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LAW OF THE REPUBLIC OF MOLDOVA

of October 3, 2016 No. 232

About improvement of banks and bank resolution

(as amended on 27-02-2020)

 

This organic law is adopted based on provisions of article 106-1 of the Constitution by acceptance on itself the Government of responsibility to Parliament.

Section I. General provisions

Article 1. - (1) This law establishes rules and procedures for improvement of banks and the resolution of banks of the Republic of Moldova.

(2) Proceeding from this law, in case of execution of the powers in the relations with bank the National Bank of Moldova considers nature of the performed activities, structure of the shareholder, risk profile, scales, legal status and extent of its consolidation with financial system in general, expansion and complexity of its activities, and also measure in which the bank represents services or investing activities thus as they are determined according to provisions of the legislation on the capital market.

Article 2. – In this law the following terms and expressions are used:

1) the agreement on compensation – any agreement or condition according to which several requirements or obligations can be transformed to single network of claims, including agreements on mutual calculations with immediate reckoning according to which incident of certain event (anyway and everywhere where it is determined), obligations of the parties immediately are subject to collection or are extinguished and, anyway, are transformed or replaced with one claim;

2) the agreement on mutual compensation – any agreement or condition on which two or more requirements or obligations between the bank subjected to the resolution and the partner, depend on permission from each other;

3) the shareholder – the shareholder or other tools of property;

4) the injured shareholder – the shareholder or other tools of property whose documents were cancelled owing to application of the measures provided in Item h) parts (1) Article 231;

5) process of the resolution – the decision to apply the resolution of bank according to Article 58; use of the tool of the resolution or application of one or more rezolyutsionny measures;

6) the help with liquidity in emergency situations – as it is determined in article 2 of the Law on National Bank of Moldova No. 548/1995;

7) competent authority – competent authority on regulation, licensing and prudential supervision of activities of banks according to provisions of the Law on activities of banks No. 202/2017;

8) rezolyutsionny body – body, authorized to use tools of the resolution and to perform powers of the resolution according to this law;

9) the macroprudential national appointed authority - the body responsible for coordinating of implementation of macroprudential policy and activities for the prevention and permission of system financial crisis situations according to the Law on National committee on financial stability No. 209/2018;

10) bank – the legal entity determined thus as it is this in article 3 of the Law on activities of banks No. 202/2017;

11) the bridge bank – the legal entity who meets the requirements, stipulated in Article 111;

12) recovery capability – capability of bank to redeem the financial position after its considerable deterioration;

13) requirements to own funds – the requirements provided in the regulations of National Bank of Moldova published according to article 60 of the Law on activities of banks No. 202/2017;

14) competence of reduction in cost or conversion – the competence specified in Article 220 and in Items e) - i) parts (1) Article 231;

15) competence of the translation – competence of the translation of shares and other tools of property, debt instruments, assets, rights or obligations or any their combination from the bank subjected to the resolution, the receiver according to Items c) or d) parts (1) Article 231;

16) financial contracts;

a) agreements on securities, including purchase agreements, sales or crediting of securities, group or index of securities or options for security, group or index of securities or the redemption repo, or repo reverse with participation of any such securities, groups or indexes of securities;

b) agreements on goods, including the purchase agreement, sale or loan of goods, groups or indexes of goods for future delivery or options for goods, commodity group or the commodity index or the redemption repo or repo reverse with participation of any such goods, groups or the commodity indexes;

c) futures and forwards, including agreements (except commodity) about purchase, sale or transfer of goods or any kind, services, the rights or interests at determined price at a given time in the future;

d) swaps, including interest rate swaps and options for interest rate; agreements on the currency rate or other foreign exchange market; currency swaps, on indexes of shares or shares, indexes on debt or debts, on indexes of goods or on goods, weather conditions; to emissions or inflation or swaps on comprehensive income from difference of the credit or credit swaps or swaps of any similar agreement or transaction which is subject to numerous transactions in the markets of swaps or derivative financial instruments;

e) the agreement of interbank credit if the credit is issued for the term which is not exceeding three months;

f) the framework agreements concerning all agreement types or agreements mentioned in subitems and) - e);

g) other contracts and agreements which are qualified as financial;

17) the central partner – person who is the party between the organizations participating in system and which acts as the exclusive partner of these organizations from the point of view of their payment orders / orders of the translation;

18) the injured creditor – the creditor whose debt is connected with element of the debt reduced or converted into shares or other tools of property owing to accomplishment of competence of reduction in cost or conversion in the context of the instrument of internal recapitalization;

19) system crisis – violation of financial system which can lead to serious negative consequences for the domestic market and real economy and which can be provoked by any financial intermediaries, the markets and infrastructures as any of them can be system in uncertain measure significant;

