Finances

​NEW CREDITING CYCLE DOES NOT MECHANICALLY REDUCE PROBLEMATIC CREDITS – NBM PRESIDENT SERGIU CIOCLEA

24 february, 2017

National Bank of Moldova (NBM) President Sergiu Cioclea regards as irresponsible and illusory the bankers’ hope that the new crediting cycle can mechanically reduce the rate of problematic loans.

In an interview to Infotag, he said that this is even more dangerous when the share of hopeful loans in the bad credit portfolio has a trend to grow.

“Banks should improve procedures of administrating and monitoring risks. Even if the business environment and economic problems are influencing the portfolio quality in the system, the level of worsening may vary from bank to bank. We will be checking these rates in all banks during the 2017, but the difference we registered is a proof that banks are differently administrating this process”, the banker said.

According to the NBM Governor, in order to efficiently address the issue of problematic credits, banks leadership should identify factors that influence the credit portfolio quality.

“It is about raising of the risk of each separate client or in connection with the general worsening in the economic branch, or this is a result of unprofitable business model of the bank. Which is the quality of initial credit assessment and risk monitoring? Which is the quality of credit structuring and amortization? Is there no excess of bullet-credits (credits with lump covering of the final term), Cioclea said.”

At the question which is Moldova’s position among other region’s countries in terms of bad loans, the banker said that the country is in the middle of the list, though it should be confessed that given the difference in standards of accounting, this comparison is not perfect.

The NBM head pointed at the fact that the example of other country banks shows the need of creating reserves for improving the share of covering (by reserves) of bad loans and consolidating banks’ own funds.

“The worsening of the credit portfolio quality demonstrates that recently bankers undertook higher risks or that risks have tendency to materialize with certain delay after credit providing. The decline in credit activities is an aggravating element but not the main reason of problems. The running forward for diluting problems by one and the same risky method of crediting is nothing else but aggravation of problems and creation of an insolvency situation”, the banker said.

Sergiu Cioclea confirmed the fact that the NBM has toughened discipline on applying regulation on doubtful loans classification.

“I want to point at the fact that some banks even do not have departments, responsible for risk management or independent control functions. Unfortunately, we are far from sterility. NBM’s goal is to change this situation. I see nothing bad in the fact that the discipline and bank strictness will be transmitted into economy via crediting”, he said.

The NBM president said that the best engine for economic growth is when banks are selecting for financing the healthier and most profitable, but not disadvantageous economic projects.

Add Comment

Add Comment

  • name
  • email
  • message
Thanks!
Your comment will be published after administrator approval.