of the legal
and regulatory framework;- the application of financial remedy;- the application of contravention.
Monitoring and control activity on securities marketThe control of the securities market professional participants focused on
accomplishing the key objectives regarding the observance of the legislation by license holders, especially related to licensing conditions, capital requirements and guarantee fund, application of internal rules of professional participants’ activity, and quality of services provided by them.
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The supervisory activity carried out through financial and specialized reports, received by the NCFM is presented in the table below:
Table No.16 Indicators of supervisory activity through financial and specialized reportsIndicators Activity period
2012 2013 2014Annual reports 2 2 2Quarterly reports 965 983 1001Monthly reports 1440 1469 1454Daily reports 4757 4788 4587Unique reports 101 85 80Financial reports 161 167 168Total reports: 7426 7494 7292Reminders (warnings) issued to ensure compliance with legislation 18 23 17Notices on correction of the submitted data 6 2 2Application of contravention for non-observance of the reporting obligation
2 0 2
Due to the reduction of the number of professional participants on the securities market in 2014, with an independent registrar6 and the license expiration of an estimate company, there were presented with 218 reports less than in 2013.
During the year, 817 securities transactions were verified based on the documents requested from professional participants, of which 467 OTC transactions with shares issued by 33 joint stock companies and 350 transactions performed on the stock market with shares issued by 40 joint stock companies.
As a result of the verification of the securities transactions, the following measures have been taken:- warning 3 broker/ dealer companies and 1 independent registrar on the need to
observe legal provisions in their presentations of documents regarding 5 stock exchange transactions and 2 transfers of ownership of securities.- warning of 2 independent registrars, 6 issuers and 2 public authorities on the
need to observe legal provisions regarding the procedure for redemption of shares from minority shareholders within the 305 direct transfers of securities ownership;
- warning of 3 broker/ dealer companies and 3 clients involved as insiders within 6 stock exchange transactions, on the need to observe the Law on Securities Market and the Regulation on brokerage and dealer activity on the securities market;
- warning of 3 broker/ dealer companies and the National Securities Depository on the need to observe legal provisions regarding delivery of the securities in nominal holding and settlement of funds in execution of 12 stock exchange transactions
- application of 3 contraventions against 2 broker/ dealer companies and against individual client for violation of the requirements set out in sale-purchase legislation of securities by insiders and presentation documents related to 6 stock exchange transactions.
- suspension of 2 personal accounts in two registers of securities holders;6 RI ”Comitent” a transmis toate registrele societăților pe acțiuni ținute altor registratori independenți;
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- the withdrawal of the license for the right to conduct professional activity on the securities market, previously issued to an independent registrar, for violations committed at 5 direct transfers of ownership of securities;
- informing the competent bodies, including the Parliament of Moldova and the National Committee for Financial Stability, about transactions with an issuer-bank actions and periodic informing the National Bank of Moldova on transactions with the shares of all commercial banks.
Also, during the year, there were performed 2 thematic controls on the observance of the legal provisions regarding the activity of keeping registers of securities owners of 6 issuers by 2 independent registrars. As result of the performed controls, there were established violations of law concerning the submitting of one register of holders of securities and of the issue of a list of shareholders entitled to attend the general meeting of shareholders, which is why people in positions of responsibility of independent registrars were warned and sanctioned.
During 2014, 10 reports were verified on the results of public offerings, as a result 1 participant was warned for the incomplete information presented in its report.
Monitoring activity of securities issuers The monitoring activity of securities issues concerning public disclosure of
information by the joint stock companies, as well as events and actions affecting the economic and financial activity and other disclosure issues, is aimed at minimizing the investors’ risks and protection of shareholders’ rights by ensuring transparency in the activity and functioning in accordance with the corporate governance principles.
The monitoring activity of securities issuers conducted by the NCFM according to its legal responsibilities included the following:
- the analysis and the assessment of data and information from the securities issuers’ reports submitted in accordance with the legislation and posted on the NCFM’s official web-site;
- the analysis and assurance of compliance with the legislation regarding securities market as a result of notifications regarding corporate conflicts.
A number of cases of wrongdoing on behalf of securities issuers were established as a result of the monitoring activity, particularly relating to violation of deadlines for annual reports submission, requirements towards information disclosure and other violations that led to the application of a number of sanctions and fines.
Table no. 17. Monitoring activity of Joint Stock CompaniesIndicators Activity Period
2012 2013 2014Number of JSC obliged to disclose publicly the information in the mentioned period for the previous operational year
650(anul 2011)
601(anul 2012)
560(anul 2013)
Number of annual financial reports 560 528 496
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Number of warnings and notification letters regarding the necessity to make corrections in the submitted reports
244 160 52
Number of JSC required to present and publish annual financial reports
82 88 72
Number of JSC whose bank accounts were blocked due to non-presentation of annual financial reports
73 73 64
Number of officials sanctioned (administrative sanctions) for disregarding legal requirements
82 125 48
Administrative sanctions received (thousand MDL) 112,10 142,90 61,00
Monitoring and control activity on the insurance marketThe supervision of the insurance market professional participants included the
achievement of the main objectives related to safeguarding the rule of law, especially aspects related to:
- respecting prudential requirements and licensing conditions;- the financial stability of the insurer (liquidity coefficient, minimum and
available solvency margin, coverage of the mathematical and technical reserves with allowed assets);
- the procedures of the creation and the maintenance of technical reserves for each category and class of insurance, for which contracts were signed;
- the placement into assets considered appropriate and admissible for the insurance reserves and respecting the norms of reserves distribution; the activity of investing the insurance funds and reserves;
- establishing the maximum limit of the insurer (reinsurer) liability for the assets insured or reinsured;
- observing the legislation while registering and examining claims, establishing the amount of insurance compensations;
- application of base insurance premiums and corrective coefficients for local and external MTPL;
- observance of legal acts regarding preventing and combating money laundering and terrorism financing;
- activity of intermediaries in insurance/reinsurance activities;- administration and utilization by the National Bureau of Motor Insurers’
of the available finances of the Compensation Fund and Road Traffic Victims Protection Fund.
The supervision of professional participants’ activity on the insurance market has been performed by monitoring and analyzing their financial and specialized reports, submitted in accordance with the legislation, including:
- reports regarding the simultaneous activity and performed transactions for life insurance and general insurance;
- assets’ balance that are aimed to cover technical reserves and the minimum solvency margin, related to general insurance and respectively to life insurance, and the incomes resulting from capitalizing on these assets. The indicators registered as the result of the supervisory activity of the professional participants at the insurance market are presented in the table below:
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Tabel no. 18. Indicators of supervisory activity of professional participants on the insurance market
Indicators Activity period2012 2013 2014
Financial statement of the insurance companies 92 32 32Statistical report no.1 – Insurance 88 67 65Specialized report on main activity of the insurer 76 67 65Report on technical reserves of the insurer 76 67 65Report on compliance with solvency normative reserves and liquidity coefficient of the insurer
76 67 65
Monthly report on MTPL insurance and international insurance “Green Card”
336 291 267
Financial statement and specialized report of insurance brokers 695 698 400Total of specialized and financial reports: 1439 1289 959Number of prescriptions issued to officials on increase of statutory capital according to legal requirements
3 5 4
Number of prescriptions issued to officials on equity (net assets) increase according to legal requirements
1 2 -
Because of the reduction in 2014 of the number of participants on the insurance market (with 1 insurance company and 5 brokers insurance / reinsurance) were presented 330 reports fewer than in 2013.
The on-site controls of professional participants on the insurance market revealed numerous offenses that resulted in the application of a number of sanctions and fines, presented in the table below:
Tabel no.19. Indicators of supervisory activity of professional participants on the insurance market
IndicatorsActivity period
2012 2013 2014
Number of complex controls 15 4 8Number of thematic controls 38 77 78Number of approved decisions 22 37 18License withdrawal 3 5 2Number of prescription on legislation observance 27 37 30Documents submitted to law enforcement bodies 1 5 12Sanctions applied and collected to state budget (thousand MDL) 168,1 160,0 317,0Suspension of operations on settlement accounts - - 2Number of decisions on application of contraventions 51 31 44
In 2014 NCFM performed 86 complex and thematic controls and on-site
inspections checking the activity conducted by professional participants at the insurers market. The materials from the control of 12 entities have been submitted to law enforcement bodies.
Monitoring and control activity of microfinance sector40
The monitoring of savings and credit associations and microfinance organizations has as a main purpose the compliance of entities with legal provisions, the prevention of abuses and frauds as regards to other entities and beneficiaries of services.
An important instrument used in the process of supervising savings and credit associations are the annual financial and specialized reports received by the NCFM through the Information Management System (IMS). The reported data is presented in the following table:
Table No. 20. Indicators of supervisory activity of savings and credit associationsIndicators Period of activity
2012 2013 2014Annual financial statements 357 329 304Specialized quarterly reports 1075 1035 942Specialized monthly reports 553 558 514Total financial and specialized reports 1985 1922 1760Warnings / Cautions on compliance with the legal requirements, including compliance with financial prudential norms and correction of submitted information
173 148 161
Suspension of operations on settlement accounts 7 4 19Number of prescriptions on compliance with the legal requirements, including reporting obligation
18 39 40
Number of decisions on contravention applications 52 21 13Amount of the received administrative sanctions (thousand MDL) 69,4 29,0 17,3
As a result of the policies designed to ensure compliance with the provisions of the legislation and to protect the legal rights of the SCA members, there were issued 161 warnings that represent 8.8 percent increase compared to last year. Similarly, there was registered an increase of the number of sanctions, such as the suspension of the operations on SCA bank accounts (approximately five-fold increase). The number of issued prescriptions on compliance with the legal requirements, including reporting obligation recorded an approximately two-fold increase compared to last year.
In 2014, the NCFM conducted 26 on-site controls verifying the activity of SCAs. As a result, the NCFM submitted upon examination to the Anti-Money Laundering Service materials regarding the activity of 3 entities which have not reported transactions according to anti-money laundering legislation. Surveillance activities at the SCAs premises established legal deviations, including the non-compliance with financial prudential norms, the manner of conducting general meetings of association members and of appointing directors, financial reporting requirements and other violations that led to the application of a range of measures and sanctions presented in the table below:
Table No. 21. Indicators of supervisory activity of savings and credit associationsIndicators Period of activity
2012 2013 2014Number of complex controls 7 6 7Number of thematic controls 17 18 19
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Number of approved decisions 327 268 269
License withdrawal 2 6 1License suspended 3 3 2Number of warnings to the administrators 3 10 17Number of prescription on legislation observance 29 19 20Number of decisions on application of contravention sanctions 29 25 26Amount of contravention sanctions received (thousand MDL) 14,0 9,35 10,9Documents submitted to law enforcement bodies 3 3 3Suspension of operations on bank accounts 2 0 0
In the process of monitoring the execution of the decisions in respect with the results of controls carried out in 2014, there was determined that 18 decisions have been fully implemented and 8 decisions have been partially implemented and are to be monitored and executed in 2015.
II.4. Protection of the rights of non-banking financial market participantsDuring 2014, the NCFM continued the implementation of the Strategy
regarding non-banking financial market development for 2011-2014 and its associated Action Plan, one of the objectives of which is to ensure protection of the rights and interests of non-banking financial market participants. In this context, several actions were taken related to the amendment of the legal framework on financial market to align it with the European and international standards. The NCFM discussed actively with market participants with regard to the provision of the Law no. 171 of 11.07.2012 on the capital market, in force since 14 September 2013, which aims to create the necessary legislative framework for capital market development and implementation of a proper mechanism of protection the rights and interests of investors and consumers of financial services.
Therewith, the NCFM representatives participated in working groups on the development of draft Law on consumer rights to contracts conclusion and draft Law on conclusion and implementation of distance contracts on consumption financial services.
In the process of ensuring the protection of rights of the financial services consumers has been verified observance of the Regulation on manner of examination of petitions by the non-banking financial market professional participants, approved by the NCFM Decision no. 38/14 of 28.09.2012, which establishes the manner of submission, recording and reviewing complaints received from individuals and / or legal persons to address to the non-banking financial market professional participants, including submission of information to consumer concerning the results of petition examination.
In the same period the NCFM conducted controls / inspections on legislation observance in the field of consumer protection to 6 participants of the insurance market, 3 securities registrars and 23 savings and loan associations.
The consumer protection of non-banking financial services is a primary activity of the NCFM being oriented towards ensuring transparency of information
7 12 decisions were approved as a result of controls carried out at the end of 2011;8 3 decisions were approved as a result of controls carried out at the end of 2012; 9 1 decision was approved as a result of controls carried out at the end of 2013;
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and raising financial literacy of the population, these served as the basis for encouraging investment and boosting overall financial market development.
The NCFM responsibility aims to ensure access to communications systems, carrying out activities for information and financial education of the public monitoring legislation observance, developing regulations according to the best practices of consumer protection and effective cooperation with public authorities, non-governmental structures and non-banking financial market participants to ensure a high level of protection of consumer rights and interests of non-banking financial services.
During 2014 the NCFM, together with the National Bank and the Ministry of Education participated in the working group on drafting the National Strategy for Financial Education for the years 2015-2020. The strategy aims to promote long-term vision for ensuring sustainable growth and financial stability welfare of the Moldova population by increasing the level of financial education.
In December 2014 the NCFM attended the webinar organized by the Council of experts in financial education and consumer protection rights in CIS countries. The webinar was attended by representatives of state authorities and public organizations of the CIS countries. Participation in this event allowed familiarization with the regulations of other countries and exchange of expertise between financial supervisors in the CIS countries.
In the same period the NCFM representatives attended working sessions with the experts of the International Finance Corporation on launching in Moldova of the program on financial education and participation prospects of the financial market supervisory authorities in this program.
The NCFM representatives participated in 11 TV shows dedicated to informing the public with the NCFM activity. During 2014 55 press releases related to the activity of the NCFM and events on the financial market have been placed on the official website and newspaper Capital Market,.
The flow of documents received by the NCFM during 2014 has decreased from the previous year. The structure of the flow of received documents are presented in the following table:
Table No. 22. Structure of the flow of documents received by NCFMIndicators Period of activity
2012 2013 2014Reports of professional participants 6993 6850 6582Other documents and appeals received from non-banking financial market participants
5879 7833 7019
Claims (requests) submitted by individuals 406 815 492Documents and appeals of public entities 449 485 496Documents and appeals of enforcement bodies 409 618 607Other documents 943 1343 1390Total: 15079 17944 16586
The complaints received by the NCFM according to the field of activity are structured as follows, compared to 2012 and 2013:
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Table No. 23. Structure of received complaintsIndicators Period of activity
2012 2013 2014Complaints on the assurance of the shareholders’ rights and the supervision of legislation observance by the professional participants on the securities markets
141 131 144
Complaints on the procedure of investment funds liquidation, financial management companies, savings and credit associations and microfinance organizations
58 63 64
Complaints from beneficiaries of insurance services 207 621 284In 2014 the output correspondence was in amount of 4646, the figure was
decreased compared to 2013 (5785 documents).
II.5. Legal activityDuring 2014, the NCFM’s legal activity aimed the creation of protection
measures regarding the legal rights and interests of consumers of non-banking financial market services, and raising the standards and methods of regulating and supervising the financial market participants in order to ensure its stability efficiency, through implementing the following activities:
Legal assistingDuring the reference period legal assistance was provided in developing and
amending the non-banking financial regulations, including legal expertise to draft orders, resolutions, ordinances, protocol entries, cooperation agreements at national and international levels and normative acts developed by the NCFM, subsequently submitted for notification. As part of supervision and control activity, legal assistance has been granted in the process of application of the legislation on violations in the non-banking financial market, ensuring accountability in the penalizing procedure. Also, by identifying problems / shortcomings during NCFM activity and proposing solutions / recommendations, provided legal assistance contributed to harmonize the legal framework in the NCFM activities.
Legal representation of NCFM interestsIn accordance with the competences established by the law, during 2014 the
NCFM participated in about 128 lawsuits, in the role of: the applicant - 18 cases; respondent - 33 cases; intervening - 36 cases; public authority to submit conclusions - 4 cases; ascertaining agent - 37 cases.
The object of disputes in which the NCFM was involved during this period refers to:
- actions for annulment of certain administrative acts issued by the NCFM, which ordered the withdrawal of licenses for carrying out professional activity on the financial non-banking market, acts for the amendment / approval / repeal of certain regulations, individual administrative acts;
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- inobservance of shareholders' rights and manner to cal land conduct the general shareholders meetings, shareholders access to information and documentation on the joint stock company activity;
- invalidity of securities transactions in the securities market;- ascertainment of invalidity of the general shareholders meetings decisions;- decisions on the application of administrative sanctions and measures to
ensure their enforcement- action on abolition of the arbitration award.
As a result of examination of the judicial files and completion of 44 cases in which the NCFM had as a party, the NCFM gained 35 lawsuits, 7 - were handed to the detriment of the NCFM, and 2 - were handed down without touching the NCFM direct interests.
Table No. 24. Resolutions of litigations in which NCFM has been involveIndicators Period of activity
2011 2012 2013 2014Actions initiated by NCFM, rejected 1 1 1 2Actions initiated by NCFM, accepted 4 5 2 4Actions against NCFM, rejected* 17 15 15 31Actions against NCFM, accepted* 5 2 3 4
*Actions initiated by the NCFM include the appeals against the decisions in the contravention procedure
Following the NCFM’s participation in litigations examining the NCFM’s acts, in most cases they were assessed as thorough and lawful and, therefore, the claims of parties against NCFM were rejected.
Diagram No.8. Dynamics of litigations wherein NCFM was involved during2011-2014
Administrative litigations
Economic litigations Contraventional litigations
Other litigations0
10
20
30
40
50
60
70
80
2429
23
12
19
32
19
11
25
69
37
9
29
62
372011201220132014
Measures applied in contravention offenses on the non-banking financial market
Analyzing the violations on the non-banking financial market, there is a significant increase of the number of offenses tracked during 2014 compared with 2013.
