CAPITAL ADEQUACY OF BANKS IN MOLDOVA IS TWO TIMES HIGH THAN IN EU COUNTRIES – PARTNER OF THE FUND HORIZON CAPITAL (USA)

Capital adequacy in commercial banks of Moldova is two times higher than in the EU countries, said Vasily Tofan, senior partner of the investment fund Horizon Capital (USA), member of the Administrative Council of maib bank. In an interview with the Infotag agency, he said that the ratio of banks' own capital in the banking system of Moldova is approximately 30%.

“The regulator's requirement to the capital of banks in Moldova is twice as high as in the EU countries,” said Vasile Tofan, senior partner of Horizon Capital investment fund (USA), member of the Administrative Council of Bank maib. In an interview with INFOTAG, he said that the ratio of banks' equity capital in the Moldovan banking system is about 30%.
"This is almost twice as much as the average ratio in European countries. But at the same time, we should recognize that the regulator's capital requirements depend from bank to bank. For example, maib has this requirement at 18%," he noted.

As one of the reasons for high capitalization, the investor named the payment of dividends to shareholders, which until recently the National Bank did not recommend, adhering to the view that it is better for banks to grow additional "fat".

"But excessive fattening costs us all more. After all, "capital on reserve" is frozen capital, it is underutilized in the economy, increasing the cost of resources on the market," Tofan stressed.

According to him, any investor looks at the Moldovan banking sector and thinks: "Banks in Moldova have a return on equity (ROE) of 16%."

Asked whether this is much or little, Tofan said that the cost of capital for Moldova exceeds 20%.

"If it is 25%, and it actually earns 16%, and in Romania, where the cost of capital is lower and its banks ROE is 21%, it is clear that the investor will go to Romania and not to Moldova," he concluded.
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