Twinning Project No. MD14/ENP/FI/17 between the Polish Financial Supervision Authority and the National Commission for Financial Markets of the Republic of Moldova

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Within the period from August 2015 till November 2017, the KNF successfully implemented the Twinning Project to the benefit of the National Commission for Financial Markets of the Republic of Moldova (MD14/ENP/FI/17)  „Development and consolidation of the National Commission for Financial Markets’ operational and institutional capacities in the field of prudential regulation and supervision”.

Twinning Project overview

Implementing Authority: KNF - the Polish Financial Supervision Authority.

Final Beneficiary: The National Commission for Financial Markets of the Republic of Moldova ("NCFM"), an independent body of central public administration, responsible for enhancing stability, transparency, security and efficiency of the non-banking financial sector in Moldova.

Financial resources of the Twinning Project No. MD14/ENP/FI/17
The Project was financed by the European Union within the European Neighbourhood and Partnership Instrument (ENPI).

The KNF, selected by the EU Delegation to Moldova as a contractor of the abovementioned Project, was responsible for the overall Project implementation and budget (in the amount of around EUR 1,2 million).

The NCFM was the direct beneficiary of the Twinning Project and played a crucial role in implementation of the Twinning Project activities in all its components.

The aim of the Project
The aim of the twinning project was to develop and implement the Risk Based Supervision System for the non-banking financial market participants in Moldova. The Polish and Moldovan partners, with the EU support, were  working together to develop and maintain an appropriate and effective regulatory and supervisory framework in Moldova in accordance with EU legislation and best practices to enable prudential regulation and supervision in the field of:

  • capital market and investment funds  sector; 
  • insurance companies sector; 
  • savings and credit associations and pension funds sector.

Scope and achievements of the Project
Within two years of the project implementation, the joint work of the Polish and Moldovan partners with the EU assistance was focused on:

  • strengthening the NCFM’s supervisory functions and capacities in terms of regulating the non-banking markets in line with the EU acquis and best practices; 
  • development of the risk based supervision system for the non-banking financial market participants to ensure the integrity and stability of the financial system in Moldova; 
  • delivering aid in creating an effective supervisory mechanisms to protect investors and beneficiaries of non-banking financial services and encourage non-banking financial markets development in Moldova.

The overall Project’s purpose has been successfully achieved thanks to strong and close cooperation among experts from the KNF and the NCFM. Within the September 2015 and August 2017, in order to accomplish mandatory results of this Project, 72 various project activities took place in the form of short term experts’ missions regarding particular subjects, including 8 steering committees in Chisinau as well as 5 study visits of the representatives of the Beneficiary to Poland. In total, 62 expert missions have been conducted in Moldova with participation of 86 short term exerts, including 78 experts from the KNF. For certain missions in the selected thematic fields the KNF’s specialists have been supported by ad hoc experts from the Central Securities Depository of Poland - KDPW, Polish Power Exchange – TGE, Banking Guarantee Fund – BFG and Insurance Guarantee Fund – UFG.
The project activities included review of regulations with gap analysis, interactive trainings and workshops, expert consultations and were focused on transfer of know–how, experience, lessons learned and good practices based on the EU acquis and Polish experiences and regulations with regard to supervision of the capital, insurance, credit unions and pension funds market, completed with development and submission to the NCFM over 100 documents, such as review reports with recommendations, guidelines, workshop materials and working papers with templates for supervisory use.

The Project activities were implemented under the following four components:

Component 1: Strengthening operational and institutional capacities of the NCFM
The aim of Component 1 was the strengthening operational and institutional capacities of the NCFM along with developing the internal NCFM’s procedures/rules in line with the EU best practices.