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The main factors that contributed to the decrease in applied administrative sanctions in 2013 are:- disciplining the non-banking financial market participants and non-admission of the majority of these violations for which they were sanctioned in previous years;- intensification of communication and cooperation with the non-banking financial market participants;- entry into force of amendments to the Contravention Code by Law no. 180 of 25.07.2014, which excluded the contravention sanctions for some violations on the non-banking financial market;- reducing the number of market participants as a result of dissolution, reorganization, insolvency processes;
Therewith, it is also revealed that about 65 percent of all fines related to offences on non-submission or late submission by the non-banking financial market participants of the reports established by legislation
The prompt sanctioning of violations committed by the non-banking financial market participants aims at correcting the behaviour of subjects that violated the rule of law so that in the future similar cases can be prevented.
Creating a clear and coherent framework for infringements of legislation on non-banking financial market determine the responsibility of all participants and increases safety, order and transparency on the non-banking financial market and thus reduce the number of allowed violations, decreasing the damages caused by them.
During the reporting period, on the non-banking financial market were found 167 facts that meet the elements constituting offences or 92 fewer than in the previous year, being made 156 minutes on contraventions or 72 fewer than in 2013, the amount of fines imposed is 390 600 lei (Annex No. 7).
During 2014 only 5minutes on offense have been submitted for forced enforcement to the bailiffs, in order to recover amounts receivable from fines imposed by the sanctioning decisions in the framework of offenses procedure. In most cases the fines were paid voluntarily by the sanctioned individuals. However, cooperation with bailiffs is crucial in ensuring plenary enforcement of the sanctions previously imposed.
Offences recorded on the non-banking financial market and the measures applied are presented in the table and diagram below:
Table No. 25. Information on the contravention sanctions
Field of activity
No. of minutes
Amount of Applied
fines, thousand
MDL
Enforced minutes,
Non enforced minutes
Reasons for non-enforcement
No. Amount thousan
d lei
Office for forced
enforcement
Ceased offences
Litigated (pending in the
courts)No. Amount
thousand lei
No Amount thousan
d lei
No. No. Amount thousand
leiSecurities 59 133100 54 60850 5 14600 4 12600 - 1 2000
Savings and loan associations
53 101200 53 53600 - - - - - - -
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Insurance 44 156300 42 74050 2 8200 1 7600 - 1 600Total 156 390600 149 *188500 7 22800 5 20200 - 2 2600*according to article 34 para.(3) of the Contravention Code of the Republic of Moldova, the offender has the right of paying half of the imposed fine if the money are transferred within 72 hours of receiving the penalty order. Satisfying this condition it results in the full execution of the penalty.
Diagram No. 9. Sanctions imposed in 2012-2014
2012 2013 20140
20
40
60
80
100
120
140
160
97
150
59
72
475351
31
44
Securities SCAs
Insurance
Cooperation with the law enforcement bodiesDuring 2014 the NCFM exploited the opportunities of cooperation with the
law enforcement bodies. Thus, based on its competences, the NCFM submitted to the law
enforcement and justice bodies materials on the supervision of the non-banking financial market for examination, according to their competences, including: NAC – 35 notifications, to the General Prosecution – 39 notifications, Ministry of Internal Affairs – 6 notifications, Ministry of Justice – 32 notifications, Superior Council of Magistrates – 4 notifications.
Also, to protect the rights and interests of investors, a special importance was given of examining and resolving petitions and complaints received from investors and consumers of non-banking financial services, to identify the problems most frequently experienced by them and to ensure the company with necessary measures to mitigate such problems in the future. However, during the year petitioners received legal advice on law enforcement in certain practical situations related to the non-banking financial market.
The main objectives the development of cooperation consumers of financial products and services and other interested parties remain to be further promotion of uniform application of the law in the non-banking financial market by improving the forms and methods of providing legal assistance, quality assurance of legal assistance, including improving the quality of representation of the NCFM in relations with other public authorities, market participants, law enforcement entities, other legal bodies and individuals, as well as strengthening and expanding the collaboration with them, and the promotion legal education and culture of the population.
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2.6. Certification of the Non-banking Financial Market Specialists
The certification procedure of the non-banking financial market specialists and auditors is established according to the Regulation on certification of the specialists of professional participants on the non-banking financial market, approved by the NCFM Decision no.44/5 of 18.09.2008, and the Regulation on certification requirements of the auditors of professional participants on the non-banking financial market, approved by the NCFM Decision no. 36/12 of 23.07.2009. The structure of the certification committees was approved by the NCFM Decision no.38/14 of 08.08.2013.
In 2014, 46 specialists of professional participants on the non-banking financial market, including 4 auditors on the securities market have been certified in accordance with the provisions of aforementioned Regulations.
Information on certification of specialists and auditors of the professional participants on the non-banking financial market is presented in the Table no. 26.
Tabele No. 26. Information on certification of professional participants’ specialists on the non-banking financial market
Indicators No. of specialists who hold
certificate of qualification on 31.12.2013
Certificates issued during
2014
Certificates cancelled
during 2014
No. of specialists who hold certificate of qualification
on31.12.2014
Certified specialists, total:Including:
1758 46 1 1803
Certified specialists on the securities market
355 20 1 374
Certified specialists in the field of savings and credit associations
1360 15 - 1375
Certified specialists in the insurance field (actuary)
7 - - 7
Certified specialists in the audit field of professional participants on the securities market
21 4 - 25
Certified specialists in the audit field of savings and credit associations
5 - - 5
Certified specialists in the audit field of insurance
10 7 - 17
2.7. Financial Stability
48
The analysis of performance indicators of the non-banking financial market sectors supervised by the NCFM show that the risk profile has a relatively low impact on the financial system as a whole. Thus, at the current stage of development the non-banking financial markets sectors supervised by the NCFM cannot generate serious systemic risks for the financial market.
However, the NCFM as a regulator of non-banking financial market, contributes to promoting and maintaining financial stability. This is because already shown that the financial system is the cornerstone of a modern economy and extensively affect the overall development of the economy. Lessons learned from various previous financial crises led to an increased focus on the process of regulation and supervision of this sector and focus not only to the better performance of individual financial institutions, but also to promote the financial stability of the markets as a whole, to greater coordination of actions between regulators at national and international level, and to strengthening standards of regulation and supervision in accordance with best international practices.
If the capital market, insurance market and the microfinance sector will reach high levels of development, they will turn into important elements of an efficient and solid financial system, serving as a solid basis for capital formation and economic growth, through their contribution to the broadening and deepening of the financial system in the country.
Although the non-banking financial market sectors are at an early stage of development, ensuring their stability over the medium term is one of the key objectives of the NCFM. To achieve this objective the NCFM aims at achieving a number of actions that will include consolidation and development of the legal framework, expanding the range of financial products and developing new investment instruments, consumer protection and education, supporting financial reforms and increasing the effectiveness of market supervision and regulation.
Thus the NCFM participated in seven meetings of the NCFS, in which were discussed topics related to ensuring stability of Moldova financial system and preventing systemic risk.
During 2014 the cooperation between NCFM and other authorities responsible for the authorization, regulation, supervision and control of markets components of the financial system was gradually increased to ensure transparency and integrity of financial system, respecting the applicable legal framework, as well as enhancing the national framework of financial stability. As a member of the NCFS, the NCFM, together with NBM, Ministry of Finance and Guarantee Fund of the Bank Deposit, periodically review the financial soundness indicators, identify possible spill over effects, share information on the supervision of each component of the financial sector and take coordinated action regarding maintenance of financial stability.
Based on the IMF recommendations, during 2014 the NCFM assured generalization of indicators of financial soundness being drafted report on financial stability which is an important tool in the evaluation of the non-banking financial market situation, financial stability and measures to minimize systemic risk.
49
2.8. Internal Institutional Cooperation ActivityDuring the reporting period, the NCFM carried out coordination and
collaboration activities with other institutions and public authorities of Moldova in order to fulfil its specific responsibilities of regulation and supervision of non-banking financial market, as follows:
NCFM took part in the NCFS activities, created under the Memorandum of Understanding on financial stability maintenance concluded between Government of Moldova, NBM, NCFM, Committee on Economy, Budget and Finance of the Parliament of Moldova and Deposit Guarantee Fund;
NCFM submitted to NBM information on transactions with banks shares and other statistical data;
NCFM submitted periodically to the Ministry of Economy reports on licensing and information on registration of securities issues on the primary market and transactions with corporate securities;
NCFM submitted to the Ministry of Foreign Affairs and European Integration and the Ministry of Economy report on the fulfilment of the Action Plan related to the Moldova-EU Association Agreement and DCFTA on non-banking financial market.
NCFM, in collaboration with the central government authorities and other public authorities, submitted for consultation and notice drafts of legislative and normative acts and examined a number of draft laws and regulations received by the NCFM, formulating proposals for amending the promoted regulatory initiatives (Annex No.8).
Deep and Comprehensive Free Trade Area (DCFTA)Following the European Commission's recommendations and the Action Plan
for implementation of the European Commission recommendations for establishment of the Deep and Comprehensive Free Trade Area between Moldova and the European Union, the NCFM submitted quarterly progress reports on implementation of the Plan under “Services and Investment” chapter. The progresses are related to the improvement and promotion of the legal framework to European and international standards and to strengthening its institutional and operational capacities.
Therewith, the NCFM actively participated in meetings of the RM-EU sub-committees where have been exposed the progresses in reforming processes of the non-banking financial market sectors according to the institutional duties.
The Deep and Comprehensive Free Trade Area between Moldova and the European Union is part of the European Association Agreement, signed in June 2014. DCFTA is a multilateral agreement concluded for an unlimited period, providing export benefits and long-term predictability for business and investment.
2.9. International Cooperation Activity
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Compliance of the national legislation on the regulation and supervision of non-banking financial market to the acquis-communautaire and to the latest international trends was one of the most important goals in the NCFM activity. To achieve this goal it was necessary for an active involvement and constant communication with international organizations in the insurance, securities and microfinance fields, including through conducting study visits to the European authorities in order to undertake the best practices in the implementation of the regulatory and supervisory initiatives of the NCFM.
Membership in International Organization
Insurance Supervision Initiative in the Central, Eastern and South-Eastern Europe countries (CESEE ISI)
This initiative brings together the insurance supervision authorities of Central, Eastern and South Eastern Europe (CESEE) for the purpose of stronger cross-border cooperation in this region. The founding members of the Initiative are authorities from Austria, Albania, Estonia, Hungary, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia and Ukraine. The scope of CESEE ISI is to strengthen international cooperation by setting up the common supervisory architecture and intensification of cross-border cooperation in the region. The objectives of the initiative are to promote and maintain communication and cooperation between supervisory authorities from CESEE countries; to serve as a forum for discussion that will focus on insurance market issues, organizing workshops, conferences and other trainings; to provide opportunity for exchange of experience in techniques field, experiences, information and know-how; to assist in implementing EU directives and regulations into national legislation of the CESEE countries.
In 2014 Chisinau hosted the 8th meeting of the Insurance Supervision Initiative in the Central, Eastern and South-Eastern Europe countries. The meeting was organized by the Financial Market Supervisory Authority of Austria and the Central Bank of Hungary jointly with NCFM. During the meeting were discussed the following topics: insurance guarantee schemes - one of the major risks of protection mechanisms, implementation of international standards in insurance and risk based supervision. Within event supervisors form Albania, Austria, Hungary, Macedonia, Poland, Romania, Republic of Srpska, Serbia, Slovenia, Slovakia, Switzerland shared their experience in the field.
Cooperation with International Financial Organizations Effective cooperation and relations with international financial organizations
have contributed to the implementation of the Strategy of non-banking financial market development for the period 2011 - 2014 and to the strengthening of the NCFM institutional capacities.
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International Monetary Fund and World Bank – Financial Sector Assessment Program
International Monetary Fund and the World Bank continue to be the main development partners in the institutional development of the NCFM and strengthening capacities for regulation and supervision of non-banking financial market in Moldova.
In the period 17 February - 5 March 2014 in Moldova was carried out the World Bank and International Monetary Fund program (Financial Sector Assessment Program - FSAP) aims to identify the main vulnerabilities of the financial sector of the country and to offer several recommendations to ensure stable and continuous development of the financial market sectors and to create the necessary mechanisms to prevent financial crises.
Following the assessment of the financial system and based on the recommendations contained in the extensive reports of assessment and technical notes presented by FSAP experts, it was developed an action plan for implementing the IMF and WB recommendations.
The FSAP recommendations concern the following issues: Ensure financial stability by strengthening the regulatory and supervisory
responsibilities of the NCFM, implementing risk based supervision and assessment of financial stability;
Create and develop tools and mechanisms for crisis prevention and resolution, including capacity building in settlement of crises and developing comprehensive emergency plans;
Develop consolidated supervision and group supervision in the insurance sector and to establish and implement an insurance compensation scheme by approving the necessary legal framework for the National Insurance Guarantee Fund;
Develop a comprehensive risk management framework on the financial market.Also, in the reference period there were organized meetings with the IMF and
WB experts teams, discussing issues on development and results program implementation for the development of private and financial sectors.
On 27 October – 7 November 7, 2014 the NCFM was visited by the IMF experts in statistics of financial and monetary policy. During the mission the experts offered advice on classification and assessment of financial instruments in accordance with the methodology on IMF financial and monetary statistics. Also, the IMF experts have assisted the NCFM in the collection and generalization of information from market participants and in elaboration of statistics reports on non-banking financial institutions.
The outcome of the mission and following IMF experts recommendations there were finalized reporting templates in the insurance field and savings and loan associations sector and microfinance organizations according to the IMF standards.
International Finance Corporation (IFC)
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The International Finance Corporation, which is a member of the World Bank Group, is an international organization whose mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives.
During 2013 the NCFM continued cooperation within agreement with the International Financial Corporation: in the fields of credit history bureaus and corporate governance.
The IFC has provided comments and proposals for amendments on the Law no. 122-XVI of 29.05.2008 on credit history bureau. Also, there were organized trainings and seminars for NCFM on peculiarities of credit history bureaus supervision, and workshops for managers of microfinance organizations.
Under the Cooperation Agreement on IFC's Corporate Governance Program in Europe and Central Asia, the NCFM employees participated in the seminar organized by IFC, which took place in Tbilisi, Georgia. Topics discussed during the seminar focused on: the role of the company's board in corporate governance, information disclosure by companies and transparency, with case studies, experience of EU countries in this field, methods of implementation of best corporate governance practices, etc.
European CommissionIn 2014, the NCFM received technical assistance through the Technical
Assistance and Information Exchange Instrument (TAIEX) of the European Commission and it was organized an Expert mission of the Romanian Financial Supervision Authority on topic: Securities trading on secondary market.
Also, the NCFM applied to other TAIEX projects, which have already been approved by the European Commission and will be completed during 2015. The areas in which technical assistance was requested are related to capital market and savings and loan associations.
The NCFM had a fruitful collaboration with the Delegation of European Commission to Moldova in order to start the technical assistance Twinning project on development and strengthening the NCFM institutional and operational capacities in the field of prudential regulation and supervision. Thus, in 2014 it was selected the project partner and drafted the Twinning contract, which was submitted for approval to the European Commission Delegation.
The main project objective is to develop and implement a surveillance system based on risks for non-banking financial market participants, including capital market, insurance market, pension funds and microfinance sector, based on forecasting and risk assessment as a result of adverse events and preventable consequences.
Cooperation with Similar International SupervisorsIn order to strengthen the regulatory and supervisory regime by transposing
the best practices implemented at European and international levels, and studying
53
the experience of international financial markets in 2014 the NCFM representatives attended events and training programs organized by the financial markets supervisor from Armenia, Germany, Poland, Slovenia, Norway and Great Britain.
The representatives of the supervisory authorities of Poland and Romania visited Moldova to participate in events at national and international level held in Chisinau in order to provide advisory support and share experiences in the field of regulation and supervision of non-banking financial market,
Polish Financial Supervision Authority In order to develop the Moldovan non-banking financial market, the Polish
Financial Supervision Authority has organized trainings on various topics on the regulation and supervision of the capital and insurance market for the NCFM and professional participant’s representatives. The training activities have been conducted by a team of Polish experts and included the following topics:
Training on stress tests in insurance; Research, evaluation and supervision methodologies (BION) - practicalities
of achieving risk-based assessment of the insurance companies activity; Information and consultation obligations of public companies and their
shareholders regarding the capital market abuses and supervising the transactions, following the example of Polish experience;
Financial disclosure, issuers reporting; Training on banks creating and licensing process in accordance with Polish
and EU regulations; Training on procedures in case of problem banks; Trading of securities on the secondary market.
Cooperation with Commonwealth of Independent States specialized organizations (CIS)
The cooperation with the CIS’ organizations in the field of regulation and supervision of the non-banking financial markets contributes to the coordination of activities between the CIS member states in the development and improvement of their supervisory mechanisms.
Council of the Heads of Securities Market Regulation Authorities of CIS member states
The Council of the Heads of Securities Market Regulation Authorities of the CIS aims to coordinate the activity of regulatory and supervisory institutions of securities market of the CIS member states.
In accordance with the principle of rotation, in 2014 Azerbaijan took over the presidency in the Council. Thus, in 2014 in Baku took place the eighteenth meeting of the Council, attended by high level representatives of similar authorities from Azerbaijan, Moldova, Belarus, Republic of Kazahstan, Kyrgyzstan,
54
Tajikistan and Russian Federation. Also, the meeting was attended by the representatives of the CIS Executive Committee.
During the meetings were examined current issues in development of securities markets in the CIS member states, such as: evolution and prospects of development of securities markets in the member states of the CIS, financial education, improvement of legislation on accounting and auditing on securities market, prevention measures of violations in the securities market, placing issuers securities in other countries.
The importance of this event was underlined by the fact that on 23 October 2014 in Baku was signed a memorandum of cooperation between the NCFM and the State Committee for Securities of Azerbaijan. Memorandum that will have positive effects on the development of bilateral cooperation relations in the field of regulation and supervision of professional participants of the securities market and will help to establish high standards of regulation, ensures the effectiveness and transparency of financial markets.
Also, in order to finalize the proposed amendments to the draft Regulations on the Council of Heads of Securities Market Regulation Authorities of the CIS, the NCFM participated in the working group of the Council of Heads which held in Moscow, Russian Federation.
