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Crisis succession and Moldovan banks
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According to Romanian economist Daniel Daianu and his European fellowsRO, the excess of all kinds of financial innovations in European financial-banking systems and others is particularly to blame for the current crisis. The financial innovation has positive and negative sides. These innovations at individual level are advantageous enough for sure, as for example to pay housekeeping invoices online or to carry out a worthy acquisition without carrying its price in pockets. However, almost all of them have a major cost for the system in general. Even more, the contamination or contagion of ultra modern financial products amplifies the risks in case of globalisation of markets, when all kinds of transactions may be done from any corner of the world. All these deals induce panic between market players and double the existing dangers, including the risk of sovereign debts in many European countries, which finally fall on shoulders of their financial and banking systems.
Many voices have recently signalled a “liquidity crisis” (it is worth to specify that it means here a surplus of liquidities). I absolutely agree with this affirmation. But, let’s not advance too far, or our banking market has a surplus of liquidities while local banks do not hurry up to provide credits and to reduce interest rates, as they feel the high risks. For example, overall assets of the Moldovan banking system are evaluated at over 46 billion lei or about 4 billion dollars, of which almost half are liquid assets of banks. There is an impression that banks save the money, so that one may affirm that interbank markets have got infected, the credit does not function the way it should do, there is a certain fear or even a crisis of confidence, a term which is often used by those who monitor the dynamics of financial markets.
The crisis of confidence was born by shortcomings of the new financial system built the last two decades. Financial innovations designed to bring security, to turn a wide range of loans into bonds have spread the risks. These bonds were transposed on account of states, governments and now we have what we have in Europe.
According to professor Daianu, simple statements cannot settle a confidence crisis. Financial markets will somehow overcome the current situation after a long time, but this condition involves a better regulation of markets, recapitalisation of many banks and regular injections of liquidities by central banks. It is supposed that a cheap loan policy will not be reintroduced soon, though central banks reduce reference interests to increase financial means on markets. Or credits for businesses and population will be relatively expensive for a long time on.
How much do local banks suffer after the financial crisis, including after the crisis of sovereign debts in Europe? It seems at the first glance that they do not suffer at all. Local banks which are actually subsidiaries of some European banksRO develop separately; that means they have an independent policy and do not depend on mother banks. This is the case of BCR Chisinau, a subsidiary of the Austrian group Erste Bank which portfolio includes the majority stock of BCR from Romania and Moldova; Mobiasbanca belongs to the Societe Generale group; EuroCreditBank has a Greek major capital, but none of them face any problems, accordingly to BNM accounts.
The Moldovan bank market is not anchored on large financial flows, so that it is less affected directly. However, one should not get drunk with cold water. Our neighbours from the other side of the Proute assured that the crisis would not hit them, but many financial institutions in Romania experience its consequences. If the true effects on European countries are not avoided, they will hit the Moldovan economy as well, as they would eventually reduce remittances, exports and finally the consumption. Or most of serious analyses reveal that the solidity of bank groups has a positive effect on financial stability and economic stability in general on a long term.