Moldova Moves to Launch a Covered Bond Market

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The introduction of this new financial instrument was discussed at an international conference in Chișinău, dedicated to the transition from traditional mortgages to a secured bond market within the framework of long-term housing finance. Participants at the event discussed the harmonisation of legislation with EU directives and signed a memorandum of cooperation between the National Bank of Moldova (NBM) and the European Mortgage Federation (EMF-ECBC).

The harmonisation of national legislation with EU Directive 2019/2162 removes the main barrier to the Moldovan capital market — the lack of reliable long-term investment instruments. All conference participants touched upon this topic in one way or another, placing their hopes on a successful reorientation of the entire financial system towards a long-term trajectory.

How covered bonds will revitalise the financial system

The adoption of EU standards and the launch of the covered bond market will have a profound systemic impact, transforming Moldova’s economy across three interlinked levels. The main economic benefit of the reform lies in the creation of a sustainable financing chain stretching from major international capital markets to the end consumer.

At the level of commercial banks, this transition will radically resolve a long-standing structural problem — the risk of a liquidity mismatch, where long-term mortgage loans are granted using short-term deposits from the public. The sale of bonds will provide financial institutions with a stable, predictable and cheaper source of long-term funding.

Anca Dragu, Governor of the National Bank of Moldova: “Long-term housing finance requires clear rules, trust and vigilant risk management. This instrument will provide the banking sector with a stable source of long-term funding, will contribute to the development of the capital market and, most importantly, will make it easier for citizens to access affordable and sustainable mortgage loans. The development of a modern legislative framework in line with European Union standards and financial stability remain our key priorities.”

According to Dragu, the regulator is currently in the active phase of drafting a new bill that directly transposes the provisions of EU Directive 2019/2162 into national law. The document is designed to rigorously protect investors’ rights and enhance transparency in the financial sector.

This priority was emphasised by Alexandra Savva, a representative of the National Bank of Moldova, who presented the framework of future Moldovan legislation on mortgage bonds to the participants.

“We have drawn up a detailed roadmap of the steps required for the practical implementation of this instrument in the local market. The covered bonds model will resolve a structural problem facing Moldovan banks — their reliance on short-term deposits from the public. Instead, they will gain access to funding for 10, 15 or more years, which will help to balance their balance sheets.”

Partners have no doubts

Experts point out that, unlike traditional corporate bonds, this instrument offers dual protection – it is secured both by the bank’s own obligations and by a pool of high-quality assets (such as collateral from mortgage loans).

It is also significant that this sends a signal to European capital. The existence of a transparent regulatory framework in the country, harmonised with EU requirements, reduces legal and infrastructure risks for large institutional investors willing to invest in Moldova’s economy.

Luca Bertalot, Secretary-General of the Council on Secured Obligations and Mortgages (CBMC):

“Our partnership aims to deeply integrate housing finance with capital markets in order to attract long-term investment. Covered bonds are a European mechanism that has been tried and tested over decades, providing a dual layer of protection for investors. Such cooperation will not only strengthen Moldova’s financial system but will also directly contribute to supporting young families and the country’s sustainable economic development as part of the European integration process.”

During the technical panel, Sergiu Oprescu, Chairman of the Board of Directors of Alpha Bank Romania and Executive Director for the International Network at Alpha Bank Group, discussed in detail the reforms required of EU candidate countries:

“The development of covered bond markets is a priority for states seeking full integration into the European economic area. Given the current maturity of Moldova’s financial sector, the creation of transparent regulatory conditions is the key factor in attracting major institutional investors from Europe.”

Sanna Eriksson, Chief Executive of OP Mortgage Bank (Finland), moderated a session on the inner workings of mortgage pool management within banks.

“The main challenge for banks when transitioning to the covered bonds model is the effective management of the so-called cover pool. Banks must learn to ensure a continuous and high-quality link between the original individual borrowers, the commercial banks acting as issuers, and long-term capital. Experience in Finland and across Europe shows that automating these processes minimises systemic risks,” said Sanna Eriksson.

