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16.06.2017

Regulation on risk-weighted capital adequacy, approved by the DCA of the NBM no.269 of October 17, 2001

Note: The translation is unofficial, for information purpose only

Published in the Official Monitor of the Republic of Moldova no. 130, Art. 310 of 26.10.2001

Amended by:
the Decision no.275 of the Council of Administration of the National Bank of Moldova, November 13, 2003
the Decision no.171 of the Council of Administration of the National Bank of Moldova, September 11, 2008
the Decision no.57 of the Council of Administration of the National Bank of Moldova, March 26, 2010
the Decision no.242 of the Council of Administration of the National Bank of Moldova, November 3, 2011
the Decision no.301 of the Council of Administration of the National Bank of Moldova, December 20, 2012 
the Decision no.160 of the Council of Administration of the National Bank of Moldova, August 20, 2014 
the Decision no.57of the Council of Administration of the National Bank of Moldova, March 10, 2015 
the Decision no.141 of the Executive Board of the National Bank of Moldova, May 24, 2017.

COUNCIL OF ADMINISTRATION
OF THE NATIONAL BANK OF MOLDOVA

DECISION no. 269 of 17.10.2001
(effective since 30.09.2002)

On the Approval of the Regulation on Risk-Weighted Capital Adequacy

To enforce of Articles 11 and 44 of the Law on the National Bank of Moldova and Articles 1, 5, 14, 25, and 53 of the Law on financial institutions, as well as to protect depositors, to avoid excessive risk in the financial system, and to promote a strong and healthy sector,

IT WAS DECIDED:

1. To approve the Regulation on Risk-Weighted Capital Adequacy (new edition).

2. Regulation and Banking Supervision Department (represented by Mr. Radu Musteața) will be accountable to control the enforcement of this decision.

3. This decision shall be published in the Official Monitor of the Republic of Moldova.

 

CHAIRPERSON
OF THE COUNCIL OF ADMINISTRATION
OF THE NATIONAL BANK OF MOLDOVA   

Leonid TALMACI

 

Annex no.1
to the Decision of the Council of Administration
of the National Bank of Moldova
no.269 of 17 October 2001

REGULATION
on risk-weighted capital adequacy

 

I. AUTHORITY

1. This Regulation is drawn up pursuant to the authority of the National Bank of Moldova as provided for in Articles 3, 11 and 44 of the Law on the National Bank of Moldova and Articles 14, 25 and 28 of the Law on Financial Institutions.
(Chapter I amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)

 

II. SCOPE

2. This Regulation establishes the requirements for the components of the total regulatory capital, minimum amount held by banks as regulatory capital, the risk weighted capital adequacy, capital management policies, being applicable to all commercial banks licensed by the National Bank of Moldova.
(Item 2 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)
(Item 2 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)

 

III. DEFINITIONS

3. Total Regulatory Capital includes:
The total amount of the followings:
Tier One Capital
Tier Two Capital 
Minus:
Shareholdings held in the capital of other banks, which hold the license of the National Bank of Moldova.
The trading securities of the bank shall be included in the calculation of the total regulatory capital
(Item 3 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)

4. Tier One Capital is the core constituent of total regulatory capital and consists of:
4.1. Total amount of the followings:
a) Ordinary shares/start-up capital (applicable to branches of foreign banks);
b) Preferred shares with unfixed dividends and preferred shares issued with fixed non-cumulative dividends for an unlimited period;
c) Capital surplus (funds obtained from the sale of shares in an amount exceeding the nominal value (fixed), included in letters a) and b);
d) Undistributed profit and reserves obtained or increased as a result of profit distribution;
e) Minus the calculated amount but unreserved of the allowances for impairment losses on asset and conditional commitments;
f) Minus total amount of the net intangible assets.
(Item 4.1 amended by the Decision of the NBM no.242 of 03.11.2011, in force as of 23.12.2011)
(Item 4.1 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)

5. Tier Two Capital is the supplementary component of total regulatory capital and consists of: 
5.1. Cumulative and partially cumulative preferred shares with unfixed maturity.
5.2. Surplus of capital related to cumulative and partially cumulative preferred shares, including preferred shares convertible in ordinary shares or other classes of preferred shares.
5.3 Subordinated debts with unfixed maturity, provided that the following requirements are met:
a) are unsecured and completely paid up;
b) are recoverable upon holder’s request;
c) debt reimbursement is demanded by the holder after a period of at least 5 years from the date of its occurrence, provided that a preliminary permission of the National Bank of Moldova is obtained, issued under Article 7 paragraph (2) of the Law on Financial Institutions;
d) may be available to cover losses without imposing the bank to cease its activity;
e) in case of liquidation, the debt is paid up after the payment of all claims of bank’s creditors, but before the payment of shareholder’s claims;
f) the contract does not stipulate any clauses that would cancel the features of subordinated debts.
(Item 5.3 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)

