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Nikolay Borissov, Chairman of the Managing Board of Moldindconbank, about transformations, image of the bank and lending

06.10.2020

You have been a member of the Moldindconbank management for a year and a half. Have you managed to adapt to the new environment? How do you like Moldova?

There was no adaptation. Before my approval by the National Bank of Moldova, I had already settled in Chisinau for several months. I participated in the evaluation of three major banks in Moldova and this allowed me to know the local banking market. The Parliamentary Elections and the three governments that were in 2019 helped me understand the dynamics of what is happening. Both Moldova as a country and the people here are very similar to Bulgaria. The understanding of language and culture quickly helped me establish communication and make friends.

So you were directly involved in the process of buying a bank from Moldova?

I have carried out due diligence (thorough analysis) on 3 banks. That is, since 2016-2017 I already had links with the banking system of Moldova. I have done due diligence on Moldova Agroindbank, then Victoriabank. Doverie Invest received permission from the National Bank of Moldova to buy this bank also. Then, at the end of 2018, I performed due diligence on Moldindconbank. Therefore, I understood the situation of the banking market in Moldova before my approval by the National Bank of Moldova.

Actually, we wanted to buy the largest bank in Moldova, but the NBM recommended paying attention to other banks, because the Doverie Group has no experience in the banking sector. It should be noted that before our arrival, there were 3 auctions for the sale of 63.8% of the shares of Moldindconbank, but no one bought them.

You have previously worked in senior positions, including in Bulgarian banks. What do you think about the banking system of Moldova in the context of the introduction of new Basel III requirements? Does it meet international standards?

I have been working in the banking sector for over 20 years and only with foreign investors. This is my first activity in Moldova, considering that the majority shareholder of the bank is the Bulgarian company Doverie Invest. I believe that the most difficult period of the banking system in Moldova is over. We have all overcome childhood illnesses.

The National Bank approved the most modern rules and regulations that are met by all participants. In 2018 and 2019, important changes took place in 4 large banks related to strengthening shareholders and promoting best practices. For example, the Board of Directors of our bank. I jokingly say that it consists of 7 professionals of 8 nationalities. None of them represents Doverie, which ensures our independence in decision-making. For example, Mr. Stepic, the Chairman of the Board of Directors of the bank, has great authority not only in Europe. His vast experience helps us improve professionalism in the bank and understand what the banks of the future will look like.

It is worthy that Basel III Standards have been implemented. They mainly regulate three areas – the requirements towards the bank's capital, the debt/capital ratio towards all assets and the liquidity. Based on this approach, it is immediately clear that the main banks of Moldova are in good condition and have sufficient liquidity, not only for existing companies, but also for the future planning. Even if the National Bank of Moldova has strict requirements, I could say even tougher compared to the European regulators. On the other hand, despite these exaggerated requirements, Moldovan banks show that they have enough capital and liquidity.

How do you assess the evolution of Moldindconbank in the last period, as well as the prospects of the institution in the coming years?

Until February this year, Moldindconbank was under the supervision and early intervention regime of the National Bank. The institution had a conservative lending policy that saved the bank's assets during COVID-19 and the agricultural crisis. During this period, we tried to be close to our customers.

If we talk about development, then the bank is in the process of selecting a new banking information system that will help us maintain the leading position in servicing individuals and strengthen our authority as an ICT-advanced bank. The main mission is now to transform the bank in all areas of activity, in accordance with the most modern and advanced standards in the industry. I am sure that in the case of Moldindconbank, the implementation of this objective will be successful. We have a development strategy for the bank by 2024 and we adjust all investments to this strategy.

What does this strategy imply?

I will answer you with another question – Have you seen the new iPhone. No! When we are ready for implementation, we will present the strategy to our shareholders and customers.

COVID-19 messed up the plans of many people and companies, and some banking institutions responded with appropriate customer support measures. Since the pandemic is showing no signs of withdrawal, how is the bank prepared to provide long-term solutions to meet the needs of customers and to deal with the new situation?