In turn, domestic and foreign investors will gain access to a qualitatively new, ultra-reliable asset class with dual collateral, protected both by the bank’s own balance sheet and by a high-quality property pool, which will serve as a genuine alternative to government securities. Ultimately, these changes will have a direct impact on ordinary citizens: thanks to the inflow of long-term capital, mortgage rates will become less dependent on current inflationary shocks, whilst the mortgage programmes themselves will be accessible, predictable and sustainable in the long term.

Market implications: a look to the future

The conference confirmed that the transition to regulation in line with European standards is not merely a technical requirement from Brussels, but the foundation for creating a fully-fledged, deep capital market in Moldova.

In his speech, Dumitru Budianschi, Chairman of the National Commission for the Financial Market (CNPF), emphasised the infrastructural and regulatory readiness of the non-banking sector. He described in detail the prospects for the development of the covered bonds segment, specifically in the context of the legal framework required for the safe launch of this new instrument.

The head of the CNPF specifically addressed the technical maturity of the market infrastructure and the actual capacity of professional capital market participants to launch, issue and freely trade these financial instruments on the local market. This included who would issue covered bonds and where they would be traded.

Who will issue covered bonds?

The issuers of covered bonds will be commercial banks in Moldova that possess a high-quality mortgage portfolio and have undergone rigorous authorisation by the National Bank of Moldova (NBM).

Criteria for issuers. Not all financial institutions will be able to issue such securities. The issuing bank must have its authorised capital fully paid up, a high level of liquidity and a transparent governance structure.

Collateral for the issue. As collateral (the ‘cover pool’), the bank uses high-quality, long-term mortgage loans already granted for commercial and residential property. If borrowers default on their loans, the bank is obliged to promptly replace these assets in the pool with other high-quality assets.

Where will they be traded?

The trading of the secured bonds will be divided into two key stages:

The primary market (placement). The initial issue and sale of long-term securities will take the form of an open public offering. The main buyers will be institutional investors — insurance companies, private investment funds and, in the future, pension funds. Major banks (such as maib) already have experience of successful programmes for issuing ordinary corporate bonds, which will facilitate the launch of this new instrument.

Secondary market (trading). The bonds will be freely traded on the Moldovan Stock Exchange (Bursa de Valori a Moldovei). As Dumitru Budianski emphasised, the authority is currently working actively to establish the technical and regulatory infrastructure to ensure these securities achieve high liquidity on the secondary market, and that professional market participants can trade freely without unnecessary bureaucratic barriers.

Systemic impact on the capital market

According to the reformers, the introduction of covered bonds deals a powerful blow to the ‘bank-centric’ nature of the Moldovan financial system, where the savings of citizens and businesses are concentrated exclusively in short-term deposits. These bonds will create a new, reliable niche on the stock exchange. They will provide healthy competition for government securities, offering investors a balanced combination of yield and reliability.

As Moldovan legislation is being harmonised with European legislation, these securities will become accessible to major European investment funds. In the long term, this will open up access to long-term capital from the EU, bypassing complex international credit facilities.

The procedure for issuing covered bonds requires rigorous international auditing and disclosure of information by commercial banks, which will significantly improve corporate governance standards in the country. Participants noted that this would bring greater discipline to the financial sector and enhance issuers’ transparency.

The ‘From Mortgages to Markets’ conference clearly demonstrated that the National Bank, the National Commission for the Financial Market (CNPF) and the banking community are all prepared to act in a concerted manner. By linking the primary property market to the stock exchange infrastructure, Moldova gains a powerful domestic driver of growth.

For banks, this means financial stability; for investors, ultra-reliable assets; and for citizens, affordable and predictable housing. Furthermore, there are political motivations at play: the creation of a transparent covered bond market regulated to European standards will provide the Moldovan authorities with yet another compelling argument in the process of European integration.

This story was translated with the assistance of artificial intelligence.The translation was also reviewed by the Logos Press editorial team.

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