20) acceptable debts – debt and equity instruments of bank which are not qualified as tools of the fixed own assets of the first level, tools of additional own funds of the first level or tools of own funds of the second level which are not excluded from scope of the instrument of internal recapitalization;

21) the deposit – the contribution determined thus as in the Law on activities of banks No. 202/2017;

22) acceptable deposits – deposits which are not included in category of non-quaranteed deposits according to the Law No. 575-XV of December 26, 2003 on guaranteeing deposits in bank system;

23) the guaranteed deposits – deposits which payment is guaranteed in warranty limits, according to the Law No. 575-XV of December 26, 2003 on guaranteeing deposits in bank system;

24) the receiver – person to whom alienate shares, other documents on property, debt instruments, assets, the rights or other obligations or any their combination, from the bank subjected to the resolution;

25) the termination right – the right to terminate the agreement, to accelerate accomplishment, to extinguish or compensate the obligation or the right following from any condition with similar effect based on which it is possible to suspend, change or extinguish obligations of the either party of the agreement or from condition which prevents generation of agreement obligation, the obligation which would exist in its absence;

25-1) own funds - the amount of own funds of the first level and own funds of the second level as they are determined in the regulations of National Bank of Moldova published according to articles 60 and 61 of the Law on activities of banks No. 202/2017

26) critical functions – activities, services or transactions which violation can lead to interruptions in deliveries of the main services for real production sector or to failures in financial stability, considering the size, market share, internal and external interactions, complexity of bank or cross-border activities of bank; relevantly, in particular, to replace opportunities these types of activity, services or transactions;

27) the instrument of internal recapitalization – the mechanism by means of which the rezolyutsionny body performs powers on reduction of cost or converting of debts of the bank subjected to the resolution according to Articles 151-153;

28) the instrument of separation of assets – the mechanism by means of which the rezolyutsionny body transfers assets, the rights or obligations of the bank subjected to the resolution, the controling mechanism by assets according to Articles 138-150;

29) the instrument of sale of business – the mechanism by means of which the rezolyutsionny body translates the shares or other tools of property issued by the bank subjected to the resolution, or assets, the rights and obligations of the bank subjected to the resolution, the buyer who is not the bridge bank, according to Articles 94-109;

30) the corresponding tools of the capital according to provisions of Articles 151-230 – tools of own funds of the second level and tools of additional own funds of the first level according to requirements of National Bank of Moldova;

31) debt instruments in sense of Items g) and h) parts (1) Article 231 – bonds and other forms of the transferred debts, tools which create or recognize debt, and the tools granting the right to acquisition of debt instruments;

32) tools of the fixed own assets of the first level - the capital tools meeting the requirements provided by the regulations of National Bank published for the purpose of application of provisions of articles 60 and 61 of the Law on activities of banks No. 202/2017;

32-1) tools of additional own funds of the first level - the capital tools meeting the requirements provided by the regulations of National Bank of Moldova published for application of provisions of articles 60 and 61 of the Law on activities of banks No. 202/2017;

33) tools of own funds of the second level - the tools of the capital or subordinated loans meeting the requirements provided by the regulations of National Bank published for application of provisions of articles 60 and 61 of the Law on activities of banks No. 202/2017;

34) property tools – shares and other tools of the capital which grant the property right tools which can be converted in or grant the right of share purchase, or other tools of the capital and tools representing the interests in shares or in other tools of the capital which grant the property right;

35) the tool the bridge bank – the mechanism by means of which the rezolyutsionny body translates the shares or other tools of property issued by the bank subjected to the resolution, or assets, the rights or obligations of the bank subjected to the resolution, the bridge bank according to Articles 110-137;

36) the investor – any person who entrusted money or financial instruments to investment firm for provision of financial investment services;

37) liquidation – development of asset cost of bank;

38) the main activities – lines of activities and the services connected with it which are important sources of the income, profit or cost of the franchize for bank;

39) measure for management of crises – operations of the resolution or appointment of the special managing director according to Article 66 or one person according to Articles 192 or 259;

40) measure for the prevention of crises – implementation of powers for direct remedial action or obstacles in way of possibility of improvement of bank according to Article 21, implementation of powers for direct remedial action or obstacles in way of possibility of the decision, according to Articles 35-41, application of measures for early intervention, appointment of the interim manager or implementation of powers on reduction in cost or conversion according to Articles 219-230;

41) the microcompanies, medium and small enterprises – the companies according to the determination provided in article 2 of the Law No. 206-XVI of July 7, 2006 on support of the sector of small and medium scale enterprises;