Interstate Coordination Council of heads of insurance supervisory authorities of the CIS member states
In 2014 NCFM participated in the sixth meeting of the Interstate Coordination Council of heads of insurance supervisory authorities of the CIS member states. During the meeting were discussed issues related to the current situation on the insurance markets of the CIS member states, risk based supervision requirements for internal control and corporate governance of insurers, as well as topics related to organizational aspects of the Council. The meeting took place in Yerevan, Armenia.
2.10. Preventing and combating the money laundering and terrorism financing on the non-banking financial market
Actions in preventing and combating money laundering and terrorist financing are complex measures undertaken by the NCFM to minimize risk of money laundering or terrorist financing at the national level. During 2014, NCFM has taken a number of measures, including the approach to anti- money laundering within 32 controls, of which 12 occurred in the insurance filed and 20 in savings and loan associations.
The actions in the field of preventing and combating ML/TF represent complex measures, carried out by the NCFM to improve and optimize the activities at national level.
During the controls was verified the observance by the reporting entities of the requirements of Law No.190-XVI of 26 July 2007 „On the prevention and combating money laundering and terrorist financing” on the non-banking financial
55
market, especially reporting of transactions under the mentioned Law, and compliance with the requirements of Regulation on preventing and combating money laundering and terrorist financing on the non-banking financial market, approved by NCFM Decision no. 49/14 of 21.10.2011.
Within 28 controls were detected deviations from legislation, being issued prescriptions to reporting entities on unconditional respect for the provisions of laws and regulations.
Therewith, in 13 cases the Anti-money Laundering Office within National Anticorruption Center was informed about suspicious transactions identified in the course of verification the reporting entities activity. In the same context, to reduce the number of violations in the field, NCFM in partnership with NAC conducted trainings for the representatives of the insurance and microfinance sector, attended by over 100 people (Diagrame no. 10).
Internationally, NCFM representative attended the 45th and the 46th planary meeting of the Moneyval Committee, Council of Europe. Within the 46th plenary meeting, it was heard and assesed the interim report of the Moldova, being appreciated the country's progress, including more effective supervision of market participants that resulted from increased number of inspections and improving the system of sanctions.
The main objectives related to NCFM capacity building in the field of preventing and combating money laundering and terrorist financing are mainly:
- the analysis of the normative framework in preventing and combating ML/TF and the identification of opportunities for improving it;
- strengthening the cooperation with the reporting entities by enhancing training and degree of awareness;
- strengthening supervision and control capacities of the reporting entities;- raising public awareness and responsibility over risks associated with
ML/TF;- the implementation of training programs for specialists in the field of
preventing and combating money laundering and terrorist financing;- the active participation in developing national mechanisms for preventing
and combating ML/TF.
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Chapter II. ORGANIZATION AND FUNCTIONING OF THE NON-BANKING FINANCIAL MARKET
I. Development of Securities Market
1.1. Primary Market of SecuritiesDuring 2014, on the primary market of securities was registered a decreasing
of both the total number of securities issues, accompanied with an increase the volume of shares issues. According to the SSR data, cumulative for the whole activity period of the securities market, there were securities issues worth 26,8 billion MDL, of which: 13,0 billion MDL - shares placed at company foundation and 13,8 billion MDL – shares placed through additional issues of shares and bonds issues. At the end of 2014 in the SSR were registered 2959 companies. During 1992-2014, 869 joint stock companies were removed from the SSR as a result of their liquidation or reorganization. During 2014, there were registered 62 securities issues amounting to 1249,6 million MDL, of which: 2 issues performed at the establishment of joint stock companies and 60 additional issues (Diagram No. 11)
217
4
13
15
Diagram no.10. Results of the conducted controls and inspections in 2014
Fără încălcări Cu încălcări și remiterea datelor către SPCSB
Cu încălcări și fără remiterea datelor către SPCSB
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
200400600800
10001200140016001800
020406080100120140160180
466.4324.8
1646.2
375.4
683.7
1274.5
814.2644.2 857.4
1389.3
1106950.1
1249.6130
104114
81 88 87
156133
84
137
113
69 62
Diagram no. 11 Issues of securities
Volume of issuance, mil. lei Number of issuance, units
The volume of issues registered at the foundation of joint stock companies is estimated at 0,12 million MDL. (Diagram No.12).
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
50
100
150
200
250
300
350
400
0
5
10
15
20
25
30
35
65.499.3
9.8 17.80.70000000000000
1
209.4
18.926.2
5.626.2
356.2
0.4 0.1
28
32 28
1614
19
26
17
7
17 17
7
2
Diagram no. 12 Fondation issues
Volume of issuance, mil. lei Number of issues, units
The list of joint stock companies that in 2014 registered foundation issues is presented in Annex No.9.
Additional issues of securities represent efficient tools in the process of attracting long-term investment in the real sector of the economy, necessary for joint stock companies to carry out investment programs. During 2014, additional issues of securities were made by closed issues, preference being granted to issues of ordinary shares.
58
The volume of additional issues made by joint stock companies during 2014 amounted to 1249,5 million MDL, registering an increase by 299,8 million MDL as compared to the previous year (Diagram No.13).
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
0
20
40
60
80
100
120
140
401.0225.5
1636.5
357.7
683.0
1065.1
795.3618.0
851.8
1363.1
749.8
949.7
1249.5102
7286
6574 68
130
116
77
120
96
62 60
Diagram no.13 Additional issues
Volume of issuance, mil. lei Number of issues, units
During 2014, highest additional issues of shares was registered by: ME „MOLDCELL” JSC – 393,6 million MDL, CB „EXIMBANK-Gruppo Veneto Banca” JSC – 250 million MDL, JSC „CENTRALA ELECTRICA CU TERMOFICARE Nr.2” – 159,3 million MDL, JSC “BANCA COMERCIALA ROMANA CHISINAU” – 100,6 million MDL, JSC „ELEVATOR KELLEY GRAINS” – 64,6 million MDL, which represent 77,5 percent of the total additional issues. The list of joint stock companies which registered additional issues in 2014 is presented in Annex No.10.
During 2014, in the SSR there were registered amendments on the issues of securities previously placed by 25 joint stock companies as a result of changes in the statutory capital and / or restructuring of securities issue companies. Also, in the SSR there were made records on securities radiation issued by 41 companies (Table No.27).
Table nr. 27. Number of records on securities radiation from SSRIndicators 2008 2009 2010 2011 2012 2013 2014
Number of records on removal from SSR and securities radiation previously issued by joint stock companies as a result of reorganization by conversion to LLC
12 20 5 10 1 1 25
Number of records on removal from SSR and securities radiation previously issued by joint stock companies as a result of their liquidation
32 30 33 26 25 16 13
Number of records on removal from SSR for other reasons
5 12 2 0 1 20 3
The list of joint stock companies that have registered changes in the SSR is presented in Annex No.11.
59
1.2. Secondary Market of Securities
The main indicator proving the secondary securities market development is the volume of transactions recorded. In the period January – December 2014, the secondary market 4412 transactions were conducted in total amount of 1307.8 mil. lei, registering an increase by 403.8 mil.lei or 23.6% compared to 2013, due to higher volumes of transactions on the stock and over-the-countermarkets (Diagram 14).
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0
200.0400.0600.0800.0
1000.01200.01400.01600.01800.02000.02200.0
0
50000
100000
150000
200000
250000
300000
558.6
1135.7
1863.0
2193.5
621.9 559.1
1940.0
1251.5
1711.6
1307.8
31801 24287
168807
232028219837
5683 5313 4398 3744 4412
Diagram no. 14. Total volume and number of transaction
Volumul tranzacțiilor (mil.lei) Numărul tranzacțiilor (unități)
Analizing the secondary market segments in 2014, it is attested a prevalence of OTC market according to the number of transactions, being doubled as compared to the stock exchange transactions and a non-significant prevalence in terms of volume of transactions.
Stock MarketAs of 31.12.2014, on MSE were registered 958 joint stock companies, of
which 9 were included in the listing (stock exchange rate) and 949 in the non-listing.
60
According to stock market indicators for the last 3 years there is an uneven trend in the volume and number of transactions.
On the stock market in 2014, there were registered 1471 transactions in total volume of 708.6 million MDL, which represents more with 213 transactions in 2013, but with 113.4 million MDL less than transaction volume in 2013. Compared with 2012 the number of transactions registered a decrease with 406 transactions, but an increase of volume by 85.3 million MDL (Diagram no. 15). Total number of securities traded through MSE in 2014 amounted to 44.9 million units, registering an increase of 18.5 million units compared to 2013 and by 24.6 million units compared to 2012. The dynamics of stock market indicators for the period 2012-2014 are presented in Table no.28.
Table nr.28. The dynamics of stock market indicatorsIndicator 2012 2013 2014
Volume of transactions, million MDL 623,3 822,0 708,6Number of transactions, units 1877 1258 1471Number of issuers whose securities were traded, units 206 158 166Number of securities traded, million units 20,2 26,4 44,9
The volume of transactions carried out during 2014 was divided similar to the results recorded during 2013, transactions made in the main area being leader in the structure of exchange transactions. The share of direct area transactions is 27.4 percent and the share of transactions made in the main area is 72.6 percent (Diagram no. 16).
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2012 2013 20140
200
400
600
800
1000
1200
1400
1600
1800
2000 1877
1258
1471
623.3
822.0708.6
Diagram no. 15. Stock market evolution in the period 2012-2014
The volume of sale-purchase transactions conducted in the main area of the MSE is 514.1 million MDL as a result of 1075 recorded transactions. The volume of these transactions in 2014 represent 72.6 percent of the total exchange transactions volume, registering a decrease of 198.8 million MDL compared to the previous year. It is worth mentioning that the largest volume of transactions recorded in the main area returns to shares issued by BC ,,Victoriabank" S.A.
Dominant position in the structure of direct transactions is occupied by transactions made as a result of auctions organized by public authorities. Thus, in 2014 there were 14 transactions amounted 56.3 million MDL or 29 percent total direct transactions volume and 7.95 percent of total stock transactions (Diagram no.17).
A second position by volume goes to the transactions performed within outcry auctions with single-batches, being recorded 329 transactions with securities issued by 79 issuers in the amount of 85.9 million MDL or 44.2 percent of total direct transactions and 12.1 percent of total stock transactions.
The third place is recorded by transactions under the terms of the public offerings on the secondary market, the value of which amounted to 1.6 million MDL or 0.8 percent of total direct transactions and 0.2 percent of total stock transactions.
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72,6%
27,4%
Diagrama nr. 16. Share of stock exchange transactions by areas, %
transactions in the main area (514,1 mil. lei) transactions in the direct transactions area (194,5 mil. lei)
Outcry auctions with single –
batches, 12,1%
Auctions organized by public au-thorities, 15%
Transactions under the conditions of public offers on the secondary mar-
ket, 0,2%
Sale - purchase, 72,6%
Other tipes, 0,1 %
Diagram no.17 Share of stock exchange transactions by tipe, 2014
Other types of stock exchange transactions (sale - purchase special conditions and execution of decisions of the court) during 2014 recorded insignificant volumes.
The structure of stock exchange transactions is shown in Table no.29.
Tabelul nr. 29. The structure of stock exchange transactions
Type of transactions
Total volume of transactions, million MDL
2014 to 2013,
million MDL
Share in the total volume of transactions, %
2013 2014 2013 2014Transactions conducted in the main area of the MSE 709,9 514,1 -195,8 86,36 72,6Auctions organized by public authorities 56,3 106,3 50 6,84 15,0Outcry auctions with single – batches 36,9 85,9 49 4,49 12,1Transactions under the conditions of public offers on the secondary market 19,0 1,6 -17,4 2,31 0,2Sale - purchase (direct negotiations) 0,0 0,6 0,6 0,00 0,1Execution of decisions of the court 0,0 0,1 0,1 0,00 0,0TOTAL 822,00 708,6 100,00 100,00
Although the volume of sale - purchase transactions made in the main area of MSE represents the largest share of total transactions volume recorded in 2014, it decreased compared with 2013 by 195.8 million MDL. Transactions volume as a result of the auctions organized by the public authorities recorded a significant increase over 2014, by 50 million MDL and amounted 106.3 million MDL. At the same time, an increase by 49 million MDL compared to the previous year registered the volume of transactions recorded as a result of outcry auctions with single - batches.
Transactions made under the conditions of public offering on the secondary market in 2014 decreased by 17.4 million MDL compared with 2013 results.
The stock price index of NCFM in early 2014 was 434.18 points and 434.35 points to end. During 2014, the stock price index has recorded two changes in its value, details in Diagram no.18.
The first change of the index was registered at the end of the period 03.02.2014 - 07.02.2014, this being 432.92 points, details in Diagram no.19. Reduction of the index with 1.26 points or 0.29 percent to end the mentioned
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03/01/1
4
18/01/1
4
31/01/1
4
14/02/1
4
28/02/1
4
14/03/1
4
28/03/1
4
11/04/1
4
25/04/1
4
08/05/1
4
23/05/1
4
06/06/1
4
20/06/1
4
04/07/1
4
18/07/1
4
01/08/1
4
15/08/1
4
29/08/1
4
12/09/1
4
26/09/1
4
10/10/1
4
24/10/1
4
07/11/1
4
21/11/1
4
05/12/1
4
20/12/1
4
31/12/1
4432
432.5
433
433.5
434
434.5
43
4.1
84
34
.18
43
4.1
84
34
.18
43
4.1
8
43
2.9
19
99
99
99
99
94
32
.91
99
99
99
99
99
43
2.9
19
99
99
99
99
94
32
.91
99
99
99
99
99
43
2.9
19
99
99
99
99
94
32
.91
99
99
99
99
99
43
2.9
19
99
99
99
99
94
32
.91
99
99
99
99
99
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
43
4.3
54
34
.35
Diagram no.18. The development of stock price index of NCFM in the period 03.01.2014 - 31.12.2014
Period
Ind
ex
Va
lue, p
oin
ts
period was due to transactions with securities issued by "Aschim" JSC recorded at the price of 29.00 MDL per share. Compared to the same period of 2013 the index increased by 44.34 points or 11.41 percent.
In early April 2014, the index recorded its second change, increasing by 1.43 points, or 0.33 percent, details in Diagram no.20. The increase of the index value at the end of the period 31.03.2014 – 04.04.2014 was due to transaction registered with the securities issued by "Produse Cerealiere" JSC recorded at the price of 0.49 MDL per share in the negotiation of 0.18 percent of
the total number of ordinary shares issued.
Also, in the main area of MSE during 2014 have been traded securities issued by "Magistrala" JSC, ,,Banca de Economii" JSC, ,,Macon" JSC, ,,Pielart" JSC, ,,JLC" JSC and ,,Floare Carpet" JSC. The prices recorded in respective transactions did not affect neither positive nor negative on the index value.
The "Free Float" coefficientThe coefficient "free float" calculated for issuers included in the listing of
the MSE indicates the percentage share of free circulation securities, which can be traded, depending on their supply and demand (Appendix no. 13). Like last year, the coefficient "free float" in the course of the year 2014 has varied between 3.17
64
24/01/14 31/01/14 07/02/14 14/02/14432.2432.4432.6432.8
433433.2433.4433.6433.8
434434.2434.4
434.
18
434.
18
432.
9199
9999
9999
432.
9199
9999
9999
Diagram no. 19. Evolution of stock price index of NCFM in the period 24.01.2014 - 14.02.2014
Period
21/03/14 28/03/14 04/04/14 11/04/14432
432.5
433
433.5
434
434.5
43
2.9
19
99
99
99
99
9
43
2.9
19
99
99
99
99
9
43
4.3
5
43
4.3
5
Diagram no. 20. Evolution of stock price index of NCFM in the period 21.03.2014 - 11.04.2014
Period
% and 100 %. Composition issuers included in the listing of MSE in the course of the year 2014 has remained unchanged.
Where:”CFF” – "free float” coefficient;”AGIB” – "MOLDOVA-AGROINDBANK" JSC;”BECM” -"BANCA DE ECONOMII" JSC;”MD14” – ordinary shares”MD24” – preference shares;”BSOC” - "BANCA SOCIALĂ" JSC;”MBIS” - "MOBIASBANCA - Groupe Societe Generale" JSC;”MICB” -"MOLDINDCONBANK" JSC;”VEST”- "EFES VITANTA MOLDOVA BREWERY" JSC;”RATE” -"SUPRATEN" JSC;”UNIB” –"UNIBANK" JSC;”FLAU” -"FLOAREA-SOARELUI" JSC;”IPTE” - "IPTEH" JSC;”VCTB” – "VICTORIABANK" JSC.
The highest ,,free float" coefficient returned to the shares issued by two commercial banks, namely "Banca Socială" JSC and ”Unibank" JSC, which constitutes 100% each. Follow shares issued of "Moldova - Agroindbank" JSC (93.81%), shares of "Moldindconbank" JSC (90.48%) and preference shares issued of ,,Banca de Economii" JSC (87.61%), details in Diagram no. 21 The ,,free float” coefficient for the rest of issuers that are part of the MSE listing ranked below 33 percent of the total number of issued shares. The lowest coefficient returned to the shares issued by ,,Efes Brewery Vitanta Moldova" JSC (3.17%).
According to data included in the Diagram no.21, during 2014 the ,,free float” coefficient for 7 (seven) included in MSE listing issuers remained unchanged, while for 2 (two) issuers has decreased compared to 2013. The biggest
65
MD1
4
MD2
4
MD1
4
MD2
4 AGIB
BECM BSOC
MBIS
MICB
VEST
RATE
BARS
DACH
FLAU IPTE VCTB
UNIB
0.0020.0040.0060.0080.00
100.00
Diagrama nr.21 .Dynamics of ,,free float” coefficient
the
perc
enta
ge
reduction of ,,free float” coefficient registered shares issued by ,,Victoriabank" JSC from 61.99 percent before to 23.79 percent. The shares issued by ,,Moldindconbank " JSC recorded reduction of the coefficient level with 9.05 percent, constituting at the end 2014 level of 90.48 percent.
In practice, the increase of the “free float” coefficient occurs because of the placement of shares on the primary market, while its decrease happens alongside with the consolidation of the share package.
