TWINNINGINTERIM QUARTERLY REPORT Number: 4

TWINNINGINTERIM QUARTERLY REPORT

TWINNINGINTERIM QUARTERLY REPORT number: 4

EUROPEAN COMMISSION

TWINNING PROJECTS

INTERIM QUARTERLY REPORT

Project Title:

Development and consolidation of the National Commission for Financial Markets’ operational and institutional capacities in the field of prudential regulation and supervision.

Partners:The National Commission for Financial Markets of theRepublic of Moldova (CNPF)

The Polish Financial Supervision Authority(KNF)

Date: September2016

Twinning Contract number: Moldova- ENI/2015/363-321

General instructions

1.Overview

The Interim Quarterly Report/Final Report for the project comprises the following parts:

Section 1Basic data on the project

Section 2Content: progress achieved in the implementation of the Twinning project during the reporting period and schedule for the remaining period

Section 3Expenditure: actual expenditure in relation to budgeted expenditure

2.General guidance

• Throughout the entire Twinning project, at three-monthly intervals starting with the date of notification of endorsement / signature, the Project leaders may prepare Interim Quarterly Reports/Final Reports.
• Interim Quarterly Reports/Final Reports cover both substance and Finances.
• The deadline for submission of the Interim Quarterly Reports/Final Reports cannot be altered – The first interim quarterly report will most often refer to less than three months’ actual project implementation, since the arrival of the RTA in the BC and the beginning of the work schedule rarely coincide with the date of notification.
• The MS Project Leader in co-operation with the BC Project Leader will submit, within the month following each quarter, the interim quarterly reports to the concerned authority (see 6.4 of the Twinning manual).
• One copy of the Report must be sent at the same moment to the relevant Twinning Team in the Commission Headquarters

• The Report must be submitted in one of the following three languages: English, French and/or German.

3.Notice

• The approval of the Report by the relevant authorities is without prejudice to the Commission's right to suspend the activities of a project, terminate an agreement or take any other appropriate step should subsequent verifications reveal problems or significant divergences from the work plan, the budget or the conditions of the Twinning Contract as approved.
• The views expressed in this report do not necessarily reflect the views of the European Commission

Twinning Contract number: Moldova -ENI/2015/363-321

Section 1: Project data

MS signature:

MS signature and date (i.e. MS Project Leader, Mr. Damian Jaworski): ……………………………

MS signature and date (i.e. MS Project Manager, Mrs. Joanna Lipowczan): ......

RTA signature and date (i.e. MS RTA, Mr. GrzegorzWąsik): ......

BC signature:

BC signature and date (i.e. BC Project Leader, Mr. Iurie Filip): ……......

RTA counterpart and date (i.e. BC RTA counterpart, Mrs. Veronica Cuhal): ......

Twinning Contract number: Moldova -ENI/2015/363-321

Section 2: Content

This section describes the activities of the project. It is divided in five sections.

2A – BACKGROUND

2B – ACHIEVEMENT OF MANDATORY RESULTS

2C – ACTIVITIES IN THE REPORTING PERIOD

2D – TIMING AND DELAYS

2E – ASSESSMENT

1

Twinning Contract number: Moldova -ENI/2015/363-321

2A – BACKGROUND

This report covers activities carried out in the fourth quarter of the project, in the period of 12 May 2016 until 11 August 2016. This chapter comprises political developments directly linked to the subject of the project, the state of the achievement of project objectives and the state of project assumptions.

Overall objectives

Project purpose

1. capital market and investment fundssector;
2. insurance companies sector;
3. savings and credit associations and pension funds sector.

Policy Developments(NCFM part)

Following the recommendations of the FSAP mission regarding the necessity to improve the safety, efficiency and soundness of the securities settlement and registry infrastructure in Moldova, the NCFM and the NBM initiated reforms in order to address current shortcomings, in particular related to IT infrastructure, gaps in the legal framework and the fragmentation of registrar functions and to enhance the safety and efficiency of the financial infrastructure in Moldova, which is a basic condition for market development and overall soundness of the financial system. The IMF and World Bank have recommended the creation of a single CSD which would provide settlement and depository functions for corporate, government and NBM securities originating from MSE and OTC market.

The NBM jointly with IMF experts have developed the draft Law on the single Central Securities Depositary, on which the NCFM with the support of Polish experts has been submitted its comments and suggestions. The draft law has been adopted at the Parliamentary session of 29.07.2016 in the first reading.

The NCFM has developed and consulted with Polish experts the technical concept for the creation of the State Registry of Securities holders and the draft Law amending the Capital Market Law in order to reform the system of independent registrars and to strengthen the evidence of securities ownership on the securities market of Moldova by creating the State Register integrated informational system containing the back-up of securities holders’ registers. The draft law has been approved by the Council of Administration and shall be submitted to the Government for examination and approval.

Following the commitments from the RM-EU Association Agreement the NBM has developed the new legislation on financial institutions aimed to transpose the provisions of CRD IV Directive related to capital requirements and risk based supervision of financial institutions. Having the support of Polish experts, the NCFM has provided to the NBM its proposals related to capital requirements for investment firms and prudential requirements in the context of risk based supervision.

Following the recommendation provided by Polish experts in their reports, the NCFM works at developing amendments to the Capital Market Law on the activity of the investment funds, management company and legal construction of the UCITS, their structureand authorization, as well as information provided to investors of UCITS.

Furthermore, based on the Polish experts proposals and comments received during public consultations, the NCFM is finishing the draft Regulation on market abuse.

Project Assumptions

In the reporting quarter the activities within the Twinning Project have assisted the NCFM in fulfilling the commitments of the Republic of Moldova stipulated in the former Partnership and Cooperation Agreement between the European Union and the Republic of Moldova, repealed and replaced by the Association Agreementbetween the European Union and the European Atomic Energy Community and their Member States, of the one part, and the Republic of Moldova, which is currentlyin force.

In particular, the Twinning Project has as main objective to contribute to the process of transition of the NCFM from compliance-based supervision to the establishment by the NCFM of the risk-based supervision for the three sectors of the non-banking financial market. The experts’ missions implemented in the fourth reporting period, focused on the review of certain aspects of the secondary legislation on capital markets, capital adequacy of investment firms as well as requirements and principles of the MTF and UCITS, included recommendations and good practicesfrom the perspective of conducting the risk-based supervision.

The activities undertaken will be subsequently continued and developed within the relevant project activities in line with the agreed Twinning Contract Work Plan.

2B - ACHIEVEMENT OF MANDATORY RESULTS

• Strengthening operational and institutional capacities of the NCFM accomplished.
• Internal procedures/manuals/rules developed in line with the EU best practice.

• Strengthening operational and institutional capacities of NCFM to supervise and regulate capital market and investment funds sector accomplished.