Quality Of Banking Supervision And Its Determinants: The Case Of Republic Of Moldova

Abstract

Recent events which have taken place within the Moldovan banking system have highlighted significant weaknesses regarding banking supervision. As a consequence the financial integrity and stability of the Moldovan banking system has been shaken and the confidence in it has been seriously affected. These deficiencies have induced the necessity of revising the central bank’s role in regulating the Moldovan banking system and increasing the quality of banking supervision. This is the main argument for addressing the determinants of bank supervision quality and finding solutions for enhancing it. The quality of banking supervision depends on several factors and preconditions which are addressed in this article. There has been highlighted the need for a greater focus to be put on independence, accountability and transparency of the supervisor for increasing the effectiveness of banking supervision. There are identified banking supervision’s deficiencies and their determinants in the Republic of Moldova and made an analysis of country’s compliance with the Basel Committee’s Core Principles. The evaluation of the quality of banking supervision in the Republic of Moldova includes statistical analysis of data related to the banking system, review of IMF assessments, as well as observations and qualitative judgments. This paper presents the policy recommendations in institution building for stronger banking system in the Republic of Moldova.