The activities of the 1st component were focused mainly on review and assessment of the relevant Moldovan legislation granting supervision powers to the NCFM, in particular supervision areas, as well as on review of the NCFM capacities in the field of trading surveillance, including market data, electronic surveillance system, and surveillance procedures. The Polish experts examined also existing internal on-site and off-site inspections rules of the NCFM in regard to UCITS and investment firms, insurance and pension sector. Selected experts’ missions were also devoted to establishing the risk based supervision regarding insurance sector, anti-money laundering, international cooperation and exchange of information with foreign regulators as well as internal audit. Moreover, guidelines of detecting and investigating cases of market abuse, manipulations and on insider transactions on capital market and on stock exchange were developed. The component 1 was summed up by a  study visit organized in Poland dedicated to practical aspects of the non-banking financial markets supervision.

Component 2: Capital market and investment funds
The aim of Component 2 was to strengthen the operational and institutional capacities of the NCFM to supervise and regulate capital market and investment funds sector.

With that component the foremost attention was paid to review against the relevant EU legal acts of the legislation on capital market in the scope of investment firms and undertakings for collective investments – UCITS operations, post – trading requirements, market infrastructure, prospectus scrutiny and approval process, market abuse and trading surveillance, market transparency, takeover bids aspects as well as investor-compensation scheme. A review of the legal framework concerning public offers and admission of securities to trading on the regulated market was also carried out. Certain component activity were dedicated to the capital adequacy of investment firms requirements, MTF and other types of trading venue, methodology as well as techniques for the companies’ assets valuation. Additionally, the Polish experts paid also attention to the importance of raising awareness and improving public confidence to the capital market. The 2nd component activity was topped off with the study visit in Poland on the risk based supervision of the capital market participants and undertakings for collective investments.

Component 3: Insurance companies
The aim of Component 3 was to strengthen the operational and institutional capacities of the NCFM to supervise and regulate insurance companies sector.

Component 3 started with the activities devoted to expert assistance in respect to the development of minimum standard for early warning system for insurers and risk-based supervision of such entities. Other Polish experts’ activities within this component were dedicated to the development of the contingency plans for insurance companies, strengthening consumer protection and insurance arbitration, review of minimum requirements on internal documentation in the field of insurance as well as reporting requirements. To some extent, experts were also dealing with the motor TPL guarantee schemes and analysis of the insurance company business plan. Moreover, the workshop on the Solvency II regime history and objectives and the study visit in Poland focused on the risk based supervision of insurance companies took place.

Component 4: Savings and credit associations (credit unions) and pension funds
The aim of Component 4 was to strengthen the operational and institutional capacities of the NCFM to supervise and regulate savings and credit associations (credit unions) and pension funds sector.

The last project component was dedicated to both credit unions and pension funds. Within this component the Polish experts conducted expert consultations with a workshop on early warning indicators system and on the principles of credit unions supervision in Poland. Certain activities were devoted to the savings guarantee funds and liquidity funds for credit unions, reporting requirements for credit unions and microfinance institutions. With regard to the pension funds sector, the review of the secondary legislation in the scope of pension general regulations and pension investments issues was performed and recommendations on inspections of the entities operating on the pension funds market were provided. The 4th component was concluded by two study visits in Poland focused on supervisory practices in regard to savings and credit associations as well as pension funds.

All the activities for all four components, including two supplementary expert missions, have been implemented in line with the scope stipulated in the Twinning Contract, in close cooperation with the Moldovan Twin Partner.

The input provided by the MS experts constituted a base for approximation of the developed Moldovan legal and regulatory framework to the EU acquis in the field of financial market. The provided knowledge and experiences of the Polish supervisory authority as well as developed practical project deliverables have contributed to increasing the NCFM’s capacities in terms of regulating the financial sector and strengthening its supervisory functions.

With the assistance of the KNF experts all planned project objectives and outputs regarding strengthening the National Commission for Financial Markets’ operational and institutional capacities in the field of prudential regulation and supervision, have been successfully achieved.

The Final Report, including the financial settlements, was approved by the EU Delegation to Moldova without any reservations on 14 February 2018.

For further information please contact:
Joanna Lipowczan
Project Manager
Head of the Technical Assistance Unit  
Analyses and International Cooperation Department, Polish Financial Supervision Authority
tel. (+48) 22 262 51 50
e-mail: joanna.lipowczan@knf.gov.pl