The OTC marketIn 2014 on the OTC segment were traded 25,2 million shares in the amount
of 599,2 million MDL through 2941 transactions.
Diagram no. 22. Evolution of OTC transactions
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
0
50000
100000
150000
200000
250000
529.8
342.3
792.7629.6
1196.7
480.7
291.3
1698
628.2
889.6
599.15
23848 19871 22442
166140
228790
218267
3082 3267 2521 2846 2941
Volumul tranzacţiilor extrabursiere, mil. leiNumărul tranzacţiilor extrabursiere, unităţi
The total volume of transactions of OTC segment in 2014 decreased compared to 2012-2013 with 29.0 million MDL, respectively 290,4 million MDL.
Reducing the total volume of transactions in 2014 compared to 2012-2013 is about 1,1 times, respectively, by 1,5 times (Diagram no.22).
Table no.30. Type of OTC transactionsType of transactions Total volume of
transactions, mil. MDL2014
compared Share in the total
volume of
66
to 2013, mil. MDL
transactions, percent2012 2013 2014 2012 2013 2014
Sale-purchase 33,6 50,9 141,8 90,9 5,3 5,7 23,7Transactions carried out based on court decision 83,4 18,3 4,7 -13,6 13,3 2,1 0,8
Sale-purchase transactions with the participation of the Agency of Public Property
32,4 2,7 11,8 9,1 5,2 0,3 1,9
Deposition of securities as contribution to the share capital 221,6 598,8 68,7 -530,1 35,3 67,3 11,5
Inheritance 6,1 9,3 8,9 -0,4 1,0 1,0 1,4Donations 38,0 68,9 53,1 -15,8 6,0 7,8 8,9The succession of the securities in the dissolution or reorganization the shareholder legal entity
119,3 55,3 46,6 -8,7 19,0 6,2 7,8
Other transactions 93,8 85,4 263,6 178,2 14,9 9,6 44,0TOTAL 628,2 889,6 599,2 -290,4 100 100 100
As shown in Table no. 1 volume of sale-purchase transactions for 2014 compared to 2012-2013 is constantly rising, constituting 23,7 percent of the volume of OTC transactions recorded in 2014 with a total value of 141,8 million MDL, which compared to 2012 increased by 108,2 million MDL, and compared to 2013 with 90,9 million MDL.
When setting up the OTC transaction volume recorded in 2014 contributed depositions of securities as contribution to the share capital of companies in the amount of 68,7 million MDL, or 11,5 percent, which decreased by 152,9 million MDL compared to 2012 and 530,1 million MDL compared to 2013 (Diagram nr.
23). A substantial share of transactions worth 53,1 million MDL, or 8,9 percent
are donations, which increased by 15,1 million MDL compared to 2012 and decreased by 15,8 million MDL compared to 2013.
Based on the results of 2014 the volume of transactions based on court decision compared to previous years is steadily decreasing, constituting 4,7 million MDL or 0,8 percent, which decreased by 78 compared to 2012-2013, 7 million MDL, respectively 13,6 million MDL.
Reducing the volume of transactions recorded in 2014 compared to previous years due to the investment climate destabilization, and following causes:
- Reducing the volume of transactions with shares of commercial banks that are due to amendments made to art. 3 and art. 15 of the Financial Institutions Act No. 550-XIII of 21.07.1995 (in force since 08.15.2014), which was reduced threshold for requesting prior permission of the National Bank of Moldova from 5 percent to 1 percent of the share capital of a bank and its banned commercial banks deposit the securities of the company capital of a company. It is worth mentioning that in 2013 the company capital transactions with commercial banks shares
67
23.71.58.90.811.5
2.0
7.8
44.0
Diagram no. 23 Structure of OTC transactions, 2014
Tranzacţii de vînzare-cumpărare (141,8 mil. lei)Moşteniri (8,9 mil. lei)Donaţii (53,1 mil. lei)Tranzacţii realizate în baza hotărîrii judecătoreşti (4,7 mil. lei)Depuneri de valori mobiliare ca aport la capitalul social (68,7 mil. lei)Tranzacţii de vînzare-cumpărare cu participarea APP (11,8 mil. lei)Succesiunea valorilor mobiliare (46,6 mil. lei)Alte tranzacţii (263,6 mil. lei)
formed about 94% of the total contributions to the share capital registered, while in 2014 only 6,6%.
- Prohibit modifications to art. 572 (3) and 665 (1) of the Civil Code of the Republic of Moldova (in force since 05.04.2013), the direct transmission of the court decision of securities as payment of any debts in order to discourage non-transparent transactions.
- Highly concentrated packages of shares in joint stock companies, which involves a small percentage of shares in free circulation.
1.3. Paricipation of foreign investors in transactions on securities market
Foreign investments on the primary securities marketThe total volume of foreign investments attracted through primary securities
market during 2014 was 843,2 million MDL, registering an increase of 353,6 million MDL or by 72,2 percent from the previous year indicator. The volume of foreign investments were attracted through additional issues. The list of joint stock companies which have registered securities issues with the attraction of foreign investments is presented in Annex No.14. Compared to 2013, when a special interest for investing in securities on the primary market expressed investors from the Italy, Cyprus, Great Britain and Germany, in 2014 the most significant participation of foreign investors through the issuance of securities are investors from the Netherlands, Italy, Romania, Austria and Iraq (Diagram No.24 and Diagram No.25).
46.2%
29.6%
12.9%
3.8%
3.6% 3.9%
Diagram no. 25 Structure of investment attracted by origin of foreign investors, 2014
Netherlands (389,7 mil. lei) Italy (250,0 mil. lei) Romania (108,5 mil. lei) Austria (32,4 mil. lei)
Iraq (30,0 mil. lei) Other (32,6 mil. lei)
74.6%
10.2%
8.1%5.1%
1.0%0.9% 0.1%
Diagram no. 24 Structure of investment attracted by origin of foreign investors, 2013
Italy (365,0 mil. lei) Cyprus (49,9 mil. lei) Great Britain (39,5 mil. lei) Germany (25,1 mil. lei)
Russian Federation (4,7 mil. lei) Romania (4,6 mil. Lei) Other (0,8 mil. lei)
Foreign investment on the secondary market of securities In 2014 the volume of transactions registered on the secondary securities
market involving non-resident individuals and legal entities was 1013.6 million MDL, 194 transactions were recorded in total. (Table no. 31).
68
Table no. 31 Structure of securities transactions carried out by foreign investorson the securities secondary market
Transaction type
2012 2013
No.
tran
sact
ions
, un
itsA
mou
nt o
f tr
ansa
ctio
ns,
mill
ion
MD
L
Shar
e (b
ased
on
amou
nt),
per
cent
No.
Tra
nsac
tions
, un
itsA
mou
nt o
f tr
ansa
ctio
ns,
mill
ion
MD
L
Shar
e (b
ased
on
amou
nt),
per
cent
No.
Tra
nsac
tions
, un
itsA
mou
nt o
f tr
ansa
ctio
ns,
mill
ion
MD
L
Shar
e (b
ased
on
amou
nt),
per
cent
Purchase 84 202.6 19.1 159 481.5 24.8 65 598.44
59.04
Sale 73 513.5 48.3 82 514.2 26.5 87 339.56
33.51
Inheritance and donations 28 92.8 8.7 28 111.5 5.7 32 31.56 3.11Company capital 12 204.1 19.2 102 834.0 43.0 10 44.03 4.34Execution of court decisions 10 49.1 4.6 0 0 0 0 0 0Other 0 0 0.0 0 0 0 0 0 0
TOTAL 207 1062.1 100 371 1941.2 100 1941013.5
9 100
According to the table, the dominant position in the structure of transactions involving non-residents is taken by purchase transactions, amounted of 598.44 million MDL, which represents 59.04 percent of the total volume of transactions involving non-resident, followed by: sale transactions amounted to 339.56 million MDL or 33.51 percent, the company capital amounted to 44.03 million MDL or4.34 percent and transactions of donations and inheritance amounted of 31.56 million MDL or 3.11 percent.
Evolution transactions carried out by non-residents in 2014, attests the considerable reduction in volumes recorded in the years 2011-2013.
Thus, the volume of purchase transactions has increased by 116.94 million MDL towards 2013, and with 395.85 million MDL towards 2012, but the volume of sale transaction has decrease by 174.64 million MDL towards 2013 and with 173.94 million MDL towards 2012 (Diagram no. 26 ).
2011 2012 2013 20140
100
200
300
400
500
600
700
108.7
202.6
481.5
598.44
133.8
513.5 514.2
339.56
Diagram no.26. Evolution of purchase and sale transactions by non-residents
Tranzacţii de cumpărare. mil. lei Tranzacţii de vînzare, mil. lei
69
Highest share of purchase transactions stands by the investors from Cyprus, Russian Federation, Estonia, Switzerland, UK, England and Wales, Germany and Irac, and the transaction of sale got a crack to investors from UK, Russian Federation, Estonia, Cyprus, Bulgaria, Germany, England and Wales. (Annex no. 15 ).
In 2014, as in 2013 the most attractive sector for foreign investors was the banking and insurance sector where were registered 63 transactions in a volume of 918.01 million MDL or 90.57 percent of the total volume of transactions involving foreign investors, including the securities of commercial banks were made 53 transactions in the amount of 858.88 million MDL, and those issued by insurance companies were made 10 transactions in the amount of 59.13 million MDL.
1.4. Financial results of joint stock companies activityFollowing the monitoring of information disclosure by joint stock companies
(issuers) corresponding to one of the criteria of art.2 para.2 of the Law On joint stock companies, 560 joint stock companies have been required to disclose information about their securities and about their economic and financial activity for 2013, 496 joint stock companies submitted their annual report for 2013 to NCFM, which constitutes 88,57 percent of the total number of issuers that, had to submit their annual financial report (Annex No.16).
The dynamics of the number of companies that submitted annual financial reports to the NCFM is presented in Diagram No. 27.
2011 2012 20130
300
600
900
650601 560560 528 496
Diagram no. 27 Dynamic presentation of annual report of joimt stock companies on securities submission
Joint stock companies re-quired to submit annual reports, mil. lei
Joint stock copmanies which submitted annual reports, mil. lei
According to annual reports for 2013, 89 joint stock companies or 17,94 percent registered the amount of equity capital lower than the amount of statutory capital and 13 joint stock companies or 2,62 percent ended the reporting year with a negative amount of equity (Diagram No.28).
70
2011 2012 2013 9 8 13 111 97 89
11197
89
9
813
Diagrama nr. 28 Dynamic of the number of joint stock companies with net assets unforable
A.N. NegativeA.N.<CS
Years
Nu
mb
er o
f jo
int
sto
ck c
om
pa
nie
s
In 2013, 280 joint stock companies or 56,45 percent of the total number of companies which submitted annual reports to the NCFM registered net profit worth 2,21 billion MDL (Diagram No.29).
43.55%
56.45%
Diagram no. 29 Joint stock companies according the financial results for 2013
Joint stock companies that have announced losses (216)
Joint stock companies that have announced profit (280)
13,31%
86,69%
Diagram no.30 Joint stock companies according the dividends announcedin 2013
Joint stock companies which announced dividents (66)
Joint stock companies which not announced dividents (430)
The dividend policy promoted by the issuer becomes one of the decisive factors which, directly, influences the market course of its shares. In 2013, 66 issuers or 13,31 percent of the total number of issuers that reported to the NCFM announced dividends in total amount of 492,12 million MDL. (Diagram No. 30).
1.5. Activity of professional participants on the securities market
Moldova Stock Exchange Moldova Stock Exchange (MSE) has been operating in accordance with the
license held and MSE Rules approved by the National Commission of Financial Market Decision no. 62/14 of 26.12.2008.
Thus, during 2014, MSE conducted only stock exchange activity on the securities market as its main activity. Related activities under the license held during 2014, MSE, did not conduct.
71
The number of MSE accredited members remained unchanged compared to 2013 with 22 members. As members of the MSE activated 11 banking brokers/dealers and 11 non banking brokers/dealers.
The size of the MSE equity at the end of 2014 was 5.70 million MDL compared to the requirement of 1 million MDL set by the law. Compared to the same period of 2013 the MSE equity increased by 0.83 million MDL or 17.04 percent.
The mandatory requirement of the guarantee fund of 30 percent of a minimum equity was complied with and amounted to 300 thousand MDL, placed in banking deposits.
The results of the economical and financial activity of MSE for 2014 are presented in Annex No.17.
The MSE total revenues from services provided during 2014 amounted to 3018.2 thousand MDL, in comparison to 2013 recorded a decrease with 302.3 thousand MDL.
Similar to the total revenues, total expenses recorded in 2014 decreased compared to the previous year, representing 2193.5 thousand MDL. Thus, the size of total expenses being lower than total revenue size, MSE recorded profit worth 824.7 thousand MDL (Diagram No.31).
2010 2011 2012 2013 20140
500
1000
1500
2000
2500
3000
3500
1518.71200.1
2519.2
3320.53018.22638.9
1715.91841.1
2256.8 2193.5
Diagram No. 31 Evolution of MSE income and expences, 2010 - 2014
Income, thousand MDL Expences, thousand MDL
National Securities Depository of Moldova The National Securities Depository of Moldova (NSD) has been operating
under license and the Rules of NSD, approved by the National Commission of Financial Market Decision nr.11/10 19.03.2010.
According to the license held for central securities depository, NSD has the right to provide depository activities, clearing and settlement. Registry keeping and consulting activities by NSD in 2014 were not provided.
72
Size of NSD equity at the end of 2014 amounted 844.2 thousand MDL, being registered a decrease compared to 2013 with 86.9 thousand MDL or 9.33 percent.
According to results of financial and economic activity for 2014 compared with the previous year, total revenues decreased by 76.2 thousand MDL and accounted 786.7 thousand MDL.
Increasing the size of total expenditures while reducing the size of total revenues was conditioned registration by NSD losses in the amount of 86.9 thousand MDL. (Diagram no.32).
Results of the financial and economic activity recorded by NSD during 2014 are presented in Annex No.18.
Brokerage and Dealer Companies At the end of the year 2014, on the securities markets, benefited from the
right to conduct professional activity in conformity with licenses held 22 brokerage/dealer companies (including 11 commercial banks), 6 of them having brokerage as the main activity, and 16 companies performing dealer activity as their main activity.
The total value of the equity capital of the non-banking brokerage/ dealer companies equals 37.96 million MDL, registering an increase of 1.56 million MDL as compared to 2013, being observed the requirement on minimum equity capital set by the law in force.
In the structure of the equity capital the share capital is included – 6.25 million MDL (16.46 percent), retained earnings – 22.9 million MDL (60.33 percent), secondary capital – 2.12 million MDL (5.58 percent), reserves – 6.18 million MDL (16.28 percent) and additional capital amounting to 0,51 million MDL (1.34 percent) (Diagram No. 33). The highest share in structure of equity capital stands by retained earnings – 60.33 percent.
73
2010 2011 2012 2013 20140.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
449.9
633.9
876.2 862.9786.7725.9
591.2
767.9 790.6873.7Diagram No.32. Evolution of NSD income and expences, 2010 - 2014
Income, thousand MDL Expences, thousand MDL
16,46%
60,33%
5,58%
16,28% 1,34%
Diagram No. 33 Structure of equity capital of non-banking broker/dealer companies at the
end of 2014
share capitalretained earningssecondary capitalreservesaditional capital
The total amount of the guarantee fund is 2,66 million MDL. Therewith, all non-banking brokerage/dealer companies have complied with the requirements to the amount of the guarantee fund, which constitutes 0.12 million MDL for professional participants conducting brokerage activity as main activity and 0.24 million MDL for professional participants conducting dealer activity. The guarantee fund is formed by 10 companies of funds placed in bank deposits and one company of State securities.
The total income from operating activity is 4.03 million MDL, including income from provided services – 3.6 million MDL or 89.33 percent, and other operating income – 0.43 million MDL or 10.64 percent. Compared with the results obtained in 2013, the total income decreased by 0.77 million MDL or 16.04 percent.
The total expenditure from operating activity is 5.22 million MDL, including general and administrative expenses – 3.56 million MDL. Compared with the results obtained in 2013, the total expenditure incurred by the non-banking brokerage/dealer companies increased with 0.03 million MDL or 0.58 percent.
Thus, since in 2014 the rate of increase of the expenditure has gone far beyond the growth rate of revenue, in the result of operational activity the brokerage/dealer companies have recorded losses in the amount of 1.18 million MDL.
The situation of economic and financial activity results has been rectified thanks to obtain considerable income from investment activities in the amount of 3.08 million MDL, this has generated a profit in the amount of 2.2 million MDL, registering a decrease by about 32.93 percent as compared to 2013.
The net earning after tax, obtained by the brokerage/dealer companies, is 2.02. million MDL, registering a decrease by about 32.2 percent as compared with results recorded at the end of year 2013.
The economic and financial activity results of the non-banking brokerage/dealer companies for 2014 are presented in Annex No. 19.
In 2014, 263010 transactions were performed through non-banking brokerage/dealer companies, or with 594 transactions more than in 2013.
74
The total value of transactions conducted through non-banking brokerage/dealer companies in 2014 is 858.76 million MDL (Annex No. 20), decreasing by 51.94 million MDL compared to 2013. By 2 companies have not been carried out transactions
The share of transactions carried out through non-banking brokerage/dealer companies is 60.6% compared to the 55.39 percent in year 2013 of the total value of securities traded on the stock market.
The transaction structure includes: 1855 sale-purchase transactions carried out on the Interactive market of the MSE, in the amount of 579.67 million MDL (67.5 percent), 649 unique-package transactions, in the amount of 66.57 million MDL (7.75 percent), 92 transactions carried out within public offers of securities on the secondary market, in the amount of 3.16 million MDL (0.37 percent), 22 transactions with public property securities, in the amount of 208.19 million MDL (24.24 percent), and 12 sale-purchase direct negotiation , in the amount of 1.17 million MDL (0.14 percent) (Diagram No. 34).