I want to highlight what we have done so far to protect the health of our customers and employees. During the state of emergency, all our branches operated normally. We closed only small agencies with 1 and 2 employees because we could not guarantee security measures. I am sure that our customers appreciated that, at this difficult time, we provided proper access to banking products and services. In addition, in order to reduce the health risks to our customers and not to force them visiting our branches every time, we have proposed to offer free cards for all, so that more customers have access to our mobile application and online banking services. Thus, only during the state of emergency, the bank issued more than 30 thousand cards free of charge. We are talking not only about the categories that traditionally benefit from free cards - young people, mothers, pensioners, holders of salary cards. All those who needed bankcards during this period, received them free of charge.

On the other hand, at the request of our customers, we facilitated the lending conditions and granted grace periods for loans totaling over one billion lei. In addition, for the convenience of our customers, we have made automatic prolongation of deposits during the quarantine regime.

At present, we focus on three directions. It is about the access to loans granted to legal entities and individuals to mitigate the economic consequences of the COVID crisis and to help the rapid standardization, the development and deployment of new remote services with constant customer access and the further development of a network of advanced ATMs and self-service devices.

As a result of social distancing measures and contactless relationships, presence on the internet has become a necessity, and customers already choose to use mobile applications. What does the bank have in the field of digital technologies?

Moldindconbank is the leader in customer digital service. At the same time, during this period, the use of mobile application and internet banking increased by 70%. This shows the direction to development. In the near future, we are preparing to launch new functionalities on our online banking systems (web/mobile). We have already received and are installing in Moldova software for new generation ATMs-recycler. However, the significant evolution we will have after the implementation of the new banking information system, which will cope with all modern requirements, as well as future prospects for the development of financial information technologies.

The bank is one of the largest creditors of the national economy. However, some experts accuse banks of parasitizing on the account of government securities instead of providing direct loans to the economy. What do you think of this?

The economy and the state in Moldova are indivisible. The banks of Moldova are the main creditor of the state. In my opinion, by financing the state, we are financing the economy, through government priorities in different sectors.

We can look at this issue from a different perspective, for example the Basel III regulations that prescribe the requirements for our liquidity. The bank's customers offer their funds mainly through current accounts and short-term deposits. Deposits on a term longer than a year and still in lei - this is an exception, not a rule. Demand for loans is mainly represented by loans for 3-5 years in the form of consumer loans and up to 25 years for mortgage loans. To comply with regulations, we must place a portion of our assets for shorter periods. And here there is an opportunity to buy government bonds - for 3, 6-12 months. This helps us balance our assets, both in terms of profit and liquidity, to protect our customers ' deposits from potential shocks.

Can we see changes in the bank's credit strategy?

Moldindconbank intends to remain an universal bank. Our desire is to preserve good practice, but to speed up the process of examining applications and lending. We are now looking for an opportunity to help agricultural enterprises extend the loan repayment term. It is also natural- if the farmer has collected only 50% of the crop, then he does not have the money to repay the loan in full.

I can say here that there is a difference between banks in Moldova and those in the EU. In Europe, more and more profit is obtained from business with transactions, and here the main profit comes from the margin between deposits and loans. I mean the interest income. So far, we cannot change the rules and market demand. On the other hand, there is still a very high share of cash transactions in Moldova. In Europe, this is perceived as a negative phenomenon and there are fewer and fewer such operations. For example, in Bulgaria, the commission for withdrawing cash from a bank is equivalent to at least 30 lei and reaches up to 3% of the amount. But in Moldova there is a trend of increasing the share of cashless operations.

Moldindconbank claims to be a leader in the cards sector. What are your arguments for that?

Moldindconbank has been keeping the largest share of bankcards on the Moldovan market for 5 years. According to NBM data for the second quarter of 2020, there are more than 786,000 Moldindconbank cards on the market, which represents almost 38%. We also have the highest share by the number and volume of transactions made by our cards - 38% and 34%, respectively.

These results are explained by the quality of our products, good services and accessibility. We have the largest network of cash-in ATMs in the country (80 units), which allow, first, to replenish cash accounts and at any time of the day.. 

We have one of the most popular and easy to use mobile and web applications for managing card accounts, through which customers can pay for the services of more than 800 providers in the country (and this is the largest list). Moldindconbank was the first in the country to launch a series of innovative services available for cards: P2P Transfer (including the first national portal www.transfer.md), Direct Transfer, Cash by Code, etc. Our customers appreciate all of them.

Previously, especially until 2014, the Bank benefited from various credit lines from international financial institutions. When will you start working with them again?

