Note: The translation is unofficial, for information purpose only
Published in the Official Monitor of the Republic of Moldova no.64-65 of 02.10.97
Approved by the Council of Administration
of the National Bank of Moldova,
minutes 28, August 8, 1997
REGULATION
ON BANK’S LIQUIDITY
Amended by:
DCA of the NBM, no.265 of 17.12.2009, Official Monitor of the Republic of Moldova no. 27-28 of 19.02.2010
DCA of the NBM, no.130 of 10.12.2015 (in force 30.06.2016)
I. GENERAL PROVISIONS
This Regulation is drawn up pursuing the authority of the National Bank of Moldova as provided for in Article 11 and 44 of the Law on the National Bank of Moldova and Articles 25, 28, and 40 of the Law on Financial Institutions.
To promote a sound and competitive financial sector, avoid excessive risks in the financial system, protect the interests of depositors and ensure the availability of an adequate level of bank liquidity, the National Bank of Moldova establishes by this Regulation the following rules, aimed at setting an adequate relationship between a bank’s invested funds (assets) and its financial resources (liabilities).
[Chapter I amended by the Decision of the NBM no.265 of 17.12.2009, in force on 19.02.2010]
II. DEFINITIONS
For the purpose of this Regulation, the following notions shall apply:
1. Liquidity is the financial institution’s ability to invest in assets and honour its payment liabilities upon maturity at all times.
2. Principle I of liquidity provides that the amount of bank’s assets, with the maturity of more than 2 years, shall not exceed the amount of its financial resources.
3. Principle II of liquidity provides that bank’s short-term liquidity, expressed as a ratio of liquid assets and total assets, shall not be lower than the percentage rate set by this Regulation.
31. Principle III of liquidity provides that the liquidity on maturity bands up to 1 month, 1-3 months, 3-6 months, 6-12 months and over 12 months, expressed as a ratio of actual liquidity and required liquidity by each maturity band, shall not be lower than the ratio set forth by this Regulation.
4. Remaining maturity of a credit - the term remaining to the due date of a credit or its instalment amount, calculated from the reporting date onwards.
5. Remaining maturity of a deposit - the term remaining to the due date of a deposit or a part thereof, calculated from the reporting date onwards.
6. Savings deposit of an individual is a type of demand or time deposit held for creating savings for certain purposes, payable on demand or according to its maturity, for which the bank may issue a savings passbook or a savings certificate.
7. Liquid securities are state securities issued by the Ministry of Finance of the Republic of Moldova and securities issued by National Bank of Moldova, which are free of any liens and encumbrances.
8. Current net interbank resources represent the difference between the amount of loans granted to other banks and funds due by banks with the remaining maturity of up to 1 month and less, and the amount of loans and funds due to banks with the remaining maturity of up to 1 month and less.
9. Zone A comprise the EU Member States and all other countries which are full members of the Organisation for Economic Cooperation and Development (OECD); if a country from Zone A reschedules its external debt, the respective country shall be excluded from Zone A for a period of 5 years.
10. Liquidity surplus/deficit is the positive/negative difference between actual liquidity and required liquidity.
11. Reserve deficit is the insufficient amount determined in accordance with the regulations of the National Bank of Moldova on required reserves regime.
12. High-risk liquidity is the liquidity risk of a bank in relation to a person or group of connected persons, whose liabilities/debts represent at least 10% of debt value, other than loans and loan commitments.
13. Group of connected persons represents two or more individuals and/or legal entities:
a) that is, unless otherwise is proved, a single liquidity risk because one person owns, directly or indirectly, control over the other person or other persons;
b) between which there is no a control relationship, but must be regarded as representing a single liquidity risk, because between them there are such links that the withdrawal by one person of a deposit, closing a current account and / or use a loan commitment received from the bank may generate the withdraw of deposits, closing the current accounts and/or use of loan commitments received from the bank by the other persons.
14. Amounts related to derivative financial instruments - values of derivative financial instruments reflected in the balance sheet and contingent accounts and the amounts to be received/paid in the operations with derivative instruments.
