TWINNINGINTERIM QUARTERLY REPORT
TWINNINGINTERIM QUARTERLY REPORT number: 7
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: June2017
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
Twinning Contract Number / ENI/2015/363-321Project Title: / Development and consolidation of the National Commission for Financial Markets’ operational and institutional capacities in the field of prudential regulation and supervision.
Twinning Partners (MS and BC) / MS: Polish Financial Supervision Authority (KNF)
BC: National Commission for Financial Markets of the Republic of Moldova (NCFM)
Report Number: / 7
Period covered by the report: / 12February2017– 11 May2017
Duration of the project: / 12August 2015 – 11November2017
Rapporteur: / Prepared by:
Joanna Lipowczan, Project Manager from the Polish Financial Supervision Authority
Grzegorz Wąsik, Resident Twinning Adviser from the Polish Financial Supervision Authority
Approved by:
Damian Jaworski, Project Leader from the Polish Financial Supervision Authority
Iurie Filip, Project Leader from the NationalCommission for Financial Markets of the Republic of Moldova
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. Grzegorz Wąsik): ......
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 seventhquarter of the project, in the period of 12February2017 until 11 May2017. This chapter comprises political developments directly linked to the subject of the project, the state of achievement of project objectives and the state of project assumptions.
Overall objectives
Overall Objective and indicators of achievement (as in Logframe) / State of achievement/ problems encounteredOverall Objective:
Development and implementation of the Risk Based Supervision System for the non-banking financial market participants, including capital market, insurance, pension funds and micro-finance based on the forecasting and evaluation of the risks and preventable consequences of some unfavourable events.
Alignment with EUacquis and implementation of best practices of EU in regard to non-banking financial market supervision.
Development and implementation of the Risk Based Supervision System for the non-banking financial market participants, including capital market, insurance, pension funds and micro-finance based on the forecasting and evaluation of the risks and preventable consequences of some unfavourable events accomplished.
A better methodology and standards of supervision of the non-banking financial market including capital market, insurance, pension funds and micro-finance in Moldova will allow a more efficient and secure application of supervisory system based on the forecasting and evaluation of risks. A well-functioning non-banking financial market in Moldova will contribute to economic growth, poverty reduction and employment as well as overall security and stability of non-banking financial market participants. / All activities performed in the seventh Project quarter were successfully implemented.
Within the reporting period the following 8 Project activities were implemented in line with the Twinning Work Plan and updated schedule, including:
the experts’ mission focused on the presentation of the Early Warning System and of the supervisory review process applied by the KNF with regards to the Early Warning System methodology (i.e. Activity No 3.1);
the experts’ mission dedicated toreview of the current regulatory framework for the analysis of insurance companies specialized reports and recommendations on the mechanisms for assets, liabilities, technical provisions and capital requirements (i.e. Activity No 3.2);
the experts’ mission devoted to presenting the approach to insolvent insurance companies or companies with poor financial standing as well as remedial measures (i.e. Activity No 3.3);
the experts’ mission focused on presentation of the KNF’s approach and legal framework regarding minimum requirements on internal documentation especially for accounting, reinsurance and risk management (i.e. Activity No 3.4);
the experts’ mission dedicated to review of existing scope of motor TPL guarantee schemes with recommendations to be provided by the KNF and Insurance Guarantee Fund (i.e. Activity No 3.5);
the expert mission devoted tothe use of insurance company business plans in the risk-based supervision, on monitoring the performance in accordance to business plan after initial license granting and workshop on the analysis of the business plan facilitating development of guidelines (i.e. Activity No 3.6);
the experts’ mission dedicated to consumer protection and development of Guidelines containing the results of analysis on the legal regulations, proposed changes in laws and principles that should be adopted (i.e. Activity No 3.9, experts’ mission No. 1);
the experts’ mission devoted topresenting the experiences of the KNF in carrying educational activities addressed to insurance market participants (i.e. Activity No 3.12).
The NCFM experts participated actively in the Twinning Project activities dedicated to the insurance sector. As a result of activities organized within the Component III the NCFM experts improved and consolidated their knowledge and experience regarding the implementation of the system of risk-based supervision in the insurance sector, focusing on specific topics such as: EWS objectives and methodology, the procedure of data collection and processing, the reporting and current practice under the Solvency II regime for insurance undertakings.
The NCFM experts developed draft amendments to the Regulation on solvency margins and liquidity coefficient of insurers (reinsurers) which have been provided for discussionwiththe Polish experts. Following objections and comments received from stakeholders and comments provided by the KNF experts, the final version of amendments have been approved by the NCFM Council of Administration, registered by the Ministry of Justice and published in the Official Gazette.
The NCFM experts developed draft amendments to the Law on insurance regarding the licensing procedure which were consulted with the KNF experts during their missions inthe NCFM. The initial draft of amendments has been approved by the NCFM Council od Administration and submitted to public authorities and interested stakeholders for examination and public consultations.
The NCFM experts developed the draft normative act on balance sheets and standardized accounting principles for insurance undertakings based on the knowledge improved during the Twinning activities and taking into account recommendations of the KNF experts presented in their reports. The draft normative act is prepared to be submitted to the NCFM Council of Administration for the examination and approval.
Following activities related to the consumer protection and insurance arbitration, the NCFM experts have consolidated their knowledge on public communication activities addressed to insurance market participants, on the publication of information through Internet and media, organization of social campaigns, basic rules for usable web-design for children and adults as well as the activity of the Educational Centre for Market Participants (CEDUR).
Project purpose
Project purpose and indicators of achievement (as in Logframe) / State of achievement/ problems encounteredProject purpose:
Development and maintenance of an appropriate and effective regulatory and supervisory framework in accordance with the EU legislation and best practices to enable prudential regulation and supervision on the non-banking financial market.