42) the guaranteed obligation – debt for which the creditor's right to payment, or in other form of obligation fulfillment is provided with the privilege, pledge or other agreement of real guarantee, or any other method of guarantee, irrespective of the legal form in which the guarantee, including the obligations resulting from transactions of repo or from other contracts of real guarantee with cession of property is founded;

43) the guaranteed bond – the bond issued by bank;

44) governing body of bank – council and members of governing body of bank;

45) the controlled market – the market according to determination in provisions of the legislation on the capital market;

46) the procedure of involuntary liquidation of bank – the procedure of involuntary liquidation of bank according to requirements of National Bank of Moldova according to provisions of the Law on liquidation of banks No. 550/1995;

47) rate of own funds - ratio between categories of own funds and total cost of risk exposures as they are determined in the regulations of National Bank of Moldova published for application of article 60 of the Law on activities of banks No. 202/2017;

48) conversion rate – the factor determining the number of shares or other tools of property when the obligation of certain class is transformed with reference to one tool from this class or on single cost from one debt;

49) the resolution – use of the tool of the resolution for the purpose of achievement of one or several purposes of the resolution according to Article 56;

50) extraordinary state financial support – government assistance in understanding of article 3 of the Law No. 139 of June 15, 2012 on government assistance, for preserving or recovery of viability, liquidity and bank solvency;

51) the generalized amount – the total amount by means of which the rezolyutsionny body determined that shall reduce or convert acceptable debts according to Article 171;

52) the controling mechanism assets – the legal entity who meets the requirements, stipulated in Article 139.

Article 3. – (1) According to this law the National Bank of Moldova is competent authority, and also rezolyutsionny body.

(2) For the purpose of implementation of the powers specified in part (1), National Bank of Moldova:

a) provides, within the internal organization, operational independence and prevention of conflict of interest between the structure performing function of the resolution according to this law and the structure exercising supervision and also between the structure performing function of the resolution and the structures performing other functions according to legislation provisions;

b) guarantees what has necessary resources and operational capability, including experienced personnel, for application of rezolyutsionny actions and that it is capable to carry out the powers with necessary speed and flexibility for realization of tasks of the resolution;

c) based on this law establishes for the personnel involved in accomplishment of function of the resolution, accurate lines of the reporting and structural separation for the personnel performing tasks on supervision or for the personnel involved in accomplishment of other functions of National Bank of Moldova;

d) claims and publishes, for the purpose of this Article, necessary internal relevant regulations including those which concern professional secrecy and exchange of information between responsible structures with various positions which are taken up according to the law;

e) establishes procedures in order that structures and persons who on behalf of National Bank of Moldova perform function of supervision and, respectively, function of the resolution closely cooperated by preparation, planning and award enforcement of the resolution.

Article 4. – The National Bank of Moldova as rezolyutsionny body is contact body for ensuring cooperation and coordination with relevant organs of other states.

Article 5. – The National Bank of Moldova as body of the resolution informs the Ministry of Finance on all decisions made based on this Law, and in case of other decisions which have direct tax effects, receives approval of the Government before implementation of the decision, having submitted in this sense the application to the Ministry of Finance according to provisions of this law.

Article 6. (1) – Tools of the resolution protect public interest on protection of financial stability and are applied when it is necessary to reach resolution task, respectively, when the bank cannot be liquidated according to the procedure of involuntary liquidation as this fact can destabilize financial system.

(2) In case of use of tools and measures of the resolution of the requirement, provided in the Law No. 139 of June 15, 2012 on government assistance, are not applied.

Section II. Preparation

Chapter I. Planning of improvement and resolution

Part 1. General provisions

Article 7. – (1) the Banks owning considerable share in national financial system develop own rehabilitation plans according to Articles 9-22 and constitute subject of some individual plans of the resolution according to Articles 23-31.

(2) In case of application of provisions of this Article it is considered that the bank has considerable share in national financial system if carries out any of the following requirements:

a) the total cost of its assets exceeds the level established by National Bank of Moldova according to its published regulations.

b) the share of general assets in gross domestic product exceeds 20%, except for case when the total cost of assets is lower than the level established by National Bank of Moldova according to its issued resolution.

Article 8. – (1) In departure from provisions of Articles 9-31, considering the elements provided by part (2) Articles 1, and also assessment of consequences as a result of provision of the increased difficulty of bank and its involuntary liquidation for the financial markets, other banks, for financing terms and for economy in general, and also the possible considerable negative effects caused by provision of the increased difficulty of bank National Bank of Moldova as competent authority and as rezolyutsionny body can establish the simplified requirements according to the plan of improvement and to the plan of the resolution of the relevant bank relatively:

a) content and details of the plans for improvement and the resolution provided by Articles 9-31;

b) date to which the forefront of improvement and plans of the resolution, and frequency of updating of these plans which can be less, than the frequency provided by this law will be developed;

c) content and the detail level of information requested from banks according to Items and) and b) parts (1) Articles 13, parts (1) Article 31 and parts A and B of appendix which is component of this Law;

d) the detail level of information necessary for assessment of the possibility of the decision specified in Articles 32-34 and part C of appendix which is component of this law;

(2) part Assessment (1) it will be performed by National Bank of Moldova, as necessary, after consultation with the appointed national macroprudential authority.