[Chapter II amended by the Decision of the NBM no.130 of 10.12.2015, in force on 30.06.2016]
[Chapter II amended by the Decision of the NBM no.265 of 17.12.2009, in force on 19.02.2010]
III. LIQUIDITY PRINCIPLES AND MANAGEMENT
1. Principle I (long-term liquidity)
Long-term liquidity indicator of a bank which is the ratio of:
The sum of a bank's assets in the form of:
(1) credits and placements granted to banks with a remaining maturity of 2 years and more;
(2) credits and advances granted to customers with a remaining maturity of 2 years and more;
(3) financial lease with a remaining maturity of 2 years and more;
(4) shareholdings in the capital of economic agents (including banks);
(5) financial assets held to maturity with a remaining maturity of 2 years and more;
(6) tangible assets;
less allowance for loan losses, calculated according to the Regulation on assets and conditional commitments classification; tangible assets amortization and the difference from their revaluation,
and the sum of the following financial resources:
(1) total regulatory capital, determined in accordance with the Regulation on risk-weighted capital adequacy;
(2) liabilities due to banks and liabilities due to customers (excluding savings deposits of individuals) with a remaining maturity of 2 years and more;
(3) 50% of liabilities due to banks and liabilities due to customers (excluding savings deposits of individuals) with a remaining maturity from 1 to 2 years;
(4) 10% of demand liabilities due to customers (excluding savings deposits of individuals);
(5) savings deposits of individuals with a remaining maturity of 2 years and more;
(6) 60% of the savings deposits of individuals with a remaining maturity form 1 to 2 years;
(7) 30% of the savings deposits of individuals, payable on demand, with a remaining maturity of up to 1 year;
(8) outstanding bonds and other securities issued by the bank with a remaining maturity of 2 years and more;
(9) 50% of outstanding bonds and other securities issued by the bank with a remaining maturity of up to 2 years;
(10) 60% of the provisions for pensions of bank’s employees;
shall not exceed 1.
2. Principle II (short-term liquidity)
Short-term liquidity indicator of a bank which is the ratio of:
1) The sum of a bank's assets in the form of:
a) cash (cash on hand and other money values);
b) deposits with the National Bank of Moldova;
c) liquid securities;
d) current net interbank resources placed with the banks of the Republic of Moldova and banks from abroad rated with not less than BBB-/Baa3 by Standard&Poor’s, Moody’s and Fitch-IBCA, provided that the respective banks are simultaneously residents of countries rated as such (placements with other banks are included in the calculation of liquid assets only if these resources are free of any liens and encumbrances).
2) and the sum of total balance sheet assets (row 160 of FIN 1 - BALANCE SHEET, Instruction on FINREP separate financial statements, applicable to banks) shall not be less than 20%.
21 Principle III (liquidity on maturity bands)
Principle III shall be calculated as the ratio of actual liquidity and required liquidity on each maturity band and shall not be less than 1 on each maturity band. If the case of recording a surplus of liquidity in any of the maturity bands, except for the last band, it shall be added to the actual liquidity for the next maturity band.
Liquidity ratio on maturity bands: up to 1 month, 1-3 months; 3-6 months; 6-12 months and over 12 months is the ratio of actual liquidity and required liquidity.
Actual liquidity - assets and contingent liabilities with the assignment of the respective adjustment ratio (contingent assets and liabilities shall not be taken into account when determining the actual liquidity, which maturity was prolonged 2 times and more, and in the case of assets collateralised by deposits - guarantees, it shall not be taken into account the part guaranteed as such):
1) cash - 100%
2) interbank operations - "Nostro" accounts, placements and overnight credits, term placements with banks and loans to banks (it shall be taken into account the placements and loans for which no late payments are recorded, and those for which no late payments of interest and/or principal repayment of up to 7 days inclusive are recorded) - 100%
3) customer operations - loans and receivables (it shall be taken into account the loans and receivables for which no late payments are recorded, and those for which no late payments of interest and/or principal repayment of up to 30 days inclusive are recorded)
a) debt instruments - 90%
b) credits and advances - 90%
4) financial assets held-for-trading
a) equity instruments (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 50%
b) debt instruments with residual maturity up to one year, inclusive (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or or from the Republic of Moldova) - 95%
c) debt instruments with residual maturity greater than one year (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 90%
d) credit and advances - 100% (it shall be taken into account the credit and advances purchased from other entities for resale purposes for which no late payments are recorded, and those for which late payments of interest and/or principal repayment of up to 30 days inclusive are recorded)
e) debt instruments, other than those mentioned above (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 60%
5) financial assets designated on initial recognition as at fair value through profit or loss
a) equity instruments (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 50%
b) debt instruments with residual maturity up to one year, inclusive (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or or from the Republic of Moldova) - 95%
c) debt instruments with the residual maturity greater than one year (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 90%
d) credit and advances - 100% (it shall be taken into account the credit and advances for which no late payments are recorded, and those for which late payments of interest and/or principal repayment of up to 30 days inclusive are recorded)