5.4 Subordinated debts with maturity and preferred shares, which repayment and/or conversion is provided for by the decision of their issue, repayable with limited term, providing that the following conditions are met:
a) are unsecured and completely payable;
b) have a minimum fixed term until maturity of at least 5 years;
c) are not repayable until maturity, upon holder’s request;
d) in case of liquidation, the debt is paid up after the payment of all claims of bank’s creditors, but before the payment of shareholders’ claims;
e) the contract does not stipulate any clauses that would cancel the features of the subordinated debts;
f) during the last 5 years before the maturity, an amortization of 20% will be applied each year in order to reflect the decrease in the value of these instruments;
g) the total amount of subordinated debts and shares, which repayment and /or conversion is provided for by the decision of their issue, with limited term included in Tier Two Capital, shall be limited to 50% of the amount of Tier One Capital.
5.5 Reserves from the revaluation of securities held by the bank, free of prohibitions, whose issuers are rated no lower than A-/A3 category assigned at least by one of the agencies Standard & Poor's, Moody's and Fitch IBCA. In case of issuer-companies, it is mandatory to be at the same time residents of countries with such ratings. If the assigned rating differs from one agency to another, the rating agency that assigned the lowest rating shall be taken into consideration.

Tier Two Capital includes favourable or unfavourable result from the revaluation of securities of respective issuers and the amount is calculated based on market price of securities determined on the last day of the reporting month.
Minus:
5.6. The amount of items 5.1, 5.2, 5.3, 5.4 and 5.5 that exceeds the amount of Tier One Capital.
(Item 5 amended and completed by the Decision of the NBM no.160 of 20.08.2014, in force as of 29.08.2014)

6. Minimum required capital – the minimum amount of Tier One Capital established by the National Bank of Moldova that the bank shall have and maintain in order to conduct financial activities, in accordance with the Article 26 of the Law on Financial Institutions.
(Item 6 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)
(Item 6 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)

61. Share capital - the amount of nominal (fixed) value of placed shares.
(Item 61 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)

7. Risk-weighted assets are the bank’s assets and certain conditional accounts (representing a risk for the bank), which are classified in categories with specific risk weights.  The risk weight assigned to a particular asset determines the percentage of that asset which is added with all other risk-weighted assets to determine the bank’s total amount of risk-weighted assets.

In case of off-balance sheet accounts (representing a risk for the bank), before assessing the risk weight, the factor of risk conversion shall be applied first and after that each converted category shall be assigned to a certain category of risk weighting, according to the type of assets or partner of the transaction.

8. Capital adequacy ratio – is used to measure the adequacy of the bank’s risk weighted capital, where total regulatory capital is the numerator and risk-weighted assets is the denominator:

IV. REQUIREMENTS

9. Starting with 30 September 2002, the amount of the Minimum Required Capital shall be established for Tier One Capital in the amount of MDL 32 million (thirty two).
Starting with 30 June 2004, the amount of the Minimum Required Capital shall be established for Tier One Capital in the amount of MDL 40 million (forty).
Starting with 30 June 2005, the amount of the Minimum Required Capital shall be established for Tier One Capital in the amount of MDL 45 million (forty-five).
Starting with 31 December 2005, the amount of the Minimum Required Capital shall be established for Tier One Capital in the amount of MDL 50 million (fifty).
Starting with 20 June 2008, the amount of the Minimum Required Capital shall be established for Tier One Capital in the amount of MDL 100 million (one hundred).
Starting with 31 December 2010, the amount of the Share Capital shall be established in the amount of MDL 100 million (one hundred).
Starting with 31 December 2011, the amount of the Minimum Required Capital shall be established in the amount of MDL 150 million (one hundred fifty).
Starting with 31 December 2012, the amount of the Minimum Required Capital shall be established in the amount of MDL 200 million (two hundred).
(Item 9 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)
(Item 9 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)
(Item 9 amended by the Decision of the NBM no.275 of 13.11.03, in force as of 21.11.2003)

10. The bank shall have and maintain the Tier One Capital in an amount not less than the Minimum Required Capital according to this chapter.
(Item 10 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)
(Item 10 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)

11. Minimum Capital Adequacy Ratio:
The bank shall have and maintain the risk weighted capital adequacy ratio at a level of at least twelve percent (12 %).
Starting with 30 June 2012, the bank shall have and maintain the risk weighted capital adequacy ratio at a level at least of sixteen percent (16 %).
(Item 11 amended by the Decision of the NBM no.301 of 20.12.2012, in force as of 27.12.2012)
(Item 11 amended by the Decision of the NBM no.242 of 03.11.2011, in force as of 23.12.2011)

 

IV1 CAPITAL MANAGEMENT POLICIES

111. The banks shall have internal policies and procedures on capital management, providing also for the monitoring and its evaluation to continuously maintain an adequate level of capital proportionate to risk profile and specific activity (size, complexity and business strategy of the bank).