67.5% 7,75%
0,37%
24,24%
0,14%
Diagram No.34 Structure of tranzactions performed by non - banking brokers/dealers
vînzare-cumpărare pachet unic oferta publică licitaţii cu valori mobiliare proprietate publică
vînzare-cumpărare negociere directă
_______________________________________________0 The number and volume of transactions include separately buyer and seller transactions
In 2014 through commercial banks as professional participants on the securities market there were carried out 31011 transactions, with 170 transactions less than in the previous year.
The total value of transactions registered in 2014 was 558.25 million MDL, registering a decrease by 175.08 million MDL as compared with results recorded at the end of year 2013(Annex No. 21).
The value of transactions made through commercial banks as dealers was 56.93 million MDL (10.2 percent), the rest being transactions through commercial banks as brokers, in the amount of 501.32 million MDL (89.8 percent).
The structure of transactions includes: 299 sale-purchase transactions, in the amount of 453.71 million MDL (81.27 percent), 6 unique-package transactions, in the amount of 100.21 million MDL (17.95 percent) and 5 transactions with public property securities, in the amount of 4.32 million MDL (0.77 percent) (Diagram No. 35).
75
81,27%
17,95%0,77%
Diagram No.35 Structure of tranzactions performed by banking brokers/dealers
sale-purchase unique-pakage public property
__________________________________________1 The number and volume of transactions include separately buyer and seller transactions
Independent registrarsAt the end of 2014, under licenses granted by NCFM for the right to conduct
professional activity on the securities market, 10 independent registrars provided services of keeping the registry of securities holders and 2 issuers which ensured keeping the registry of securities holders independently.
During the mentioned period, independent registrars provided services of keeping registers for 1954 joint stock companies (Annex No.22 ).
Independent registrar’s equity capital, consisted 10,8 mil. MDL at the end of 2014. All registrars recorded net assets exceeding the amount of share capital.
At the end of the reporting period, the total volume of the registrars guarantee fund consisted 3,5 mil. MDL. All registrars have complied with the requirements related to the size and form of the guarantee fund (210,000 MDL) established under the provisions of article 53 of Law No. 199-XIV of 18.11.1998 “On securities market”.
Due to a reduced operational activity in the reference period, independent registrars have received a total net profit worth 0,4 mil. MDL, or by 66,6 percent less than in the previous year. (Table No. 32). Results of the financial-economic activity of the independent registrars at the end of 2014 are presented in Annex No.23.
Table No. 32 Evolution of main indicators of independent registrars’ activityIndicators 2009 2010 2011 2012 2013 2014
Share capital, mil. MDL 5,5 5,5 6,2 6,2 6,2 6,2Equity, mil. MDL 9,9 10,1 11,5 11,1 10,9 10,8Guarantee fund, mil. MDL 2,5 2,2 2,7 3,3 3,4 3,5Total operational incomes, mil. MDL 5,4 5,1 6,1 5,8 8,1 5,8Total operational expenditures, mil. MDL 4,9 4,6 5,1 5,3 7,1 5,6Net profit, mil. MDL 1,1 0,8 1,32 0,8 1,2 0,4Number of independent registrars acting on 10 10 11 11 11 10
76
securities’ market, units
Investment FundsDuring the reference period, the liquidation procedure continued for 9
investment funds subjected to forced liquidation according to the NCFM decisions and for the other 8 investment funds with a liquidation procedure started on their own initiative in compliance with the decisions of the General Assembly of Shareholders. Moreover, the liquidation procedure of the Investment Fund UNIF “Viitorul Tau” continued because of the two Court’s decision.
Investment funds subjected to forced liquidationDuring 2014, the investment funds “MCI-Fond” JSC, “Zodiac-Invest” JSC,
“Papirus-Invest” JSC and “BSV-Invest” JSC continued the distribution of financial means to the shareholders through the branches and representative offices of the CB “Energbank” JSC.
By the end of 2014, these 9 funds subjected to forced liquidation, accumulated 23.37 million MDL financial funds, of which 22.35 million MDL were previously placed as deposit accounts at the CB “Investprivatbank” JSC. According to the financial and specialized statements, the equity value of these funds as of the end of 2014 was 21.97 million MDL.
The economic and financial situation of the investment funds subjected to forced liquidation is presented in Annex No.24.
Investment funds in process of liquidation out of own initiativeAs of the end of 2014, the investment funds in process of liquidation out of
own initiative accumulated bank account funds worth 201.58 million MDL, of which 162.82 million MDL were previously placed as deposit accounts at the CB “Investprivatbank” JSC. According to the financial and specialized statements, the equity value as of the end of 2014 was 198.75 million MDL.
At the end of 2014, out of 8 investment funds, only 1 fund registered profit worth 2.26 million MDL.
In the reporting period, through the branches and representative offices of the CB “Moldindconbank” JSC, continued the distribution of financial funds, as well as the additional financial funds to the shareholders of the UNIF “Viitorul Tau” JSC.
The economic and financial situation of the investment funds in process of liquidation out of own initiative is represented in Annex No.25.
Trust companiesAs of 31.12.2014, 7 trust companies were registered in the Register of the
professional participants of the non-banking financial market, of which:- 2 trust companies: “Mobiastrast” JSC and “Compania Fiduciară a
Feroviarilor” JSC, continue the liquidation procedure of the professional activity;- 1 trust company: “Colaborare” JSC is subjected to forced liquidation as a
77
professional participant. During the reference period 2 auctions were organized, regarding the sale of the assets managed by “Colaborare” JSC, but due to the lack of participation requests these auctions did not take place.
According to the National Securities Commission decisions No. 30/8 of 25.05.2006 and No. 63/6 of 23.11.2006, the activity of TC „BV Fiduciar Invest” S.A. (former TC“Europa-Trust” JSC) and TC “Econ-Renastere” JSC, was suspended until the recovery of the whole information from the clients registry of the nominal holder, which will be focused on the company’s clients data base recovery.
According to the specialized statements presented by the trust companies “F.O.N.D” JSC, “Europa - Trust” JSC, “Codru” JSC and “Econ – Renaştere” JSC, as of 31.12.2014, these funds provided services to 381.848 fiduciary accounts; and their administered portfolio includes 617 shares in joint stock companies and shares in limited liability companies.
By the end of 2014, the financial investments of trust companies achieved an amount of 131.19 million MDL, of which 125.3710 million MDL (95.6 percent) are clients’ investments and 5.82 million MDL (4.4 percent) are the trust companies’ own investments. For the total amount of financial investments made by trust companies and by their clients, the long-term investments are valued at the end of 2014 at 110.97 million MDL or 84.59 percent, and the short-term investments at only 20.22 million MDL or 15.41 percent. At the same time, the total income earned by companies during the reporting period indicates a share of 57.14 percent obtained by short-term investments, and only 42.26 percent – income generated by long-term investments.
The evolution of the main indicators of the 4 trust companies with a fiduciary management activity is shown in Table No.33.
Table No.33 Evolution of the main indicators of fiduciary management activityNr. Indicators 2011 2012 2013 20141. Share capital, million MDL 2,12 2,12 2,12 2,12
2. Equity, million MDL 3,06 3,31 3,51 3,613. Investment result, million MDL, including: 1,73 2,81 2,30 2,85
Dividends 0,66 1,08 0,69 1,20Interest 1,58 1,79 1,81 1,64Assets trading result -0,51 -0,06 -0,23 -0,0012
4. Net profit (loss), million MDL 0,08 0,26 1,44 1,89
5. Number of fiduciary accounts, units 382132 382017 381948 3818486. Number of portfolio’s companies, units 631 629 622 6177. Financial investments, million MDL 128,7 129,5 130,47 131,198. Number of trust companies, units 4 4 4 4
The table reflects the fact that during 2010-2014, the number of managed fiduciary accounts didn’t decrease significantly, the number of the portfolio of the 10 Reduced by the amount of investments in joint stock companies excluded from State Register of legal persons
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societies (as a result of the shares traded or societies’ liquidation) is constantly decreasing, subsequently the managed investments decreased, and the value of managed investments has a small increase in the last 3 years. At the same time, the net profit registered by the trust companies increased by 1.81 million MDL, compared to 2011, and by 0.45 million MDL relative to the last year.
The return on the financial investments (i.e. the ratio of total investment income to total investments) registered by trust companies’ clients is 1.88 percent, while 8.47 percent is recorded by the trust companies. Thus, a difference is ascertained regarding this indicator to the detriment of the clients, because trust companies investments are placed in income-generating assets (deposits), unlike trust companies’ clients assets which are dependent on the profitability of the stock companies and on the payment of dividends.
The overall value of operational income registered by the trust companies during the year 2014, represented 1.09 million MDL, of which 0.56 million MDL – as a payment for the fiduciary management (according to the established standards, the remuneration of a trust company should not exceed 25 per cent of the earned profit as a result of its asset management activity). Therefore, the amount of remuneration depends directly on the results of the investment management activity performed on the behalf of the company’s clients.
As of 31.12.2014, the overall expenses registered by the trust companies were 1.46 million MDL. The value of expenses were higher than the value of the licensed activity’s income. As a result, the trust companies recorded negative results in terms of their operational activity.
The economic and financial situation of the 4 trust companies is reflected in Annex No.26.
Companies which provide evaluation of securities and of assets relating to them During 2014, 5 companies acted on the securities market of the Republic of
Moldova, providing estimation of their securities and assets: „Bartol-Consulting” JSC, „ICF-Consulting-Service” JSC*, A.R.E. „Estimator-VM” JSC*, „Finactiv-Consulting” JSC* and „Evalestim” JSC, (further – securities valuation companies).
In 2014, according to the reports presented to the NCFM, securities valuation companies have signed 45 contracts, obtaining an income of 734.130 MDL (Annex No.27). As compared to 2013, the securities valuation companies have signed with 10 contracts less, but the income increased with 148.825 MDL as compared to the previous year (+25,42%) (Table No.34).
Table nr. 34. Number of concluded contracts and income generated by valuation companies Indicator 31.12.2013 31.12.2014 2014
relative to 2013, MDL
2014 relative to 2013, %
Number of contracts, units 55 45 -10 -18,18Income earned from securities valuation, million MDL
585 305734 130
148 825 +25,42
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The evolution of revenues and contracts signed by securities valuation companies during the period 2012 - 2014 is shown in Diagram no.3 and Diagram no.37.
"Bartol Consulting" JSC
A.R.E. "Estimator-VM" JSC
"Finactiv-Consulting" JSC
"ICF-Consulting- Service"
JSC ”Evalestim” JSC
050000
100000150000200000250000300000350000400000450000
Diagram no. 36 Evolution of income generated by companies which provide evaluation assets related to them during the period 2012-2014
MDL
"Bartol Consulting" JSC
A.R.E. "Estimator-VM" JSC
"Finactiv-Consulting" JSC
"ICF-Consulting- Service" JSC ”Evalesti
m” JSC
0
5
10
15
20
25
30
35
Diagram no.37 Evolution of contracts signed to provide evaluation of securities during the period of 2012-2014
unit.
________________________________________________________________* Given the fact that the license of A.R.E. „Estimator-VM” JSC* expired on
26.06.2014, license of „Finactiv-Consulting” JSC* expired on 27.07.2014 and license of „ICF-Consulting-Service” JSC*expired on 10.02.2014, the report reflected data for the period in which they have operated in compliance with those licenses.
All 5 companies have complied with the normative requirements for minimum equity capital (200 thousand MDL), and they all have complied with the requirements of the guarantee fund (60 thousand MDL), since they are placed in bank deposits.
Of the 5 companies, have completed reporting period with positive financial results, „Finactiv-Consulting” JSC has recorded financial results negative.
The equity capital of securities valuation companies have decreased by 303 158 MDL in 2014 compared to 2013, which consisted -12,39 percent (Table No.35).
Table no. 35. Evolution of key indices of valuation activity, thousand MDLIndicators 2013 2014 2014
compared to 2013, MDL
2014 compared to 2013,%
Capital 1 327 384 1 327 384 0 0Equity capital 2 446 441 2 143 283 -303 158 -12,39
Revenue from sales 1 130 622 1 050 912 -79 710 -7,05
Cost of sales 175 314 219 633 +44 319 +25,28
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General and administrative expenses
356 708 228 628 -128 080-35,90
Net profit 532 921 557 206 +24 285 +4,55
The increase of the net profit by 24 285 MDL or 4,55 percent in 2014 compared to 2013 was mostly due by lower general and administrative expenses.
Securities valuation companies’ structure, reflected in Table No. 36, shows a decrease in 2014 compared to 2013 of total long-term assets to 164 045 MDL, and also the decreased of total assets represent -156 514 MDL which represents - 5,71 percent (Annex No. 28).
Table nr.36. Securities valuation companies’ structure, million MDLNr.
d/o
Indicators 31.12.2013,
31.12.2014, million
MDL
Deviationabsolute,
MDLrelative,
%
1 Total long-term assets 1 261 208 1 097 163 -164 045 -13,00
2 Total current assets 1 479 230 1 486 761 7 531 + 0,51
3 TOTAL ASSETS 2 740 438 2 583 924 -156 514 -5,71
Professional participants exercising the activity of consulting and investment consulting
During 2014, 11 participants provided professional consulting services and 6 participants investment consulting services professionals. In the course of the year 2014 professionals participants have supplied with 13 investment consulting services less as compared to 2013, the income constituting 501 841 MDL, increased with 81 851,10 MDL (with 19,49 percent) front of the income in the previous year.
The number of provided consulting services was with 23 units more than compared to 2013, but the income decreased as compared to the previous year with 41,47 percent and consisted 395 971,6 MDL ( Annex No. 29).
II.Insurance market development
II.1.Insurance companies activityDuring 2014, 16 companies were licensed to carry out their business, of
which in the category of "general insurance" – 14 insurers, one insurance company has developed composite activity and another one has developed life insurance. The evolution of the insurers’ number is presented in the Diagram No. 38.
81
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
10
20
30
40
50
60
70
80
90
3832 33 33
2824 24
24 18 16 15
32
45
63 66
76 7570
Diagram no. 38. Evolution of the number of lincensed insurance companies and insurance and reinsurance brokers
Numărul societăţilor de asigurare Numărul brokerilor de asigurare/reasigurare
At the end of 2014, 15 insurers have carried out licensed activity.During the year, under the Decision of Court of Appeal of 28.02.2014 on
instituting insolvency proceeding against the insurance company "EUROASIG GROUP" JSC, maintained by the Decision of Civil, commercial and administrative College of the Supreme Court of 30.07.2014, on 08.08.2014 the supervisory authority, has withdrawn the license of the Insurance Company "EUROASIG GROUP"JSC.
Insurance Gross Written PremiumsThe gross written premiums revenues amounted to 1203.6 million MDL, of
which in the category of "general insurance" – 1123.5 mil. MDL, decreasing by 1.9 million MDL compared to the previous year and in "life insurance" – 80.0 mil. MDL, increasing by 6.5 mil. MDL or 8.7 percent compared to the previous year. The total gross written premiums volume amounted to a growth of 0.4 percent. The dynamics of the amount of gross written premiums is presented in the table below:
Table no. 37. Dynamics of gross written premiums’ amount during 2008-2014
YearGross written premiums
(mil MDL)
Nominal increase (decrease) compared to the previous year
(%) (mil.lei)2008 837,2 15,6 1132009 816,5 -2,5 -20,72010 914,7 12,0 98,22011 1006,3 10,0 91,62012 1089,3 8,2 83,02013 1198,9 10,1 109,62014 1203,6 0,4 4,7
The growth of gross written premiums volume was influenced by the increase of number of contracts of health insurance, with validity outside Moldova,
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facultative motor insurance (CASCO) and compulsory Motor Third Party Liability insurance, and due to the development of distribution network of insurers and insurance and/or reinsurance brokers. Thus, during 2014, there were issued 1483279 insurance policies based on contracts concluded with natural and legal persons, increasing by 279632 issued policies compared to the previous year. The biggest share of the total number of policies is held by motor third party liability insurance for which there were issued 833408 policies, while for life insurance there were issued 1423 policies.
The share of the compulsory insurance in the structure of gross written premiums in 2014 amounted to 42.3 percent, increasing by 1.3 percent compared to 2013, respectively that of facultative insurance – 57.7 percent.
According to the insurance object, in the segment of civil liability insurance there were written premiums in the amount of 613.4 million MDL (51.0 percent), followed by property insurance – 419.1 million MDL (34.8 percent), personal insurance – 167.6 million MDL (13.9 percent) and reinsurance premiums – 3.5 million MDL (0.3 percent) (Diagram No. 39).
Diagram no. 39. Structure of gross written premiums for 2013-2014
49.9
36.7
12.2 1.3
2013
Asigurări de răspundere civilă (597,9 mil. lei) Asigurări de bunuri (439,8 mil. lei)Asigurări de persoane (146,4 mil. lei) Prime încasate prin reasigurare (15,2 mil. lei)
51.0
34.8
13.9 0.3
2014
Asigurări de răspundere civilă (613,4 mil. lei) Asigurări de bunuri (419,1 mil. lei)Asigurări de persoane (167,6 mil. lei) Prime încasate prin reasigurare (3,5 mil. lei)
During the reporting period, the amount of gross written premiums for civil liability insurance decreased by 1.1 percentage points compared to the previous year, property insurance showed an decrease of 1.9 percentage points, personal insurance registered a increase of 1.8 percentage points, while the premiums earned from reinsurance decreased by 1.0 percentage points.
Among all non-life insurance classes, the motor insurance held supremacy in the consolidated portfolio of the market – 68.0 percent of the total written premiums from direct insurance amounting to 1120.1 mil. MDL. The facultative insurance CASCO generated 20.6 percent of the total non-life direct insurance or 231.2 mil. MDL, increasing in the nominal value by 16.4 mil. MDL compared with the previous period. External compulsory motor insurance "Green Card" has
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increased by over 7.2 percentage points (up to 263.4 mil. MDL - the equivalent of 23.5 percent of the total non-life direct insurance), while the MTPL insurance - valid only within the Republic of Moldova - increased by 0.9 percentage points and accounted for 241.0 million MDL or 21.5 percent of the total non-life direct insurance.
The other type of auto insurance generated written premiums from direct insurance by 26.4 mil. MDL or 2.4 percentage points of the total.