Strengthening operational and institutional capacities of the NCFMaccomplished.
Development and maintenance of an appropriate and effective regulatory and supervisory framework in accordance with the EU legislation and best practices to enable prudential regulation and supervision in the field of:
- capital market and investment fundssector;
- insurance companies sector;
- savings and credit associations and pension funds sector.
During the seventhquarter of the Project, activities scheduled within the Component 3 (Insurance companies) weresuccessfully conducted.
During the third Component of the Project a review of the current regulatory framework for the analysis of insurance companies’ specialized reports was performed, and as a consequence the working papers for supervisory use, including a Risk Assessment Framework methodology, a risk map and a questionnaire on risks were provided, as well as a Review report with recommendations on risk based supervision of (re)insurance undertakings operating in Moldova wasdeveloped.
In regard to the insurance guarantee fund, the relevant Moldovan provisions were examined and the review report with recommendations was drawn up.
Moreover, during the reporting period, four workshops on the developing of the Early Warning system and methodology; the content of recovery plans and information to be collected during the recovery period; the minimum requirements on internal documentation especially for accounting, reinsurance and risk management; as well as the use of business plans in the risk-based supervision were performed. As a result three working papers for supervisory use were provided by the Polish experts to the NCFM staff.
With regards to strengthening consumer protection and insurance arbitration, two workshops on consumer protection and educational activities addressed to insurance market participants were performed and Guidelines on strengthening consumer protection and insurance arbitration were developed.
The input provided by the MS experts shall contribute to the establishment of a sound base to facilitate further efforts of the NCFM in development and maintenance of an appropriate and effective regulatory and supervisory framework in accordance with the EU legislation and best practices.
Thus, the NCFM capacities to regulate the non-banking financial market and strengthen their supervision functions in line with the EU acquis and best practices have started to increase.
The knowledge and experience accumulated during activities in the Component III of the Project shall contribute to the development and improvement of insurance legislation in accordance with the EU legislation and commitments assumed by the NCFM in the EU-RM Association Agreement.
Policy Developments
During the reporting period the NCFM has promoted normative acts finalized after their examination and comments provided by the Polish experts. Thus, the final version of the Regulation on capital market abuse, which transposes the main provisions of the EU legislation in that field has been approved by the NCFM Council of Administration and has been registered at the Ministry of Justice and published in the Official Gazette.
The NCFM experts finished the examination of the new legislation developed by the National Bank of Moldova to transpose the provisions of CDRs IV Directive related to banks and investment companies and submitted their comments and objections. In this field recommendations and opinions of the Polish experts provided during missions and the study visit have been very important.
The NCFM experts developed the Regulation on applying sanctions on the capital market. As a result of public consultations’ procedures and review of the Polish experts, the final version of draft regulation is being prepared for the approval of the NCFM Council of Administration.
During the reporting period the NCFM staff has been involved in several activities related to strengthening consumer protection and insurance arbitration, during which they have acquired additional knowledge on activities and incentives helping to raise awareness and improve public confidence in insurance companies.
Also, during these activities the NCFM experts absorbed detailed information regarding the use of the regulatory authority’s website as a main communication tool with market participants and consumers of financial services, highlighting the importance of information and data published on the authority’s official website.
The NCFM experts have learned about the role and content of social campaigns, including stages to be completed and questions to be answered when designing a social campaign.
Within activities related to the insurance sector, the NCFM staff has gained additional knowledge on reporting requirements which should be applied to Moldovan insurers in line with the Solvency II Directive, the EU Delegated Regulation, the EU Technical Standards and EIOPA Guidelines, including applied valuation principles, the reported data and information, the time and frequency of reporting, the analysis of guarantee fund, development of contingency plans of insurance companies, the analysis of insurance companies business plans etc. Based on the acquired knowledge and recommendations from the Polish experts, the NCFM staff shall revise the regulatory framework related to the insurance market and amend it in compliance with the main EU standards.
As result of public consultations on the Draft law amending the Law on joint stock companiesno1134 of 02.04.1007 and based on objections and comments provided by stakeholders, the NCFM experts have developed the conformity table. Currently the law is under preparation to be approved by the NCFM Council of Administration and to be submitted to the Government for examination and approval.
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 seventh reporting period,were focused on presenting the supervisory review process applied by the KNF in regard to Early Warning System methodology, on review of the current regulatory framework for the analysis of insurance companies specialized reports, on presenting an approach to insolvent insurance companies and remedial measures, on presenting the KNF minimum requirements on internal documentation, on reviewing the existent scope of motor TPL guarantee schemes, on analyzing the use of insurance company business plans in risk-based supervision, as well as on strengthening consumer protection in the insurance sector. Within these activities recommendations and good practices from the perspective of conducting the risk based supervision were provided to the NCFM.
The activities undertaken will be subsequently continued and developed within the relevant project activities in line with the agreed Work Plan in the Twinning Contract.
2B - ACHIEVEMENT OF MANDATORY RESULTS
Results and indicators of achievement (as in Logframe) / State of achievement/ problems encounteredComponent 1 – Strengthening operational and institutional capacities of the NCFM.
Indicator of achievement (copied from logframe)
- Strengthening operational and institutional capacities of the NCFM accomplished.
- Internal procedures/manuals/rules developed in line with the EU best practice.
Component 2 – Capital Market and Investment Funds.
Indicator of achievement (copied from logframe)
- Strengthening operational and institutional capacities of NCFM to supervise and regulate capital market and investment funds sector accomplished.
Component 3 – Insurance Companies.
Indicator of achievement (copied from logframe)