2016 - victoriabank · and imports totalled 4,020.30 million usd. in 2016, the export to import...

Management report

2016

2

Annual report Victoriabank 2016

Macroeconomic situationIn 2016, the economy of the Republic of Moldova showed the first signs of recovery, but continues to be vulnerable to a number of inter-nal and external factors: the reciprocal sanctions between the Russian Federation and the European Union, the restrictions imposed on the import of certain agricultural products in Moldova by the Russian Federation and the recession in this country, the Ukrainian crisis, the banking sector problems, the continuous reduction of the volume of money transfers of individuals from abroad.

Economic climate

Fig.1 Dynamics of the trade balance

Export,million USD

Import, million USD

Trade balance, million USD

In 2016, the Gross Domestic Product (GDP) amounted to 134.47 billion lei (or 6.75 billion USD), increasing by 4.1% in comparable prices and by 9.7% in current prices compared to 2015. The most significant impact on the GDP increase comes from the gross added value in agriculture + 2.2 percentage points (p.p.), wholesale and retail trade + 0.9 p.p., information and communications, extractive and processing industry, professional, scientific and technical activ-ities – each increasing by 0.3 p.p.

In 2016, the evolution of foreign trade was influenced by the geo-political situation in the region, the reduction of world prices of food and energy resources.

0

1000

3000

5000

7000

-1000

-3000

-5000

-7000

4,020.30

2,045.30

3,986.80

1,966.90

5,317.00

2,339.50

-2,977.50-2,019.90 -1,975.00

2014 20162015

3

Annual report Victoriabank 2016ECONOMIC CLIMATE

Fig.2 Dynamics of exports

In CIS states, million USD In EU member states, million USD In other states, million USD

The volume of exports increased by 4.00% and imports increased by 0.8%. In absolute value, the exports of goods in 2016 amounted to 2,045 million USD, an increase by 78.4 million compared to 2015, and imports totalled 4,020.30 million USD.

In 2016, the export to import ratio was 50.9%.

The commercial restrictions imposed on the Republic of Moldova by the Russian Federation and the depreciation of national currency in-fluenced the reorientation of exporters towards the European Union market.

The average annual inflation rate represented 6.4%. In December 2016, the inflation rate represented 2.4%, recording a decreased by 11.2 p.p. compared to the inflation rate during the same period of 2015, at the same time being under the target level of inflation determined by the National Bank of Moldova (5% +/- 1.5%). The decrease of the annual inflation rate was mainly due to the modest domestic demand, the rich harvest in 2016 agricultural season, the effect of a high basic period associated to the depreciation of the national currency in 2015 as well as the dissipation of the impact of increasing the electricity tariff in July 2015.

In 2016, the national currency marked a depreciation of 1.6% com-pared to the US dollar, in nominal terms from 19.66 lei for 1 US dollar on 01.01.2016 to 19.98 lei on 31.12.2016. Compared to the European currency, the Moldovan leu appreciated by 2.7%. The main factors that determined the national currency fluctuations were the decrease of remittances from abroad, the fluctuations in the US dollar on the international currency markets and the mone-tary policy of the National Bank.

On 31.12.2016, foreign currency reserves of the National Bank of Moldova reached the value of 2,202.90 million US dollars, increas-ing by 26.9% compared to the level recorded at the end of 2015.

Simultaneously, the foreign exchange market of the Republic of Moldova was strongly influenced by the volume of remittances sup-porting the national economy. According to the data of the National Bank of Moldova, in 2016, these remittances represented 1,079 million US dollars, decreasing by 50 million dollars or 4% compared to the level of remittances recorded in 2015.

In 2016, the average nominal monthly wage income of an employee in the national economy was 5,084 lei, increasing by 10.3% com-pared to the average monthly wage in 2015.

0

200

400

600

800

1000

1200

1400

1,246.00

357.90

735.60

201620152014

1,217.60

256.90

492.30

1,332.40

298.70

414.20

In the 4th quarter of 2016, the unemployment rate was 3.8%, de-creasing by 0.4 p.p. compared to the unemployment rate in the 4th quarter of 2015. According to the World Bank forecasts, the growth rate of the Gross Domestic Product shall increase to 4.5% and shall totalize 148.3 billion lei in 2017.

The National Bank of Moldova forecasts the decrease of inflation up to 5.5% annually for 2017.

4


Evolution of the banking systemOn 31.12.2016, 11 banks licensed by the National Bank of Mol-dova (NBM), including 4 branches of foreign banks and finan-cial groups, were operating in the Republic of Moldova. During 2016, the banking system assets recorded an uptrend.

According to the International Financial Reporting Standards, on the 31st of December 2016, the assets of commercial banks amounted to 72,951.37 million lei, marking an increase by 4,161.17 million lei or 6.05% compared to the assets recorded on the 31st of De-cember 2015.

In 2016, the banking system underwent a period of reduction of na-tional economy crediting because of the domestic economic crisis and the depreciation of the national currency.

The balance of deposits accumulated by banks increased by 8.7% compared to 2015, accumulating 54,917.05 million lei.

The balance of loans and advances granted by banks decreased by 4,217.66 million lei or 11.56% compared to 2015, representing 32,252.33 million lei.

The financial statements on 31.12.2016 recorded Tier I capital as amounting 9,437.85 million lei, increasing by 429.62 million lei or 4.77% compared to 2015.

The risk-adjusted capital adequacy ratio represented 30.08%, in-creasing by 3.77 p.p. compared to 2015 (threshold ≥ 16%), indica-tor that varied from bank to bank between 22.60% and 121.32%.