e) debt instruments, other than those mentioned above (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 60%
6) financial assets available-for-sale
a) equity instruments (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 50%
b) debt instruments with residual maturity up to one year, inclusive (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or or from the Republic of Moldova) - 95%
c) debt instruments with the residual maturity greater than one year (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 90%
d) credit and advances - 100% (it shall be taken into account the credit and advances for which no late payments are recorded, and those for which late payments of interest and/or principal repayment of up to 30 days inclusive are recorded)
e) debt instruments, other than those mentioned above (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 60%
7) financial assets held-to-maturity
a) debt instruments with the residual maturity up to one year, inclusive (issued or guaranteed by government bodies from countries from Zone A or from the Republic of Moldova, listed on a stock exchange of countries from Zone A or or from the Republic of Moldova) - 95%
b) debt instruments with the residual maturity greater than one year
c) credit and advances - 100% (it shall be taken into account the credit and advances for which no late payments are recorded, and those for which late payments of interest and/or principal repayment of up to 30 days inclusive are recorded)
d) debt instruments, other than those mentioned above (listed on a stock exchange of countries from Zone A or from the Republic of Moldova) - 60%
8) other financial assets - 90%
9) debit contingent liabilities - 100%
(irrevocable and unconditional financial guarantees received from banks, which are applied with ratio Ke)
Ke - is determined a the ratio of the average balance (it shall be determined on the basis of the simple arithmetic average of the monthly balances recorded on the last day of each month) of irrevocable and unconditional financial guarantees received, the execution of which was requested by the bank during the 6-month period preceding the month for which the reporting is performed and received within 30 days from the date on which the execution was requested to the average balance (it shall be determined on the basis of the simple arithmetic average of the monthly balances recorded on the last day of each month) of irrevocable and unconditional financial guarantees received, calculated for a 6-month period preceding the month for which the reporting is performed.
10) Amounts to be received in connection with financial derivatives - 100%
a) financial assets at fair value through profit or loss and interests calculated (discount/premium) to be received from operations with financial derivatives.
b) financial derivatives recorded in contingent accounts and interests (discount/premium) to be received from the respective operations.
Required liquidity - financial liabilities and contingent liabilities with the assignment of the respective adjustment ratio (when determining the required liquidity, it shall not be included the deposits - guarantees that are collateral for exposures assumed by the bank, as for the contingent liabilities collateralised by deposits, registered with the bank, it shall not be taken into account the part guaranteed as such):
1) interbank financial liabilities - LORO accounts and overdrafts on NOSTRO accounts, interbank deposits and loans - 100%
2) financial liabilities held-for-trading - deposits, financial liabilities relating to securities and other financial liabilities - 100%
3) financial liabilities designated as at fair value through profit or loss - deposits, financial liabilities relating to securities and other financial liabilities - 100%
4) financial liabilities measured at amortized cost
a) demand and term deposits of customers - 100% to the bank with high liquidity risk and/or if the bank records a deficit of reserves or the level of at least one of capital indicators is below the minimum requirement level
b) Demand deposits of customers - 40% to the bank without a high risk of liquidity and/or if the bank does not record a deficit of reserves or none of the capital indicator is below the minimum requirement level
c) Term deposits of customers - 15% (on each maturity band) and 5% of total deposits (on the first maturity band) to the bank without a high risk of liquidity and/or if the bank does not record a deficit of reserves or none of the capital indicator is below the minimum requirement level
d) financial liabilities related to savings deposits - 100%
e) financial liabilities relating to securities - 100%
f) REPO agreements and Lombard facilities - 100%
g) other financial liabilities - 100%
5) other financial liabilities - 100%
6) credit contingent liabilities - 100%
(irrevocable and unconditional financial guarantees provided to banks, which are applied with ratio Kn, it shall not be included the financial guarantees secured irrevocably to maturity, by persons who are not affiliated with the bank, collateralised by deposits, registered with the bank assuming the exposure).
Kn - is determined by dividing the average balance (it shall be determined on the basis of the simple arithmetic average of the monthly balances recorded on the last day of each month) of irrevocable and unconditional financial guarantees provided, the execution of which was requested by the bank during the 6-month period preceding the month for which the reporting is performed to the average balance (it shall be determined on the basis of the simple arithmetic average of the monthly balances recorded on the last day of each month)of irrevocable and unconditional financial guarantees provided, calculated for a 6-month period preceding the month for which the reporting is performed;
7) Amounts to be paid in connection with financial derivatives - 100%
a) financial liabilities at fair value through profit or loss and interests calculated (discount/premium) to be paid from operations with financial derivatives.
b) financial derivatives recorded in contingent accounts and interests (discount/premium) to be paid from the respective operations.