So far, we are still in negotiations. Still in 2019 we tried to resume collaboration, but the message we received was that as long as we are under the regime of early intervention of the National Bank, it means that there are still some problems and these organizations are not ready to work with the bank. The special supervision regime of the National Bank was canceled in February 2020, but in order to resume cooperation, international financial institutions are expected to carry out due diligence on Moldindconbank. We started negotiations in March, but because of COVID, they were not completed.

There is, however, another, more significant problem. It is about opening correspondent accounts with international banks. Due to the situations that Moldindconbank faced earlier, we are not yet able to open direct correspondent accounts with the US banks in US dollars. The international financial institutions consider it an obstacle in working with us, a consequence of the image that the bank had. The image that the bank have had influences the decision of banks and international financial institutions to work or not in Moldova and to work or not with Moldindconbank.

We are making significant investments to change this situation. We want to introduce new software by the end of this year to improve money-laundering prevention. This is an international certified software, so that everyone understands that we have all the procedures meeting the international requirements. We also want to be subject of another due diligence procedure to show all future partners that we are complying with all international standards and norms.

For example, when companies from Transnistria said that Moldovan banks do not open or service their accounts, this is explained by the situation we have talked about. There were also cases related to PEP (politically exposed persons). I refused these businesses because they were related to PEP. If we want to go further, we cannot risk due to several hundred or thousands of lei. Otherwise, we will lose our business. Image is the most important thing now.

Banking experts predict that after the coronavirus crisis we can expect a process of consolidation in the banking system. As a result, we could see mergers or acquisitions in the banking system. Is Moldindconbank planning a possible expansion through a merger or acquisition?

In the medium term, I believe that there are conditions for consolidation. But, this has nothing in common with the coronavirus. It is just that modern banking services require more and more investment and compliance with laws/regulations. For small banks, it is increasingly difficult to find a niche in the market and be profitable. To date, Moldindconbank is focused on organic development and does not intend to buy another bank. But if there is a good opportunity in the market that will help us to develop our strategy faster, then I believe that the shareholders and the Board of Directors of the bank will approve such a proposal. Of course, small banks have to find their niche in the market, otherwise they will not resist. For them, consolidation is a matter of survival.

The decision not to pay dividends for 2019, how will affect the development of the bank?

This may be beneficial for the development of the bank, but the bank has not paid dividends since 2014. I think this decision will be reconsidered. After all, other shareholders besides Doverie have not received dividends for a long time.

Recently, Veaceslav Platon was released from prison, who until 2016 was considered the owner of 63.9% of the bank's shares. Have been there any meetings or have you received any requests for meetings from Veaceslav Platon?

No. He did not come to me or address me. I do not know him, and I do not want to comment on his case. I was shown Mr. Platon's former office. If he was officially not a member of the bank’s management, then how can an outsider sit here and give instructions? That is not normal.

Until 2016, Moldindconbank was considered the "Bank of Veaceslav Platon". Who now owns the bank?

Moldindconbank belongs to all shareholders approved by the National Bank. The previous existing management style and former black owners - everything is already in the past. Today, Doverie Invest, the daughter company of Doverie United Holding, is a public company with over 140,000 shareholders. The percentage of shares freely traded on the market is 57.8% of the holding capital. I understand that every decision we make and our results affect all these people. That is why the Board of Directors and the Managing Board are personally accountable to our shareholders. Look at our biographies and you will understand that today we have here only professionals.

What is the impact of the "inheritance"(old problems) on the institution, especially attempts to associate the bank with certain people, operations? Can we witness a rebranding?

There is an inheritance. And it is not just for Moldindconbank. All these stories about "Laundromat" and "The theft of the billion" have caused great harm to the banking sector in Moldova. But you need to understand that all this was not done by banks, but by people.

When I was asked how much Moldindconbank benefited from Laundromat, I checked and it turned out that the bank had no income from this. Moldindconbank enforced court decisions and bailiffs' titles without receiving commissions. If someone won, then this someone needs to be looked for elsewhere.

Rebranding is still under discussion. On the one hand, the bank and its name are very popular and are trusted in Moldova. In order for a new name and a new brand to appear, we must offer our customers something new that could distinguish us. I hope we can do it soon.

Thank you!

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