112. Capital management policy shall include at least the following components:
a) capital planning process, taking into account the forecasts of the risks’ level assumed by the bank, sources that may be used for capital policy, dividend policy, etc.;
b) procedures for future bank compliance with capital requirements to mitigate the risks related to banking activity;
c) stress tests to identify the potential weaknesses and vulnerabilities on bank capital positions in the unpredictable conditions that will include credit risk, foreign exchange risk, interest rate risk, etc. and capital management plans, taking into account different stress scenarios on capital for unforeseen scenarios;
d) internal reporting process to ensure the bank management with adequate information for measurement, estimation and reporting of the amount, structure and quality of capital.
(Chapter IV1 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)

 

V. RESTRICTIONS ON CAPITAL DISTRIBUTION

12. The bank shall not distribute the capital if the National Bank of Moldova believes that the distribution of the capital will lead to non-compliance by the bank with the requirements provided in letters a) and c) paragraph (2) Article 7 of the Law on Financial Institutions. Upon the examination of bank’s request, the National Bank of Moldova shall take into account at least the following:
a) evolution of financial performance indicators of the bank related to revenue and profitability of capital, assets of the last three years;
b) evolution of bank’s prudential indicators for the last three years;
c) bank’s capacity to comply with the indicators provided at letter b);
d) impact of events, including subsequent ones, of economic and social nature on bank’s prudential indicators, assessed including by evaluating the stress test results carried out by the bank and/or the National Bank;
e) remedial, recovery, and resolution measures applied by the National Bank towards the bank.
The bank shall also take into account the opinion of the independent audit company on annual financial statements upon the distribution of the bank’s capital.
(Item 12 amended by the Decision of the NBM no.141 of 24.05.2017, in force as of 16.06.2017)
(Item 12 amended by the Decision of the NBM no.57 of 10.03.2015, in force as of 27.03.2015)
(Item 12 in the wording of the Decision of the NBM no.242 of 03.11.2011, in force as of 23.12.2011)
(Item 12 supplemented by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)
(Item 12 amended by the Decision of the NBM no.171 of 11.09.2008, in force as of 03.10.2008)

121. The bank shall require the permission of the National Bank of Moldova for the intention to distribute the capital in accordance with the definition of “capital distribution” referred to in Article 3 of the Law on Financial Institutions with 20 days before the bank’s Board meeting, where the capital distribution will be examined (dividend payment, purchase of shares by the bank, material aid exceeding 5 percent of the minimum required capital, etc.) or a proposal that shall be submitted to the general meeting on the capital distribution. Documents required for the NBM permission will be submitted according to Annex no.1.
Within 10 days from the receipt of the set of documents, according to Annex no.1, the National Bank shall issue the permission or shall communicate in writing the reason for refusal to issue the permission for the distribution of capital. 
If the National Bank of Moldova believes that further investigation is required for the examination of bank request, the term set up according to the second paragraph of this item may be extended up to 10 days, informing the bank about such decision. Banks shall ensure that the permission/refusal of the National Bank of Moldova for the distribution of capital is included on the meeting agenda of the bank’s Board and/or General Meeting of Shareholders, where the capital distribution is to be discussed.
The adoption of the decision to distribute capital by the bank’s Board or General Meeting of Shareholders without complying with the requirements imposed by the permission of the National Bank of Moldova or in the absence of such permission shall lead to the application of the sanctions provided for under Article 38 and/or Article 156 of the Law on Financial Institutions.
(Item 121 amended and supplemented by the Decision of the NBM no.57 of 10.03.2015, in force on 27.03.2015)
(Item
121 amended by the Decision of the NBM no.242 of 03.11.2011, in force as of 23.12.2011)
(Item
121 inserted by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)

 

VI. REPORTING REQUIREMENTS

13. All banks shall submit monthly reports, which show the calculation of Total Regulatory Capital, Risk-Weighted Assets, and Risk Weighted Capital Adequacy Ratio in accordance with the requirements of the normative acts of the National Bank of Moldova for reporting.
(Item 13 amended by the Decision of the NBM no.242 of 03.11.2011, in force as of 23.12.2011)
(Item 13 amended by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010)

 

VII. FINAL PROVISIONS

14. This Regulation shall be published in the Official Monitor of the Republic of Moldova and becomes effective starting with 30 September 2002.

15. From the effective date, the Regulation on risk-weighted capital adequacy shall be abrogated (approved on December 25, 1997 by Decision no.161 of the Council of Administration of the National Bank of Moldova), (Official Monitor of the Republic of Moldova no.8 of 30 January 1998), with further amendments and completions.

 

Annex no.1

Documents necessary for obtaining the permission of the National Bank of Moldova

1. A request for obtaining the permission, submitted to the Governor of the National Bank of Moldova, signed by the President of the bank’s Board on the capital distribution.

2. Draft Decision of the bank’s Board/General Meeting of Shareholders on capital distribution.

3. Information note to the draft document mentioned in item 2, indicating the purpose, method of capital distribution, the expected amount for distribution to the bank’s shareholders, as well as other information that is useful according to the bank.

4. The preliminary opinion according to the draft of the report, or the report of the independent audit company on the financial statements.
[Annex no.1 amended by the Decision of the NBM no.141 of 24.05.2017, in force as of 16.06.2017]
[Annex no.1 supplemented by the Decision of the NBM no.57 of 10.03.2015, in force as of 27.03.2015]
[Annex no.1 supplemented by the Decision of the NBM no.242 of 03.11.2011, in force as of 23.12.2011]
[Annex no.1 inserted by the Decision of the NBM no.57 of 26.03.2010, in force as of 07.05.2010]