3. LIQUIDITY MANAGEMENT POLICY
1) Banks shall have an appropriate liquidity management framework that includes policies, procedures and internal guidelines on the assessment , monitoring and ongoing maintenance of a sufficient level of liquidity, but not less than the ratio set forth by this Regulation.
2) Liquidity management policy shall include at least the following components:
a) appropriate information systems for the assessment, monitoring and reporting the level of liquidity;
b) stress tests to identify the weaknesses and potential vulnerabilities of bank's liquidity level in unforeseeable conditions;
c) management plans for different stress scenarios on liquidity for unforeseen circumstances;
d) control of liquidity management.
3) Internal procedures and guidelines on information systems shall ensure that the bank's liquidity is duly assessed and examined by bank's management to take appropriate decisions on liquidity management. Such systems shall be able to calculate liquidity positions in all currencies in which the bank operates, future cash flows and to be flexible to adapt them to various unforeseen circumstances that may occur.
4) Internal procedures and guidelines on stress testing shall ensure regular stress tests and cover various short, medium and long term scenarios, considering the specific situations of the bank and market, under which vulnerabilities related to the bank liquidity position are analysed, the potential negative effects and ways of their resolution are determined. These scenarios shall be constantly updated, taking into consideration both internal (specific to the bank) and external factors (related to market).
5) management plans for different stress scenarios on liquidity for unforeseen circumstances shall comprise:
a) different options to create a clear picture of the available measures for the management of liquidity in unforeseen circumstances;
b) internal procedures that allow bank's management to take timely and duly reasoned decisions, apply promptly and efficiently the respective measures in unforeseen circumstances.
In the process of planning for unforeseen circumstances, bank's management shall take into account the results of the stress tests.
6) The control over liquidity management shall imply regular and independent reviews and assessments of the efficiency of liquidity management. This shall include the verification whether bank's employees act in accordance with the internal procedures and guidelines and whether these ensure the achievement of objectives set by the bank. In the case of such reviews and assessments, it shall be also taken into account any significant changes that might affect the efficency of controls.
[Chapter III amended by the Decision of the NBM no.130 of 10.12.2015, in force on 30.06.2016]
[Chapter III amended by the Decision of the NBM no.265 of 17.12.2009, in force on 19.02.2010]
Note: Decision of the NBM no.302 of 30.10.1998 abrogated by the Decision of the NBM no.27 of 10.02.2000, in force as of 17.02.2000
[Chapter III amended by the Decision of the NBM no.302 of 30.10.1998]
IV. REPORTING
1. Banks shall report monthly to the National Bank of Moldova as provided for in the normative acts of the National Bank of Moldova.
2. The first report shall be submitted as of 31 December 1997.
[Chapter II amended by the Decision of the NBM no.130 of 10.12.2015, in force on 30.06.2016]
[Chapter IV amended by the Decision of the NBM no.265 of 17.12.2009, in force on 19.02.2010]
V. COMPLIANCE
1. As from 31 December 1997, banks shall reach and maintain the short-term liquidity ratio (Principle II) at the level of at least 10%.
2. As from 30 June 1998, banks shall reach and maintain the short-term liquidity ratio (Principle II) at the level of at least 15%.
3. As from 30 November 1998, banks shall reach and maintain the short-term liquidity ratio (Principle II) at the level of at least 20%.
Note: Decision of the NBM no.302 of 30.10.1998 abrogated by the Decision of the NBM no.27 of 10.02.2000, in force as of 17.02.2000
[Item 3 amended by the Decision of the NBM no.302 of 30.10.1998]
VI. FINAL PROVISIONS
1. As from 31 December 1997, the following regulations shall be abrogated:
Norm no.1 on controlling the activity of commercial banks (joint stock), both private and co-operative of 29 June 1993, with all amendments and additions:
(1) Supplement no.1 of 29 June 1993;
(2) Amendments of 28 December 1993;
(3) Supplement of 13 October 1994;
(4) Amendments of 17 March 1995, Minutes no.9;
(5) Amendments of 18 April 1995, Minutes no.13;
(6) Amendments of 31 May 1995, Minutes no.17;
(7) Amendments of 27 June 1995, Minutes no.19;
(8) Amendments of 8 May 1996, Minutes no.22;
(9) Amendments of 12 June 1996, Minutes no.28;
(10) Amendments of 25 December 1996, Minutes no.59.
2. This Regulation shall enter into force on the date of its approval and subsequent publication in the Official Monitor of the Republic of Moldova.
Minutes no.24 of 8 August 1997
__________
National Bank
Regulation of 08.08.1997 on bank's liquidity //Official Monitor 64-65/105, 02.10.1997