As in the previous years, the evolution of the insurance market is characterized by a high concentration. Thus, 5 insurance companies have subscribed 827.4 mil. MDL or about 68.7 percent of the total gross premiums. The insurance gross written premiums and the market shares of companies in 2014 are presented in the Annex No. 30.
The analysis of the degree of insurance penetration, expressed as a ratio of gross written premiums to GDP, has registered a level of 1.08 percent, fact which attests the decrease compared to 2013.
The insurance density, which is the ratio between the amount of gross written premiums to the number of inhabitants, has reached the level of 338.3 MDL per capita, more by 1.3 MDL per capita compared to the previous year.
The main factors that have created this situation are: the low income per capita, underestimating the role of insurance, lack of trust in this sector of society, lack of prudential regulation, providing insufficient enforcement. Most insurance companies have insufficient levels of capitalization.
The evolution of the degree of insurance penetration and insurance density is shown in Diagram No.40.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
1.180000000000011.1
1.251.36 1.34 1.36
1.27 1.22 1.24
1.21,08
105.0 114.8155.9
202.4234.5 229.0
256.8282.7
306.0
337.0 338,3
Diagram no. 40. Evolution of the degree of insurance penetration and insurance density in the Republic of Moldova
Gradul de penetrare al asigurărilor în PIB, %Densitatea asigurărilor (lei/locuitor)
%
lei/l
ocui
tor
Compensations and insurance indemnities
84
During the reporting period, insurance companies have paid compensations and insurance indemnities amounting to 513.6 million MDL, recording an insignificant increase of 81.2 million MDL or 18.8 percent compared to the level of the previous year Annex No. 31.
The dynamics of compensations and insurance indemnities paid for non-life and life insurance is presented in the Table No.38:
Table no. 38. Dynamics of compensations and indemnities paid during 2008-2014
YearCompensations and
indemnities paid (mil. MDL)
Nominal increase (decrease) compared to the previous year(percent) (mil. MDL)
2008 273,8 16,4 38,52009 361,2 31,9 87,42010 322,7 -10,7 -38,52011 348,4 8,0 25,72012 430,5 23,6 82,12013 432,4 0,4 1,92014 513,6 18,8 81,2
The total amount of insurance paid claims compared to written premiums in 2014 constituted 42.7 percent, marking an increase by 6.6 percentage points compared to the level registered during the previous year. Within the internal compulsory motor third party liability insurance, insurance paid claims as compared to the gross written premiums amounted 37.8 percent and have decreased compared with 2013 by 2.0 percentage points, and within the external compulsory motor third party liability insurance "Green Card", this ratio registered 28.0 percent, the decrease being 0.9 percentage points.
The cumulative amount of paid insurance claims for the motor insurance (motor third party liability insurance and insurance of road vehicles (CASCO)) amounted to 297.5 million MDL or 58.6 percent of the total compensations paid in non-life direct insurance in value of 508.0 million MDL.
The structure of compensations and insurance indemnities are presented in the Diagram No.41.
Diagram no. 41. The structure of compensations and insurance indemnities paid in the years 2013-2014
2013 201485
32.7%
61.6%
5.3%0.4%
Asigurări de răspundere civilă (167,9 mil. lei)
Asigurări de bunuri (316,4 mil. lei)
Asigurări de persoane (27,4 mil. lei)
Despăgubiri plătite pe riscurile primite în reasigurare (1,9 mil. lei)
Net assets and social capital of insurance companiesAt the end of 2014, the net assets of insurance companies constituted 1130.5
million MDL or by 61.6 mil. MDL (5.8 percent) more than the level recorded at the same date in the previous year Diagram No. 42.
2007 2008 2009 2010 2011 2012 2013 20140
200
400
600
800
1000
1200
1400
364.9
656.4
812.703531000004
1081.7812,7 1241.8
1068.91.130,5
207.7323.1
388.505488 420.1388,5 556.7
469.3 505.5
Diagram no. 42. Net assets and socila capital of insurance companies for 2007-2014
Active nete Capitalul social
mil.
lei
The increase of the net assets is due to the increase of social capital of the insurance companies.
The total value of the social capital registered at the end of 2014 by insurance companies amounted to 505.5 million MDL, increasing by 36.2 million MDL or 7.7 percent compared to the previous year indicator. The annual financial balance sheet of the insurance companies is presented in the Annex No. 32.
Investments in the social capital of domestic insurers made by non-residents at the end of the reference year amounted to 133.8 mil. MDL, and increased by 27.7 mil. MDL compared with 2013 (Table No. 39), as result of the withdrawal of the license of the Insurance Companies „Victoria Asigurari” JSC and „DONARIS-GROUP” JSC by additional issuance of shares.
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36.9%
56.1%
6.7% 0.3%
Asigurări de răspundere civilă (159,5 mil. lei)
Asigurări de bunuri (242,4 mil. lei)
Asigurări de persoane (29,1 mil. lei)
Despăgubiri plătite pe riscurile primite în reasigurare (1,4 mil. lei)
Table no. 39. Evolution of foreign investments’ structure within the social capital of insurance companies, million MDL
Country 2008 2009 2010 2011 2012 2013 20142014
compared to 2013
Share in
2014, %
Austria 22,5 41,7 41,7 41,7 56,8 56,8 92,2 35,4 68,91Cyprus 49,5 48,0 - - - - - - 0,00Switzerland 4,0 - - - - - - - -Russia Federation 2,8 0,4 48,4 48,0 - - - -
Italy 2,4 2,4 2,4 3,7 3,7 - - 0,0 0,00Israel 2,4 2,4 2,4 3,7 3,7 - - 0,0 0,00Liechtenstein 4,5 18,0 18,0 36,6 36,6 14,1 - -14,1 0,00Great Britain 22,5 22,5 22,5 22,9 22,9 22,9 22,9 0,0 17,11Holland 4,8 4,8 4,8 19,7 19,7 12,3 18,7 6,4 13,97Romania 3,6 3,5 0,0 0,02 0,02 0,02 0,02 0,00 0,01Ukraine 0,2 0,3 0,3 - - - - - 0,00TOTAL 119,2 144,0 140,5 176,3 143,4 106,1 133,8 27,7 100,0
During the reported period, the share of the non-residents in the total paid social capital of insurance companies represents 26.5 percent. The list of insurance companies with foreign capital is presented in Annex No. 33.
Insurance reservesAccording to the data registered in the specialized reports filled in by insurers
for 2014, the total amount of insurance reserves consisted of 1143.60 mil. lei, registering an increase of 101.4 mil. lei or 9.7% compared to the indicator of the previous year. The increase is also due to the regulatory changes of the insurance reserves’ formation, such that the insurer reports the gross insurance reserves, and the reinsurer's share in these reserves is shown separately.
2009 2010 2011 2012 2013 20140.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
487.5 515.6
722.7
841.9
1,042.21,143.6
Figure 43. Insurance reserves of insurance companies for 2009-2014
Structure of the total amount of technical reserves constituted by insurance companies includes technical reserves for general insurance in the amount of 759.5 mil.lei (66.4%) and life insurance mathematical reserves amounting to 384.1 mil.lei (33.6). Compared to 2013, the technical reserves created by insurers who carried out general insurance, recorded a decrease by 1.6 milo.lei and the
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mathematical reserves established for life insurance reported an increase of 36.6% (or 103.0 mil. lei).
According to the current regulatory framework regarding the solvency guarantee, insurers are required to cover with admitted assets the insurance reserves and a third of the minimum solvency margin. Thus, assets admitted to represent the Insured (Policyholder) Fund must meet the principles of diversity, reimbursement, profitability and liquidity. Categories of assets admitted to cover the Insured (Policyholder) Fund are shown in Figure 44.
In order to cover the risks assumed by insurance and reinsurance contracts and to ensure permanently solvency and liquidity, the insurance companies must invest with caution in certain categories of assets admitted to represent the insurance reserves and a third of the minimum (required) solvency margin, complying to the dispersion criteria of placements according to the requirements established by the Regulation on solvency margins and liquidity coefficient of insurers (reinsurers) approved by NCFM Decision no.2/1 of 21.01.2011.
32.9%
25.5%5.6%
18.7%
5.6%11.7%
Valori mobiliare (398,4 mil. lei)
Depozite bancare (308,8 mil. lei)
Disponibilităţi în conturi bancare şi în casierie (67,5 mil. lei)
Terenuri şi construcţii (226,9 mil. lei)
Creanţe aferente primelor subscrise (68,4 mil. lei)
Cota reasigurătorului (142,0 mil. lei)
Figure 44. Structure of assets representing reserves and a third of the minimum solvency margin
According to the established requirements, insurers are obliged to place insurance reserves and a third of the minimum (required) solvency margin into securities, bank deposits, available funds in current bank accounts, available funds in cash offices, lands and buildings, receivables related to written premiums.
The structure of assets admitted to represent the technical reserves and a third of the minimum (required) solvency margin of the insurer includes the following assets:
- securities issued by the Government of the Republic of Moldova or by other state authority worth 351.1 mil. lei, representing 29.0% of the total amount admitted in the insurance policyholders’ fund;
- corporate securities traded on the regulated market (stock exchange) of the Republic of Moldova in the amount of 45.4 mil.lei representing 3.7% of the
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total amount admitted in the insurance policyholders’ fund;- corporate securities which are not traded on a regulated market (stock
exchange) of the Republic of Moldova in the amount of 1.9 mil.lei representing 0.2% of the of the total amount admitted in the insurance policyholders’ fund;
- available cash funds in the amount of 10.3 mil. lei, representing 0.8% of the total amount admitted in the insurance policyholders’ fund;
- available funds in current bank accounts in financial institutions licensed by the NBM, including in foreign currency in the amount of 57.3 mil.lei, representing 4.7% of the total amount admitted in the insurance policyholders’ fund;
- deposits and investments in the financial institutions licensed by the NBM amounting to 308.8 mil.lei representing 25.5% of the total amount admitted in the insurance policyholders’ fund;
- separate land or buildings or buildings and land located close enough to each other to be considered as one investment in a real legal interest in a real estate in the amount of 226.9 mil.lei representing 18.7% of the total amount admitted in the insurance policyholders’ fund;
- receivables related to written premiums, provided that they are not older than 60 days amounting to 68.4 mil.lei representing 5.6% of the total amount admitted in the insurance policyholders’ fund;
- reinsurers' share in technical reserves amounting to 142.0 mil.lei representing 11.7 percent of the total amount admitted in the insurance policyholders’ fund.
Placement of assets admitted to represent the insurance reserves and a third of the minimum (required) solvency margin of the insurance companies according to the situation at the end of 2014 are provided in Annex 34.
Evolution of the structure of assets admitted to cover the insurance reserves and a third of the minimum solvency margin during the period 2009-2013 is presented in the table below:
Table 40. Evolution of the structure of assets admitted to represent insurance reserves and minimum solvency margin
Indicators 2010 2011 2012 2013 2014mil. lei
% mil. lei
% mil. lei
% mil. lei
% mil. lei
%
Securities 68,4 13,3 203,2 26 152,9 16,9 284,3 26,1 398,4 32,9Bank deposits 249 48,3 184,8 23,6 317,5 35,2 323,0 29,7 308,8 25,5Available funds in current bank accounts and cash office
49 9,5 74,7 9,5 60,9 6,8 89,3 8,2 67,5 5,6
Lands and buildings 106,9 20,7 160 20,5 185,6 20,6 199,9 18,4 226,9 18,7Receivables from insured’s
36,6 7,1 44,4 5,7 54 6 63,8 5,9 68,4 5,6
Deposits at ceding companies
5,7 1,1 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Reinsurers' share 0 0,0 115,1 14,7 130,4 14,5 127,3 11,7 142,0 11,7
89
Total 515,6 100 782,2 100 901,3 100 1087,6 100 1212,0 100
Subsidized Agriculture InsuranceSubsidized agriculture insurance is carried out in compliance with the
provisions of the Law no.243-XV of 08.07.2004 "On providing subsidized agriculture insurance for production risks in agriculture”, according to which the subsidies for the payment of insurance premiums can receive agricultural producers who registered at the town hall crops as well as animals, poultry, bees families and fish cultivated according to the approved technologies, take measures to prevent disease and pest attacks, and keep evidence of the performed activities, having as main objective to guarantee a stable production in the agricultural sector by ensuring the production risks in agriculture.
Thus, the subsidy is determined on the basis of insurance premiums calculated according to the insurance tariffs of provided in the special conditions of insurance of production risks in agriculture and represents 50 percent of their value for all farmers.
By the Government Decision no.135 of 24.02.2104 "On approval of the distribution of agricultural producers subsidy funds" was accepted the distribution of of agricultural producers subsidy funds in the amount of 500 mil. lei, for a range of support measures, including the stimulation of the insurance of the production risks in agriculture.
The funds provided for this measure are used to subsidize the insurance premiums for agricultural producers, based on the insurance contracts for the production risks in agriculture and on the basis of the List of risks for which insurance is subsidized from the subsidy fund of the agricultural producers for 2014 - insurance premiums in plant growing, horticulture, viticulture and livestock breeding (hail, storms, excessive drought) and the List of crops and species of animals and poultry for which insurance is subsidized from the subsidy fund of the agricultural producers for 2014 - insurance premiums (sugar beet, sunflower, corn, multiannual plants, animals etc.).
In 2014, 7 insurance companies have carried out activities in the subsidized insurance of production risks in agriculture.
According to the data provided by 7 insurance companies accredited to carry out activity in this area, 264 contracts of subsidized insurance of production risks in agriculture were concluded in 2014, with the insured amount of 575.3 mil. lei. The cumulative amount of gross written premiums constituted 58.3 mil.lei, registering a decrease of 38.5 mil.lei compared to the value reported in the previous year (Table 41).
Table 41. Gross written premiums and paid claims for subsidized insurance ofproduction risks in agriculture by insurance objects in the calendar year 2014, mil. lei
Insured objects
Total insurance
Including those paid by Share in total
Insurance paid claims,
Share in total claimsAgricultural State
90
premiums, mil. lei
producer premiums (%)
mil. lei (%)
Harvest 29,1 14,55 14,55 49,9 3,6 53,7Plantations 23,6 11,8 11,8 40,5 2,9 43,3Animals 5,6 2,8 2,8 9,6 0,2 3,0
TOTAL 58,3 29,15 29,15 100,0 6,7 100,0
Subsidies allocated to the payment of insurance premiums accounted for 29.15 mil.lei or by 25.35 mil.lei more than in 2013, registering a decrease of the agricultural producers’ interest for this type of insurance. This considerable decrease was influenced by changing the amount of subsidy of insurance premiums for perennial plantations, sugar beet and vegetables, which until 2014 represented 60%.
At the same time, the potential of agricultural insurance in the Republic of Moldova remains undeveloped, the areas covered by insurance representing only 3.3 percent of the total agricultural land.
Insurance paid claims constituted 6.7 mil. lei and decreased by 4 times compared to the previous year. The evolution of premiums and paid claims are presented in Figure 45.
2009 2010 2011 2012 2013 20140
20
40
60
80
100
120
20.8
39.6 42.3
74.6
91
57
23.6 23.9 23.9
100.2
27.3
5.2
Figure 45. Gross written premiunmd and paid claims for subsidized insurance of production risks in agriculture for 2009-2014, mil.lei
Prime brute subscrise Despăgubiri achitate
The structure of the gross written premiums and paid claims (compensations) for subsidized insurance (of risks for which insurance is subsidized from the subsidy fund for agricultural producers for 2014) by types of risks, presented in Annex 35, reveals the following:
- for the risk of "hail" insurance written premium amounted to 22.9 mil.lei, and paid compensations – 2.2 mil.lei, the compensation rate being 9.6%;
- for the risk of "winter frosts" insurance written premium amounted to 10.1 mil.lei, and paid compensations – 1.8 mil.lei, the compensation rate being 17.8%;
- for the risk of "spring frosts" insurance written premium amounted to 6.8 mil.lei, the compensation paid being equal to zero;
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- for the risk of "excessive drought" insurance written premium amounted to 12.9 mil.lei, and paid compensations – 1.5 mil.lei, the compensation rate being of 11.6%;
- for the risks included in the category "others", insurance written premium amounted to 5.6 mil.lei, and paid compensations – 3.6 mil.lei, the compensation rate being of 34.6%.
With regard to insured agricultural crops, the largest share by volume of premiums paid refers to orchards’ harvest, followed by sunflowers, autumn grain and grapes. The share of paid premiums for crops insurance constitutes 72.0% of the total subsidized insurance premiums in agriculture.
At the same time, the largest amount of compensations for insured crops were paid to orchard owners, followed by vegetables producers and grapes cultivators. The share of compensations for these crops constitutes 88.3% in the total amount of compensations paid for the risks in agriculture (Diagram 46).
Figure 46. Gross written premiums and paid claims for subsidized insurance of production risks in agriculture in 2014, mil. lei
Livada (
road
a)
Floare
a soa
relui
Grîu de
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Legum
e
Orz de
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nă
Porum
b
Plant
aţii d
e viţă
-de-v
ie
Plantaţ
ii pom
icole
Rapiţă
de to
amnă
Sfeclă
de zah
ărSo
ia
Strug
uri
Tutun
Animale
0.02.04.06.08.0
10.012.014.016.018.0
15.6
9.4 9.2
0.6 1.0
3.30.2 0.3
2.50.9 1.7
7.9
0.1
5.6
10 0
10 0 0 0 0 0 0
10
4
Suma totală a primelor de asigurare subscrise, lei Suma totală a despăgubirilor plătite, lei
Reinsurance activityReinsurance as a tool for risks transfer made by an insurance company to a
reinsurance company, leads to the improvement of the financial situation of the transferor by reducing technical risks, diversifies and homogenizes the insurance portfolio and creates additional insurance capacity.
According to the legal norms in force, in the case of performing reinsurance to a non-resident insurer (reinsurer) of the Republic of Moldova, the own retention of the resident insurer (reinsurer) of the Republic of Moldova must be at least 20% of total amount of liabilities, observing that the requirements when the maximum limit of the insurer (reinsurer) liability for an insured or reinsured risk may not exceed 25% of value of the owners’ equity and technical reserves.
