The relevant draft law was developed by the National Commission on Financial Market (NCFM) and is aimed at harmonizing the national legislation with the EU standards.
The essence of the securitization model is to isolate a part of homogeneous credit assets (e.g., a bank) that generate stable income and sell them to a specially created Special Purpose Vehicle (SPV). This isolates the assets from the risk of bankruptcy of the bank itself.
The SPV then issues new financial instruments (bonds) secured by this pool of loans to the stock market. Investors buy them and receive income at the expense of payments on the original loans.
Main benefits for the Moldovan economy
- Alternative sources of financing: Businesses and banks get access to money from institutional investors (investment and pension funds), bypassing the classical bank lending sector.
- Reduction of credit risks: Banks transfer the risks of non-repayment of loans to investors, which stabilizes the banking system.
- Increased liquidity: Funds “frozen” in long-term loans (e.g., 20-year mortgages) are returned to the bank’s circulation as soon as securities are issued.
- Capital availability: Lowering the cost of raising money for banks in the long run can lead to cheaper credit for end consumers and businesses.
Current context for reform
The establishment of the legal framework is directly linked to Moldova’s commitment to harmonize national legislation with EU norms (acquis communautaire) in preparation for integration into the European economic area. The launch of the securitization mechanism expands the capacity of the National Bank of Moldova (NBM) and the National Commission of Financial Market (NCFM) to regulate the non-banking and banking sectors.
The legal status and taxation of special purpose vehicles (SPVs) in Moldova will be adapted to the requirements of EU Regulation No. 2017/2402 and aims to make these structures transitory (“transparent”) elements of a financial transaction. The main objective of the new legislation is to eliminate double taxation and guarantee investors absolute protection of their capital.
It is planned to transfer three types of assets (mortgages, leasing and microcredits) to the balance sheet of SPVs in Moldova, and both residents of the Republic of Moldova and international funds will be able to act as investors.
The regulatory framework developed by NCFM is initially focused on the maximum coverage of financial instruments and attraction of diversified capital.