(3) the National Bank of Moldova as competent authority and, as necessary, as rezolyutsionny body can demand from bank to which the simplified conditions, according to part (1), transition to complete application of the requirements provided in Articles 9-31, with determination and the message of term of compliance of bank to new requirements were applied at any time.

(4) Application of the simplified requirements provided in part (1), does not influence powers of National Bank of Moldova as competent authority or, as necessary, rezolyutsionny body to take measures for the prevention of crises or measure for management of crises.

(5) the National Bank of Moldova shall not enact the measures provided in plans and the resolution of improvement and can apply any other measures or perform any competence which has, for the purpose of accomplishment of powers of competent authority or rezolyutsionny body, as necessary.

(6) the National Bank of Moldova issues resolutions for enforcement of provisions of Articles 9-31, including and those that treat development and assessment of plans of the resolution of improvement.

Part 2. Improvement planning

Article 9. – (Each bank develops 1) and supports the rehabilitation plan providing measures which the bank shall undertake for recovery of the financial position, in case of its considerable deterioration.

(2) Rehabilitation plans are component of the formal base of management founded by bank according to article 38 of the Law on activities of banks No. 202/2017.

Article 10. – Banks update rehabilitation plans at least once a year or, upon the demand of National Bank of Moldova as competent authority, with bigger frequency and anyway, after any change of organizational or legal structure, or activities or financial position of bank which can influence considerably rehabilitation plans, or require their change.

Article 11. – In case of improvement plan development banks shall not be based on access to extraordinary public financial aid at all.

Article 12. – Banks include in the rehabilitation plan, as necessary, the analysis of provisions when can require in the conditions provided by the plan access to the eases rendered by Central Bank and identify assets which can be qualified as real guarantees.

Article 13. – (Rehabilitation plans shall include 1) Without causing damage to provisions of Articles 7-31,:

a) information provided in parts A of appendix, and also information according to the regulations published by National Bank of Moldova;

b) measures which can be accepted by bank when the conditions of early intervention provided by Articles 42-44 are satisfied;

c) adequate conditions and procedures for guaranteeing application of timely measures of improvement, and also improvement wide range of possibilities.

(2) Rehabilitation plans are developed taking into account series of the scenarios of financial and macroeconomic large-scale crisis corresponding to specific characteristics of bank, and also the system elements, crisis scenarios specific to legal entities individually and also to groups in general.

Article 14. – The National Bank of Moldova as competent authority can require from bank to keep detailed accounting of financial contracts which participant is.

Article 15. – The governing body of bank estimates and approves the rehabilitation plan before its transfer to National Bank of Moldova as competent authority.

Article 16. – (1) the Banks obliged to constitute rehabilitation plans according to Article 9, shall transfer rehabilitation plans for assessment to National Bank of Moldova as competent authority.

(Banks shall show 2) well to National Bank of Moldova as competent authority that rehabilitation plans fulfill requirements of Article 17.

Article 17. – Within 6 months from the date of receipt of the rehabilitation plan the National Bank of Moldova as competent authority analyzes the rehabilitation plan and estimates in what measure the bank observes the requirements provided in Articles 9-15, and the following criteria:

a) application of the measures proposed in the rehabilitation plan reasonably will provide preserving or recovery of viability and financial position of bank, considering the previous measures taken or planned by bank;

b) implementation of the plan and the tasks on improvement determined in it will be reasonably expedited and is effective in provision of financial crisis, as much as possible avoiding considerable negative effects on financial system, including in scenarios in which other banks shall implement rehabilitation plans in the same period.

Article 18. – In case of assessment of adequate nature of the rehabilitation plan according to Article 17, the National Bank of Moldova as competent authority considers degree in which the capital structure and financings of bank corresponds to complexity of its organizational structure and profile of risk.

Article 19. – (1) the National Bank of Moldova takes measures in order that the structure performing supervision function transferred the rehabilitation plan to the structure performing function of the resolution.

(2) the National Bank of Moldova takes measures in order that the structure performing function of the resolution estimated the rehabilitation plan for identification of the measures containing in it which can negatively affect possibility of the decision of bank and could make recommendations about these aspects to the structure performing supervision function.

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