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The total amount of reinsurance premiums transferred in reinsurances during 2014 amounted to 235.4 mil. lei, of which – 232.0 mil. lei - general insurance related premiums, and 3.4 mil. lei - life insurance related premiums. The nominal decrease of transferred premiums compared to 2013 amounted to 3.0 mil. Lei and the share of premiums ceded in reinsurance within the total amount of gross written premiums in 2014 was 19.5%. The main indicators of reinsurance activity are presented in Table below:
Table 42 Main indicators of reinsurance activity in 2014, mil. leiIndicators General
InsuranceLife Insurance Total
Gross written premiums 1120,1 80,0 1200,1Premiums ceded in reinsurance 232,0 3,4 235,4Premiums earned for the reinsured risks 3,5 0,0 3,5
During the reporting year, reinsurance cessations for the category of general insurance were reported by 13 insurance companies, cessations for life insurance category were reported by one insurance company.
The structure of premiums ceded in reinsurance at the end of 2014 includes:- the amount of premiums ceded in reinsurance for general insurance is equal to
232.0 mil. lei (20.7%), respectively their own retention level related to domestic insurers is 79.3% (888.1 mil. lei) of the total gross written premiums for general insurance;
- the amount of premiums ceded in reinsurance for life insurance is equal to 3.4 mil. lei (4.2%), respectively its own retention level is 95.8% (76.6 mil. lei).At the national level, 5 insurance companies earned an amount of 3.5 mil. Lei
in reinsurance premiums received from international insurance companies, representing 0.3% of the total gross written premiums on the market. The report on reinsurance operations is presented in Annex 36.
Financial results of insurance companiesAccording to the financial results registered at the end of 2014 by insurance
companies, the net profit (loss) recorded was 3.7 mil. lei.The aggregate value of the profit registered in the reporting period by 10
insurance companies amounted to 73.8 mil. lei, which shows a decrease of 4.8 mil. lei compared to previous year's level.
The financial losses in the amount of 77.5 mil. lei was registered by 6 insurance companies, registering an increase of the value of losses by 41.1 mil. lei compared to previous year's level.
The main indicators of the activity of the insurance companies, as of December 31, 2014 are presented in Annex 37.
II.2. Activity of insurance and/or reinsurance intermediaries
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Under the provisions of the Law no.407-XVI of 21.12.2006, insurance intermediaries are insurance agents, bancassurance agents and insurance and/or reinsurance brokers.
An insurance and/or reinsurance broker has the status of a legal entity registered in the Republic of Moldova, who negotiates the conclusion of insurance (reinsurance) contracts on behalf of its customers, individuals or legal entities, and assists during the duration of contracts or related regularization of claims.
By the end of 2014, 167 insurance agents - legal entities and 1516 insurance agents – individuals performed intermediation activity on the insurance market.
According to the register of insurance and/or reinsurance brokers, as of 01.01.2014, 75 brokers had the license to conduct insurance and/or reinsurance intermediation activity, thus during the year 2014, there were granted licenses for 20 new professional participants, at the same time, during the reference period being withdrawn the licenses of 9 insurance and/or reinsurance brokers. During the reporting year 13 licenses for professional experience expired, 11 new licences have been granted and 3 licenses were considered invalid. By the end of 2014, on the insurance market 70 licensed brokers and 27 bancassurance agents performed insurance and/or reinsurance intermediation activity.
Pursuant to the data from the insurance intermediaries specialized reports, in 2014 the written premiums intermediated by brokers amounted to 340.3 mil. lei or by 19.5 mil.lei more than in 2013, therewith the revenues from the intermediation activity amounted to 103.4 mil. lei, increasing by 3.6 mil. lei compared to the previous period. The share of written premiums intermediated by insurance and/or reinsurance brokers registered an increase of 6.1 p.p. compared to the previous period, and constitutes 28.3% of the total gross premiums written by insurers.
However, according to specialized reports of insurance intermediaries, in 2014 insurance premiums intermediated by bancassurance agents constituted 5.4 mil. Lei, and the share of written premiums intermediated by bancassurance agents on 31.12.2014 amounts to 0.4% of gross premiums written by insurers.
The main indicators of the insurance and/or reinsurance brokers’ activity as of 31.12.2014 are presented in Annex 38.
II.3. The Street Victims Protection Fund and the Compensation Fund
The Street Victims Protection Fund operates in accordance with the Law no. 414-XVI of 22.12.2006 and aims to protect injured persons due to accidents caused by vehicles whose owners have not complied with the requirement of the compulsory motor liability insurance, as well as unidentified vehicles and/or vehicles procured illegally.
During 2014, contributions in the amount of 4816.6 thousand lei were transferred to the Street Victims Protection Fund, or by 126.1 thousand lei more than in 2013. During the reporting period 103 requests for compensations from persons injured in car accidents have been settled in which the author and/or vehicle remained unidentified or the vehicle’s owner failed to conclude the
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compulsory motor liability insurance, being paid damages in the amount of 3024.3 thousand lei, registering a decrease of 1101.7 thousand lei compared to the value registered in the previous year. At the same time, at the end of the reporting period the reserve of reported but not settled claims in the total amount of 2317.9 thousand MDL for 70 claims, which are to be settled was formed.
The National Bureau of Motor Insurers manages and uses the resources of the Compensation Fund in strict conformity with the General Regulation of the Council of Bureaux. At the beginning of the reporting period the available balance of the Compensation Fund was 14107.2 thousand lei, during the year 2014 being transferred cash contributions in the amount of 5183.2 thousand lei, at the same time being made the following payments:
a) 58 repayments to foreign National Bureaus of amounts compensated by them for damages caused by holders of Green Card insurance certificates, in the total amount of 7966.4 thousand lei;
b) 11 cases of repairing the damages caused as result of use false, unauthorized or modified Green Card insurance certificates, in the total amount of 1515.7 thousand lei;
c) 160 cases of paying the amounts due to injured persons in the Republic of Moldova by owners of Green Card insurance certificates issued by foreign insurance companies, in the total amount of 4251.0 thousand lei.
III. Development of the Microfinance Sector
During 2014 the microfinance sector in the Republic of Moldova, represented by savings and credit associations and microfinance organizations, registered a constant increase in terms of its typical activity indicators. During the reference period, 14.9 percent of the economically active population of the Republic of Moldova, became microfinance sector’s loan recipients, a ratio that increased by 4.2 percentage points as compared to 2013 (Table No. 43).
Table No.43 Indicators of microfinance activity in Republic of MoldovaIndicators 2014 2013 2014 as
compared to 2013
Economically active population (persons)11
1235900 1232400 99,7%
Sector SCA MO TOTAL SCA MO TOTAL xLoan recipients (persons) 3652512 94871 131396 4031815 143753 184071 140,1%Penetration rate (percent) 3,0 7,7 10,7 3,3 11,6 14,9 +4,2Return on assets (percent) 4,9 7,9 7,4 4,2 8,4 7,8 +0,4Return on equity (percent) 16,0 19,3 19,0 13,5 23,7 22,5 +3,5
The efficiency of assets and equity investments made by the national microfinance sector’s entities are reflected by a rate of return of about 7.8 percent on assets and, accordingly, 22.5 percent on equity, or, an increase of 0.4 percentage 11 www.statistica.md12 The indicated value represents the average number of loan recipients of savings and credit associations during one
year of activity.95
point, and, accordingly, of 3.5 percentage points as compared to 2013. This increase was conditioned by a 37.5 percent growth of the net profit value during 2014.
Table No.44 Development of microfinance activity, million MDL
Indicator 2013 2014 2014 as compared to
2013 (percent)
SCA MO TOTAL SCA MO TOTAL
Granted loans 331,9 1897,0 2228,9 409,3 2427,5 2836,8 127,3Total assets 403,9 2509,4 2913,3 483,9 3318,9 3802,8 130,5Net profit 19,6 197,2 216,8 20,5 277,6 298,1 137,5
Similar to the previous year, during 2014 the basic national microfinance sector activity indicators registered growth, the loan portfolio increasing with 27.3 percent and the overall value of assets recording a growth of 30.5 percent (Table No. 44).
In 2014, the microfinance entities loan portfolio registered a 2.55 percent share in GDP13, out of which the SCA sector – 0.37 percent and the MO sector – 2.18 percent. This ratio was relatively constant (increasing by 0.32 percentage points as compared to previous year), while the microfinance sector applied efficient and prudent risk-management policies to the lending operations (Diagram No. 47).
III.1. Activity of savings and credit associations
By the end of the reference period, 303 SCA had a license of A and B category, out of which 285 worked with their members and creditors. In order to provide to its members the full spectrum of services established by law, according to the category of license held, the Statute and its policies, SCA have used the following sources:
1. Received loans and bank credits - 194 SCA;2. Savings deposits – 61 SCA, out of which 26 SCA have not received loans
and bank credits;3. Equity - 75 SCA.
Diagram no.48. Evolution of the number of members of SCA, loan recipients and savings depositors
13 GDP 2014, preliminary data96
2006 2007 2008 2009 2010 2011 2012 2013 20140
0.5
1
1.5
2
2.5
3
3.5
0.560.6100000000000010.8
0.530,34 0,31 0,310.3300000000000020.37
1.731.92
2.33 2.25
1,66 1.75 1.81 1.92.18
2.292.53
3.13
2.78
2 2.06 2,12 2.232.55
Diagram no. 47 Rate of microfinance entities loan portfolio to GDP (percent)
SCA MO Microfinance sector
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
20000
40000
60000
80000
100000
120000
140000
160000
The analysis of the evolution of the SCA system during the period 2003-2014 (Diagram No. 48) ascertains a decrease of loan recipients’ number, during the period 2009-2011, and of savings depositors during the period 2010-2011 and 2013-2014. By the end of 2014, while the number of loan recipients increased, the number of members as well as of savings depositors registered a decrease compared to 2013.
The evolution of the indicators regarding the number of members, of loan recipients and of savings depositors, during the period 2003-2014, shows the following results:
- increase of the number of SCA members, from 71.2 thousands persons to 125.1 thousands persons, or by 1.8 times;
- decrease of the number of loan recipients from 39.6 thousands to 37.0 thousands persons, or by 6.4 per cent;
- increase of the number of savings depositors from 472 to 5.4 thousands persons or 11.5 by times.
By the end of 2014, the number of SCA members decreased by 1941 persons or by 1.5 percent as compared to 2013. During the same period, the number of savings depositors registered a decrease of 349 persons or with 6.0 percent. The number of loan recipients was 37027 persons, increasing by 2407 persons or by 7.0 percent compared to the value of the indicator registered in 2013.
The evolution of the average value of a loan granted to a loan recipient member during 2003-2008 and 2010-2014 shows a growing demand for loans granted by the SCA. In 2014 the level of this indicator reached the average value of 11055 MDL, registering an increase of 1468 MDL, or by 15.3 percent as compared to 2013. During the same period of analysis the average value of savings as deposits per depositor member was 35754 MDL, recording an increase of 8253 MDL, or by 30.0 percent as compared to 2013 (Diagram No. 49).
Diagram no. 49. Evolution of the average value of a loan and of savings deposits, MDL
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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
5000
10000
15000
20000
25000
30000
35000
40000
2507 2816 40005262
66188956 8038 7597 8080 8296
9587
11055
70045770
9649 10053
1450611619 10664
1595817871
20612
27501
35754
Average loan Average savings deposit
The increase of the average value of savings is the result of the 22.2 percent growth registered by the savings deposits reflected by the SCA with B license category, together with the decrease registered by the savings depositors’ number.
Diagram no. 50. Number of loan recipients and members registered by SCA with A and B license category, 2014
No of members No of loan recipients0
10000
20000
30000
40000
50000
60000
70000 66607
15476
58453
21551
A licenseB license
The average loan granted by SCA with a B license category was of 13634.6 MDL, 82.7 percent higher than the average loan granted by SCA with an A category of license (7462.1 MDL), as a result of the fact that the loan recipients number as well as the amount of granted loans registered by B license category SCA, overcome the relative value registered by A license category SCA. (Diagram No.50). At the same time, the share of loan recipients’ number in the total number of members registered by SCA with B license category, overcomes the relative share registered by SCA with A license category, with 13.7 percentage points. Thus, the SCA register a low rate of active members, both the SCA with an A license category (23.2 percent) and the SCA with a B license category (46.2 percent, including the savings depositors).
Taking into account that the number of the A license category SCA overcomes 4 times the number of B license category SCA, the loan portfolio registered by the B license category SCA is 2.5 times higher (Diagram No.51).
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Diagram no. 51. The value of granted loans and the value of total assets registered by the SCA with an A and B license category in 2014, mil MDL
A license B license0
50
100
150
200
250
300
350
400
115.5
293.8
133.7
350.2
Granted loansTotal assets
Considering the trend of assets and loan portfolio values, the activity of the SCA system during the period 2003-2008 expressed a continuous growth tendency, followed by a decrease of about 50.0 percent (Diagram No. 52). In 2014, a growth of 19.8 percent and of 23.3 percent respectively is registered, as compared to 2013.
Diagram no.52. The trend of SCA indicators, during the period 2003-2014, mil. MDL
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
100
200
300
400
500
600
700
124.5 149.7
239
323.5
415.4
590.7
366.2
289.3 300.5334.5
403.9
483.9
99.2 114.8
177.5
250.3
326.8
506.4
322.9
244.2 254.2273.9
331.9
409.3
Total assets Granted loans
According to the results reflected at the end of 2014, the development registered by the SCA system is characterized by the following general activity indicators reflected in Table No.45.
Table No.45 General indicators of the SCA activityIndicators 2013 2014 2014 as
compared to 2013
(percent)
2014
Share of A license category SCA (percent)
Share of B license category SCA (percent)
Number of SCA members (persons)
127001 125060 98,5 53,3 46,7
Number of loan recipients (persons)
34620 37027 107,0 41,8 58,2
99
Number of savings depositors (persons)
5790 5441 94,0 - 100,0
Ownership equity (million MDL)
122,5 152,0 124,1 41,6 58,4
Granted loans (million MDL) 331,9 409,3 123,3 28,2 71,8Savings deposits (million MDL)
159,2 194,5 122,2 - 100,0
Received loans and bank credits (million MDL)
105,4 124,2 117,8 52,9 47,1
General information regarding the economic and financial situation of the SCA at the end of 2014 is reflected in Annex No. 39.
Assets of the savings and credit associations As of the end of 2014, the consolidated amount of SCA assets is 483.9
million MDL. The share of 72.4 percent from the total amount of the registered assets is held by B license category SCA. The 19.8 percent increase of the total amount of assets, as compared to 2013, is a result of an increase by 23.3 percent of the granted loans. The maximum share in the structure of SCA assets is held by granted loans that accounts for 84.6 percent of the overall value of assets, which is 2.4 percentage points higher than in 2013.
The structure of SCA assets at the end of 2013 and 2014 is shown in Table No. 46.
Table nr. 46. Structure of SCA’s assets, mil. MDLAssets 2013 2014 2014 as
compared to 2013
2014
SCA with A license category
SCA with B license category
Securities 4,2 4,4 +0,2 2,1 2,3Bank deposits 27,3 25,8 -1,5 9,5 16,2Granted loans 331,9 409,3 +77,4 115,5 293,8Loan loss provisions -8,8 -9,7 +0,9 -2,8 -6,9Long-term tangible and non-tangible assets
7,2 8,3 +1,1 1,7 6,6
Cash funds 12,2 10,0 -2,2 3,7 6,3Checking accounts 6,6 5,1 -1,5 2,0 3,2Interest receivables 5,1 5,5 +0,4 1,4 4,1Interest loss provisions -1,0 -0,8 -0,2 -0,5 -0,3Other assets 19,2 26,0 +6,8 1,1 24,9
TOTAL 403,9 483,9 +80,0 133,7 350,2
In 2014, similarly to the previous year, we can see the priority given by SCA to profit-generating assets rather than to fixed and non-profitable assets. The share of efficient assets increased in 2014, registering a 2.0 percentage points higher value than the minimum level recommended by WOCCU.
The analysis of the financial structure of SCA assets as of 31.12.2014, classified according to WOCCU recommendations, shows the indicators in Table No. 47.
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Table no. 47. Financial structure of assets as of 31.12.2014
Indicators
Share in overall assets (per cent)
Recommended level/range (share in
overall assets, per cent)
2014 (percent)
2013 2014SCA with A license category
SCA with B license category
I. Efficient assets: 96,3 97,0 minimum 95 97,7 96,71 Granted loans (reduced by the value
of loan loss provisions)80,0 82,6 70-80 84,3 82,0
2 Liquid assets 16,3 14,4 maximum 16 13,4 14,7II. Inefficient assets: 3,7 3,0 maximum 5 2,3 3,31 Long-term tangible and non-tangible
assets1,8 1,7 1,3 1,9
2 Interest receivables (reduced by the value of interest loss provisions)
1,0 1,0 0,7 1,1
3 Other assets 0,9 0,3 0,3 0,3
Thus, we can see a favourable change in the assets structure of SCA caused by the increase of granted loans and by the decrease of liquid assets, resulting in the increase of earnings gained by the SCA. While the value of liquid assets registered an increase of 4.3 percent as compared to 2013, their share in the overall value of assets decreased by 1.9 percentage points, being 1.6 percentage points below the maximum level recommended by WOCCU.
Ownership equityThe consolidated ownership equity of SCA at the end of 2014 was of 152.0
million MDL, registering a 29.5 million MDL or 24.1 percent increase compared to 2013. In 2014, SCA recorded a profit of 20.5 million MDL. The increase by 0.9 million MDL or by 4.5 percent of the registered profit is a consequence of the decrease of net result from establishment and cancellation of loan loss provisions. The maximum share of the ownership equity – 58.4 percent, is held by SCA with B license category.
The share of the institutional reserve in the total value of assets as of 31.12.2014 is 31.0 percent, while the minimum level recommended by WOCCU is 10 percent. At the same time, the weight of members’ shares in the total value of assets, at the same reference date, is 2.9 percent, while the maximum level recommended by WOCCU is 20.0 per cent. Under such circumstances, the SCA system is in compliance with the requirements on capital adequacy, the observance of which ensures the efficient SCA risk management.
