Banking system

The National Bank of Moldova has the following main goals: to ensure the stability of the national currency; to work out and implement the monetary, credit and foreign exchange policies pursuing to the laws of the state; to ensure control over commercial banks' liquidity and credits; to supervise the system of payments; to work out the balance of external payments; to manage international reserves and the state foreign debt and to maintain the state treasury.

There are 22 commercial banks in Moldova. Seventeen of these have a capital above eight million lei and have obtained the NBM's Type B and Type C licences for performing international foreign exchange operations. Five banks have a Type A licence that allows them to carry out foreign exchange operations on the domestic market.

In their current activities commercial banks are implementing advanced operating techniques which allow them to earn the confidence of foreign banks. In 1996 Moldova's banking system moved to a system of electronic settlement, and is being connected to the SWIFT system. In 1997 the whole banking system will move over to international accounting standards, implemented in 1995 by the NBM.

On July 21 1995 the Parliament of Moldova adopted laws on the National Bank of Moldova and on financial institutions. They include new and modern elements aimed to strengthen the role of the National Bank in the establishment and running of the monetary and foreign exchange policy and contain the legal framework for a safe and durable financial system.

The law on financial institutions aims to protect the private investor's interests, not to admit the excessive risk in the financial system, to achieve a strong and a competitive financial sector and to facilitate the actions of market forces in performing financial services. Each bank is free to conclude agreements and has the right to possess movable and immovable goods and to take part in any subsequent operations.

Monetary and credit policy

The most significant step was the introduction on 29 November 1993 of the national currency - the Moldovan leu - further pursuing a tight monetary and credit policy. Since its introduction the leu has remained stable; its exchange rate is floating and is fixed on daily basis at the Moldovan Inter Bank Foreign Currency Exchange. The exchange rate of the Moldovan Leu at the moment of introduction was 3.85 MDL for US$1, the rate as of 1 January 1997 being 4.65 MDL for US$1. The Moldovan Leu is one of the most stable currencies of the CIS countries.

Following the acceptance by Moldova on 30 June 1995 of Sections 2, 3 and 4 of Article 8 of the IMF Articles of Agreement, the currency regime of Moldova has been completely liberalised for current account operations.

Due to a tight monetary policy inflation has decreased considerably, reaching 1.9 per cent in January 1997 compared to 18.9 per cent in January 1994, or 55.7 per cent in January 1993. In August 1996 the inflation rate was negative and equal to -0.3 per cent. Tha annual rate of inflation in 1996 was 15.1 per cent (the projected level was 15 per cent). The annual rate of inflation is projected at a level of 15 per cent for 1996, while in 1995 it was 23.8 per cent and in 1994 -104.5 per cent.

From January 1994 the NBM's refinancing rate became positive in real terms. The National Bank has abolished preferential credits. Since the beginning of 1994 the refinancing rate is not determined administratively and is set on a regular basis at the credit auctions held by the National Bank of Moldova. At the end of 1996 the level of refinancing rate was 18 per cent, while in February 1994 it was 377 per cent.

Generally speaking, economic reforms from the last two years have shown significant results, being highly appreciated by the international community.