RESOLUTION OF NATIONAL BANK OF THE REPUBLIC OF MOLDOVA

of May 24, 2018 No. 114

About approval of Regulations about approach to market risk according to the standardized approach

Based on the item d) parts (1) the Art. 5, parts (1) the Art. 11, the item c) parts (1) the Art. 27, the item and) Art. 44 of the Law on National Bank of Moldova No. 548-XIII of July 21, 1995 (pereopublikovan: The official monitor of the Republic of Moldova, 2015, Art. No. 297-300, 544), with subsequent changes and amendments, Art. 60 and 71 of the Law on activities of banks No. 202 of October 6, 2017. (The official monitor of the Republic of Moldova, 2017, Art. No. 434-439, 727), with subsequent changes and amendments, DECIDES: Executive committee of National Bank of Moldova

1. Approve Regulations about approach to market risk according to the standardized approach according to appendix to this resolution.

2. The regulations specified in Item 1 of this resolution become effective on July 30, 2018.

3. From the date of entry into force of the regulations specified in Item 1 of this resolution, banks will provide compliance of the activities, including domestic policy and regulations, to its requirements.

Appendix No. 1

to the Resolution of Executive committee of National Bank of Moldova of May 24, 2018 No. 114

Regulations about approach to market risk according to the standardized approach

These regulations realize the following acts of the European Union:

Article 4 Item (1) subitems 50, 68, 69, 70, 72, 84, 85, 86, 87, 92, 96, 97, Article 102, Article 103, Article 104, article 105 Items (1) - (13), Article 106, Article 325 - 327, article 328 Item (1), article 329 Items (1) and (2), Article 330 - 335, article 336 Items (1) and (4), Article 338-351, article 352 Items (1) - (5), article 353 Items (1) and (2), article 354 Items (1), (2), (4) and (5), Article 355-357, article 358 Items (1) - (3) and (5), Article 359-361 and appendix II of Regulations No. 575/2013 of the European Parliament and Council of the June 26, 2013 about prudential requirements to credit institutions and investment firms making changes to Regulations (EU) the No. 648/2012, changed and added with No. 2015/62 delegated by Regulations of the Commission (EU) of October 10, 2014.

Regulations about enforcement (EU) No. 945/2014 of the Commission of September 4, 2014 about establishment of some technical standards about enforcement of relevant indicators with the corresponding diversification according to Regulations (EU) No. 575/2013 of the European Parliament and Council

The delegated regulations of the Commission (EU) No. 525/2014 of March 12, 2014 about amendment of Regulations (EU) No. 575/2013 of the European Parliament and Council regarding requirements to technical standards of regulation for market determination

The delegated regulations of the Commission (EU) No. 528/2014 of March 12, 2014 about amendment of Regulations (EU) No. 575/2013 of the European Parliament and Council regarding requirements to technical standards of regulation for other risks, than risk of delta transactions within the standardized approach of market risk

Regulations about enforcement (EU) No. 2015/2197 of the Commission of November 27, 2015 about establishment of technical standards about enforcement regarding requirements to strongly correlated currencies according to Regulations (EU) No. 575/2013 of the European Parliament and Council

Chapter I. General provisions

Part 1. Subject, scope

1. These regulations establish rules according to requirements of own means for market risk according to the standardized approach for calculation of requirements of own means according to regulations of National Bank of Moldova about own means and requirements of the capital.

2. These regulations are applied to banks, legal entities of the Republic of Moldova and departments of the Republic of Moldova of banks of other states (further - banks).

3. Banks observe the obligations provided by these regulations on individual basis. On circumstances, banks carry out on measure and according to the methods provided in Chapter IV of Regulations about supervision of banks on the consolidated basis, the Executive committee of National Bank of Moldova No. 101/2020, approved by the Resolution the obligations provided by these regulations on the consolidated basis.

4. On condition of observance of item 5 and only for calculation of net line items and requirements of own means on the consolidated basis according to these regulations banks can use line items of one bank for offset of line items of other bank.

5. Banks can apply provisions of item 4 only on condition of receipt of permission of National Bank of Moldova if the following conditions are in total satisfied:

a) within group there is satisfactory allocation of own means;

b) the legal or contractual regulating basis in which the banks which are able to guarantee mutual financial aid within group operate.

6. If there are companies in other states, except Item conditions 5, it is necessary to satisfy the following conditions in total:

a) these companies were resolved in other state and correspond to determination of bank, recognized from other states;

b) these companies observe, on individual basis, requirements of own means, equivalent to the requirements provided by these regulations and regulations of National Bank of Moldova;

c) in these states there are no regulations which could influence considerably money transfer within group.

Part 2. Determinations

7. The terms, concepts and expressions used in these regulations have the determinations provided by the Law on activities of banks No. 202 of October 6, 2017 (further - the Law No. 202 of October 6 2017) and the regulations of National Bank of Moldova published for application of the specified law.

8. In these regulations the following determinations are established:

1) internal hedging (hedging) - is line item which considerably compensates constituent elements of risk in one line item or set of line items of trade portfolio and line item or set of line items out of trade portfolio;

2) the simple agreement of repo - the transaction of the redemption of one or more similar, not complex assets, unlike basket of assets;

3) the acknowledged exchange - is the exchange which in total satisfies the following conditions:

a) is the controlled market according to the subitem 10) of these regulations;

b) has the mechanism of offset via which the agreements specified in appendix No. 1 to these regulations are subject of requirements of daily margin which, according to competent authorities, provides the corresponding protection;

4) the delta - is the expected variation of cost of the option in relation to variation of cost of the main tool of the option;

5) financing of inventories - is line items in which physical stocks were sold the forward, and costs of financing was refrigerated to sale date the forward;

6) the financial instrument is any of the following:

a) any agreement generating at the same time financial asset (for one of the parties) and financial debt or the tool of the capital (for other party);

b) the tool specified in Art. 4 of the Law on the capital market No. 171 of July 11, 2012;

c) derivative financial instrument;

d) primary financial instrument;

e) monetary instrument.

Specified in podp.a), b) and c) tools are financial instruments if only their cost follows from the cost of the underlying financial instrument or other Basic Element, the indicator or indicator.

7) binding to model - any assessment which shall be reflected in basic level, extrapolated or calculated in any other manner, proceeding from one or several entering data of the market;

8) binding to the market - assessment of directly available line items on closing price which come from independent sources, including the stock exchange quotations, electronic quotations or quotations happening from several famous independent brokers;

9) the basic obligation - the obligation used for establishment of cash settlement cost of the credit derivative financial instrument.

10) the controlled market - the controlled market according to the Law on the capital market No. 171 of July 11, 2012;

11) trade portfolio - all line items on financial instruments and goods in ownership of bank or with intention of implementation of transactions, or with intention of covering of line items with intention of implementation of transactions;

12) line items in ownership with sale intention - are any of the following:

a) line items at own expense and the line items coming from services for clients and from market grouping;

b) the line items intended for short-term resale;

c) the line items using differences real or expected for the short-term period between the purchase value and cost of sale, or other variations of the prices or interest rate;

13) multilateral trade system - multilateral trade system according to the Law on the capital market No. 171 of July 11, 2012;

14) the convertible security - security which, as a rule at the choice of the owner, can be exchanged for other security;

15) independent check of the prices - process of permanent check of accuracy and independence of the market prices or the entering data used for binding to model;

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