Savings Deposits As of 31.12.2014, the consolidated value of SCA savings deposits was of
194.5 million MDL, 22.2 percent higher than in 2013 (Table no 48).
Table No. 48 Structure of savings deposits by due dateDue date 2013 2014 2014 as Share (percent)
101
(million Mdl)
(million Mdl)
compared to 2013
(percent)
2013 2014
Up to 1 month 9,3 8,1 87,1 5,8 4,11-3 months 11,5 13,1 113,9 7,3 6,7
3 months – 1 year 107,4 127,9 119,1 67,4 65,81-3 years 28,7 42,9 149,5 18,0 22,13-5 years 2,3 2,5 108,7 1,5 1,3
Over 5 years 0,0 0,0 - 0,0 0,0Total 159,2 194,5 122,2 100,0 100,0
Similarly to 2013, SCA tend to accept savings deposits for a short term of up to 1 year, which is determined by the need to ensure the balance of due dates namely in relation to granted loans, most of which (76.7 percent) are short term loans.
The maximum share (65.8 percent) is held by the savings deposits with due dates of 3 months up to 1 year, share that decreased in 2014 by 1.6 percentage points, while the savings deposits with due dates of over 1 year increased.
The amount of savings deposits, as compared to that of received loans and bank credits for SCA with B license category, in 2013 and 2014 is shown in Diagram No.53.
The rate of financing granted loans by savings deposits, recorded by the SCA with B license category, is 66.2 percent, a value decreased with 3.7 percentage points as compared to that registered at the end of 2013, reflecting the faster growth of the granted loans rather than the growth of the savings deposits.
Diagram No.53 The amount of savings deposits, received loans and bank credits recorded by SCA with B license category, million MDL
2013 20140.0
50.0
100.0
150.0
200.0
250.0
159.2
194.5
43.858.5
Savings deposits Received loans and bank credits
The share of savings deposits in the overall value of assets recorded by SCA with B license category at the end of 2014 is 55.6 percent, which is 0.9 percentage points lower than in 2013 and highlights an insignificant increase of the dependence on external crediting sources, as a result of the received loans and credits growth rate which is higher than that of the savings deposits. At the same
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time, this indicator remains below the range recommended by WOCCU (70-80 percent).
Loan portfolioThe total value of loans granted to SCA members, as of 31.12.2014, is 409.3
million MDL, 23.3 percent higher than in 2013 (Diagram No. 54).
Diagram No. 54 Structure of granted by SCA loans, million MDL
2013 20140
50
100
150
200
250
300
350
73.1
107.9
258.8
301.4
Loans granted for over 1 year Short term granted loans
As of the end of 2014, loans granted up to one year made up 73.6 percent of the total amount of granted loans, this indicator being 4.4 percentage points lower than in 2013, in favour of loans granted for over 1 year.
The largest share of loans was granted in agriculture and food industry - 44.7 percent. The structure of SCA loan portfolio by directions of use as of the end of 2014, is reflected in Diagram No. 55.
Diagram No. 55 The structure of loan portfolio of SCA by destination
103
44.73
19.67
22.75
0.065.030.41 7.35Chart Title
Agriculture/food industry Real estate Consumer credit Energy industry Commerce
Roads and transportation Other
By the end of 2014, loans for which the contract conditions are observed (standard) account for 95.6 percent in the structure of the consolidated loan portfolio of SCA, while the supervised loans (expired for up to 30 days) – 2.4 percent (Table No. 49).
Table No. 49 Structure of the loans portfolio granted by savings and credits associationsCategory Granted loans 2014 as
compared to 2013
(percent)
2014 (percent)(total, million Mdl)2013 2014 SCA with A
license category
SCA with B license
categoryStandard 318,0 391,2 123,0 28,3 71,7Supervised 6,3 9,8 155,6 25,5 74,5Substandard 2,7 4,2 155,6 23,8 76,2Doubtful 2,5 2,3 92,0 13,0 87,0Compromised 2,4 1,8 75,0 50,0 50,0
Total 331,9 409,3 123,3 28,2 71,8
As of 31.12.2013, the rate of delinquent loans was 4.2 percent, whilst at the end of 2014 this indicator increased up to 4.4 percent in the total value of granted loans, at the same time this value being under the maximum level set by WOCCU by 0.6 percentage points. One of the reasons for the level of the delinquent loans share is the fact that unsecured loans hold the largest share in the total loan portfolio – 93.8 percent, value with 0.4 percentage points lower than in the similar period of the previous year. The B license category SCA register a rate of delinquent loans of 4.5 percent, exceeding the similar indicator recorded by the SCA with A license category by 0.4 percentage points.
Financial resultsIn 2014, the SCA system has recorded a net profit of 20.5 million MDL,
increasing by 4.6 percent as compared to the previous year. Granted loans interest income increased by 9.4 million MDL or by 12.0 percent, while the expenses on interest related to savings deposits recorded an increase of 3.0 million MDL or of 17.3 percent. Whilst the expenses related to other interests (received loans and
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bank credits) decreased with 5.3 percent during 2014, the value of other operational expenses decreased by 35.7 percent. The financial results of SCA are shown in the Table No. 50.
Table No.50 Financial results of savings and credit associationsIndicators 2013
million Mdl
2014million
Mdl
2014 as
compared to 2013
(percent)
2014
Share of A license
category SCA
(percent)
Share of B license
category SCA
(percent)
Interest income, related to granted loans 78.6 88.0 112.0 31.9 68.1Other income from interest 2.5 3.3 132.0 21.2 78.8Net result from the establishment and cancellation of provisions
-4.8 -6.7 139.6 14.9 85.1
Other operational income 27.2 28.6 105.2 26.9 73.1Result from the investment activity (profit) 1.0 2.1 210.0 52.4 47.6Result from the financial activity (profit) 0.0 0.1 - 76.4 23.6Exceptional result: profit (loss) 0.0 0.0 - - -Expenses (savings) on the income tax 0.0 0.0 - - -
Total income 104.5 115.4 110.4 31.8 68.2Expenses on savings deposit-related interest 17.4 20.4 117.3 - 100.0Expenses related to other interest 17.0 16.1 94.7 60.9 39.1General and administrative expenses 47.7 54.6 114.5 36.6 63.4Other operational expenses 2.8 3.8 135.7 21.0 79.0
Total expenses 84.9 94.9 111.8 32.2 67.8Net profit / Net loss 19.6 20.5 104.6 29.7 70.3
As of 31.12.2014, the recorded number of SCA employees was 803 persons, registering a 2.3 percent decrease as compared to 31.12.2013. During 2014, the general and administrative expenses increased by 14.5 percent, while at 31.12.2013 there was registered an increase of 11.4 per cent compared to the same period of 2012. At the same time, the share of general and administrative expenses in the overall value of assets is 11.3 percent, by only 0.5 percentage points less than the share recorded on 31.12.2013, exceeding the maximum level of 5.0 percent set by WOCCU.
The B license category SCA make up 20.1 percent of the total number of SCA. At the same time, these SCA record a value of income gained as commission, fees, penalty related to granted loans that were not repaid in due time (delinquent loans) and other income resulted from the basic activity that overcomes 2.7 times the amount of the same income recorded by the SCA with an A license category. Also, the negative net result from the establishment and cancellation of provisions registered by SCA with a B license category is 5.6 times higher than the similar indicator recorded by the A license category SCA.
Evaluation of the savings and credits associations system using the PEARLS model
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The assessment of the indicators regarding the effective financial structure, assets quality, liquidity and the signs of growth, according to the PEARLS model is reflected in Table No. 51.
Table No. 51 PEARLS analysisPEARLS indicators 2013 (%) 2014 (%) Recommen
dedlevel / range
(percent)
SCA with A
license category
SCA with B
license category
SCA with A
license category
SCA with B
license category
Accumulated Charge-offs Recovered / Accumulated Charge-offs
75,3 133,5 141,0 75,8 > 75
Net loan portfolio / Total assets 82,4 79,0 84,2 82,0 70-80
Liquid assets / Total assets 14,8 17,0 13,5 14,7 ≤ 16Securities / Total assets 1,7 0,7 1,6 0,6 ≤ 2Savings deposits / Total assets - 39,4 - 55,5 70-80Received loans and bank credits / Total assets
50,4 15,5 49,1 16,7 0-5
Member shares / Total assets - 2,1 - 1,8 ≤ 20Institutional capital14 / Total assets 36,9 22,6 41,6 23,6 ≥ 10Total Loan Delinquency / Gross Loan Portfolio
5,0 3,8 4,1 4,5 ≤ 5
Non-earning assets15 / Total assets 5,6 5,8 4,4 4,0 ≤ 5Liquidity reserve 16 / Total savings deposits
- 12,4 - 10,9 ≥10
Cash funds / Total assets 3,5 2,8 2,8 1,8 < 1
During 2014, the ratio of accumulated charge-offs recovered to total accumulated charge-offs, achieved a proportion of 141.0 percent for SCA with an A license category and of 75.8 percent for B license category SCA, exceeding the minimum level recommended by WOCCU.
The increase of the net loan portfolio to the total value of assets ratio is due to the increase of the loan portfolio in 2014 as compared to 2013 as well as the decrease of loan loss provisions to the total amount of granted loans ratio during the same period.
The value of liquid assets reported to the total value of assets, in 2014, unlike 2013, is below the recommended maximum level (16 percent). As a result, the registered decrease influence positively the investments made by SCA in interest-generating assets, fact proved also by the decrease of non-earning assets share in the overall value of assets recorded by SCA.
The share of securities in the overall value of assets and the weight of member shares in the overall value of assets, both in 2014 and 2013, does not exceed the maximum levels – 2.0 percent and 20.0 percent. The value of institutional capital to the total value of assets ratio exceeds the recommended minimum limit of 10
14 The institutional capital in the case of the analyzed indicator consists of legal reserves and the surplus created from accumulations of net profit and donations.15 Assets that do not generate incomes are represented by cash funds, long-term tangible and non-tangible assets and other assets.16 The calculation formula is: liquid assets - 10% of the total value of assets.
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percent. In this context, SCA have the tendency to make additional reserves to cover potential operational, investment, financial or exceptional losses.
The value of financing sources of SCA with B license category records a negative deviation in 2014 of 14.5 percentage points as compared to the minimum level recommended by WOCCU, regarding the ratio of savings deposits to total assets.
In 2014, the share of delinquent loans in the total value of assets did not exceed the recommended maximum level of 5.0 percent, registering a decrease of 0.9 percentage points – in terms of A license category SCA results, and an increase of 0.7 percentage points, in case of B license category SCA, as compared to the end of 2013. The positive trend in respect to A license category SCA is due to the decrease of the value of delinquent loans, by 8.0 percent, together with the increase registered by the overall loan portfolio.
Although the share of cash funds in the total value of assets registers a value that exceeds the recommended minimum level, both for A and B license category SCA, still it records a positive deviation in 2014. At the same time, the indicator that reflects the ratio of liquidity reserves reported to the value of savings deposits records a decrease during 2014, exceeding though the recommended minimum level.
3.2. The activity of microfinance organizations
At the end of 2014, there were registered 101 microfinance organizations, out of which 77 submitted financial statements. The evolution of microfinance organisations system is characterized by general activity indicators presented in Table No.52.
Table no. 52. General Indicators of the MOs ActivityNr. Indicators 2013 2014 2014 as
compared to 2013 (+,-)
2014 as compared to
2013 (%)1 Number of organizations (units) 85 101 +16 118,82 Ownership equity (million MDL) 1020,6 1171,5 +150,9 114,83 Total assets (million MDL) 2509,4 3318,9 +809,5 132,34 Granted loans (million MDL) 1897,0 2427,5 +530,5 128,05 Received loans and bank credits
(million MDL)1280,4 1857,6 +577,2 145,1
6 Net profit (million MDL) 197,2 277,6 +80,4 140,87 Return on assets rate (percent) 7,9 8,4 +0,5 -
During 2014, the main indicators on the MOs activity registered a temperate increase as compared to the previous year. The number of MOs grew by 16 units or about 18.8 percent, following the same trend registered during the last 8 years of system evolution. The increase of the net profit of about 40.8 percent as compared to 2013 is determined by the growth of the loan portfolio by 28.0 percent as compared to the same period of the previous year, due to a 45.1 percent growth of the received loans and bank credits. The increase of the return on assets by 0.5
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percentage points, as compared to the previous year, indicates the fact that the MOs invest predominantly in interest-bearing assets with high profitability.
The MOs assets, the largest share of which is held by loan portfolio, during 2006 – 2008, registered a 40.0 percent constant growth on average. At the same time, during 2009-2010, with an increasing number of MOs by 34.3 percent there was registered a decrease of asset value by 14.3 percent on average. The period of 2011-2012 was characterized by an insignificant assets growth by about 3.0 percent. At the end of 2014, the system recorded the maximum value of the sector, with an amount of 3318.9 million MDL, a growth by 32.3 percent as compared to the same period of the previous year. (Diagram No. 56).
Diagram no.56. Development of number and total assets of MOs
2006 2007 2008 2009 2010 2011 2012 2013 20140
500
1000
1500
2000
2500
3000
3500
0
10
20
30
40
50
60
70
80
90
100
110
1266.5
1917.3
2454.9
1933.81783.9
1844.3
1892.9
2509.4
3318,9
1113
24
35 43
59
73
85101
Total assets, million Mdl Number of microfinance organizations
The value of equity held by MOs registered a continuous growth during 2006 – 2014. As a result, this indicator is 11.8 times higher, by the end of 2014 achieving the amount of 1171.5 million MDL (Diagram No. 57). The continuous significant growth of this indicator reflects definitely an increase of the overall financial stability of the whole MOs system. The high rate of capitalization is determined by the 10.6 times increase of the net profit resulted from the lending activity during the last 8 years.
Diagram no.57. Development of MOs ownership equity, net profit and return on equity
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2006 2007 2008 2009 2010 2011 2012 2013 20140
200
400
600
800
1000
1200
1400
0
5
10
15
20
25
99.1184
405.3491.1
658.4
960.8 970.71020.6
1171,5
22.3 26.273.8 77.1 85.2 114.6 90.9
197.2277,6
22.5
14.2
18.2
15.7 12.9
11.9
9.4
19.3
23,7
Ownership equity, million Mdl Net profit, million Mdl Financial profitability, %
The return on equity registered a temperate decrease during 2006-2012, the lowest level being reached at the end of 2012 – of about 9.4 percent. The slowdown in the evolution of this indicator is determined by the significantly higher growth pace of the ownership equity as compared to the slower growth pace of the net profit. Although, the enhanced ability of MOs to generate net profit through own capital used in their activity fostered the significant increase of the financial profitability during 2013, at 31.12.2014, the value of this indicator is 4.4 percentage points higher as compared to the end of the previous year.
Diagram no.58. Guaranteeing MOs granted loans by due terms, %
2013; 36,32013;
55,8
2013; 7,9 2014;
44,0
2014; 49,1
2014; 6,9
Due term of granted loans
Up to 1 year 1 to 5 years More than 5 years
2013 2014 2013 2014 2013 2014Up to 1 year 1 to 5 years More than 5 years
0
20
40
60
80
100
120
54.6 58.682.7 76.7
100 100
45.4 41.417.3 23.3
0 0
The structure of granted loans
Unguaranteed Guaranteed
According to the values shown in Diagram No. 58, the largest share of loans provided by MOs – of 49.1 percent, are granted for an average term of 1 to 5 years, 76.7 percent out of which are guaranteed. At the same time, 44.0 percent of loans are granted for a term up to 1 year, 58.6 percent of which are guaranteed, whilst other 6.9 percent of loans are granted for an over 5 years term – these being 100 percent guaranteed. Thus, it can be concluded that MOs apply a more prudent
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policy of loan portfolio management as compared to the previous year, ensuring their delinquency risks of granted loans as their due terms are increasing.
Diagram no.59. The classification of granted loans by destination
8.0%
21,8%
24,6%9,2%
8.3%
28,1% Agriculture
Real estate
Consumer loans
Industry and commerce
Roads and transportation
Other purposes
The destination of loans provided by MOs is dispersed proportional throughout the whole range of national economy sectors (Diagram No.59). However, the maximum share of about 28.1 percent is held by loans that according to the accounting classification are loans granted for “other purposes”, registering a decrease by 7.0 percent as compared to 2013. Out of these loans, 22.7 percent are loans granted to SCAs mainly by two MO.
The 24.6 percent share is held by consumer loans. 21.8 percent represent mortgage loans, value 6.5 percentage point higher than that registered at the end of the previous year, the significant share of which is determined by the high value of loans for real estate purchasing, compared to the low number of borrowers. Other 9.2 percent are granted for industry and commerce sector, the priority being given to micro, small and medium enterprises.
The basic indicators of MOs activity for 2014 are reflected in the Annex No.40.
IV. The activity of the Credit History BureauIn 2011 a credit history bureau launched its activity, providing services
related to the registration, processing and storage of credit histories, as well as to issuing credit reports. As of 31.12.2014, there are 14 commercial banks and 5 microfinance organizations that are participants to information exchange with the credit history bureau JV ”Biroul de Credit” LLC.
Table no. 53. General indicators on credit history bureauIndicators 31.12.13 Reporting period 31.12.14
Individuals Legal entities
Number of credit agreements concluded by the credit histories sources
343 181 84 242 15 240 442 663
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Number of registered credit histories 144 033 6573 77 150 683
Number of submitted credit reports
to credit history users 428 763 182 447 16 447 627 657
to credit history subjects
366 397 34 797
Data analysis shows that on the background of the 29 percent increase of the credit contracts’ number concluded by the sources of the credit histories, the number of the credit histories registered in the database of the bureau has increased by 4.6 percent, fact which shows the increase of loans granted to people who already have a positive credit history.
At the same time, compared to the situation at 31.12.2013, there is a positive trend regarding the number of credit reports submitted by the credit history bureau to the credit history users, this indicator registering an increase of about 1.5 times, which certifies the fact that the information obtained from the credit history bureau is an additional guarantee measure against credit risk. A positive fact is that microfinance organizations accessed the credit history bureau services, requiring 2670 credit reports during 2014.
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