The high level of risk-adjusted capital adequacy allowed the banks to absorb the losses related to the deterioration of loan quality. At the same time, for avoiding the solvency risk, the National Bank of Mol-dova, as surveillance authority, requested the banks to review their

policies and strategies for the efficient monitoring and management of the level of bad loans and for strengthening the capital.

Banks maintained the liquidity ratios at a high level.

The long-term liquidity ratio was 0,63 (norm ≤ 1). The current liquidity per sector increased by 7.5 p.p., representing 49.22% (norm ≥ 20%). In 2016, the net profit of the banking system was 1,466.69 million lei – increasing by 322.46 million lei or 28.18% compared to 2015.

On the 31st of December 2016, the return on assets and the return on capital represented 1.97% and, respectively, 11.95% annually, increasing by 0.30 p.p. and, respectively, 1.79 p.p. compared to the financial statements on the 31st of December 2015.

Fig.3 Total basic indicators of the banking system in the Republic of Moldova

ECONOMIC CLIMATE

Total assets, million MDL Total loans, million MDL

0 20000 40000 60000 80000 100000

2014

2015

2016

93,877.27

66,895.42

52,435.66

68,790.20

50,565.65

36,469.00

72,951.37

54,917.05

32,252.33

Total deposits, million MDL

5


Evolution of the basic indicatorsAt the end of 2016, the number of Bank’s subdivisions repre-sented 104 units, of which 34 branches and 70 agencies.

At the end of 2016, the number of Bank’s subdivisions represented 104 units, of which 34 branches and 70 agencies.

According to the International Financial Reporting Standards, on the 31st of December 2016, the Bank’s assets amounted to 12,612.72 million lei, recording an increase by 4.37% or 528 million lei com-pared to the value on 31.12.2014.

Activity of B.C. “Victoriabank” S.A.

Based on the value of assets, the Bank kept the 3rd position in the domestic banking system and the market share of the Bank’s assets represented 17.29% of the banking system assets. The total volume of deposits amounted to 9,929.65 million lei, an increase by 5.77% or 541.42 million lei compared to the previous year.

The increase of loans portfolio was influenced by the expansion of the volume of liquid assets in the accounts of clients – legal entities and by the increase of the number of clients attracted in service.

Fig.4 Evolution of the balance sheet indicators Fig.5 Dynamics of income and expenditure

Total assets, million MDL

Based on the volume of deposits, the Bank kept the 3rd position in the banking system and the market share of the Bank’s deposits repre-sented 18.05% of the banking system deposits. During the reporting period, the portfolio of loans and advances decreased to 4,635.22 million lei, recording a decrease by 17.70% or 997.01 million lei compared to 2015.

The gross income of the Bank amounted to 1,417.56 million lei, 2.53% under the level of 2015, while total volume of expenditure amounted to 1,196.69 million lei, 10.83% lower compared to 2015.

0 400 800 1200 1600

2014

2015

20161,417.56

1,196.69

1,454.35

1,341.95

879.00

1,077.56

0 2000 4000 6000 8000 10000 12000 14000

2014

2015

2016

12,180.36

9,765.69

5,726.21

12,084.76

9,378.23

5,632.24

12,612.72

9,919.65

4,635.22

Total deposits, million MDL Total loans, million MDL Total expenditure, million MDLTotal income, million MDL

6

Annual report Victoriabank 2016ACTIVITY OF B.C. “VICTORIABANK” S.A.

The financial results for 2016 were strongly influenced by:

• the reduction of lending activity, prevailingly caused by lack of loans demand as well as by the more prudent approach applied by the Bank in relation to potential debtors;

• the decreasing of interest rates on monetary policy instruments promoted by the National Bank of Moldova by 10.5 p.p.;

• the reduction of interest rates on the securities portfolio by 8.4 p.p.

Evolution of the number of clients In 2016, services were provided to 48,862 new clients, includ-ing 507 legal entities and 48,361 individuals. Thus, at the end of 2016, the total number of active customers was 511,465, of which: legal entities – 23,809 clients and individuals – 487,662 clients.

In order to the diversify the services provided to individuals, the bank assurance service was launched and the list of organisations for the benefit of which payments may be performed by means of remote service systems was expanded in 2016.

For the purpose of providing the option of more convenient man-agement of the company’s activity within the Bank, the remote ser-vice system designed for legal entities was improved: the possibility of making transactions with deposit accounts and using the mobile signature was included, the delivery of statements by applying the Bank’s electronic signature and launching of the mobile applica-tion that shall provide managers an increase in convenience in the management of the company’s operations. Currently, the normative framework is adjusted and the updated version of the system shall be launched in the first half of 2017.

Fig.6 Net profit Fig.7 The dynamics of Return on Assets and Capital

The net profit earned by the Bank was 220.87 million lei, increased by 108.48 million lei or 96.52% compared to the value recorded in 2015.

The Return on Capital recorded an uptrend and represented 9.93%, increased by 4.51 p.p. compared to 2015.

The Return on Assets was situated at the level of 1.71%, the indica-tor value being in increase by 0.84 p.p. compared to 2015.

Profit, million MDL Return on assets, % Return on capital, %

0

4%

8%

12%

16%

2014 20162015

1.650.87

1.71

11.02

5.42

9.93

0

50

75

25

100

125

150

175

200

225

198.56

2014

220.87

2016

112.39

2015

7


Activity related to attracting depositsAt the end of 2016, the total volume of deposits amounted to 9,920 million lei, increasing by 541 million lei or 5.77% compared to the 31st of December 2015. The bank recorded a market share of 18.05% with regard to total deposits, obtaining the 3rd place.

The increase of the balance of deposits was due to growth of the balances of corporate clients both in current accounts and by set-ting up new deposits. During the last year, due to the high level of interest rates offered by the competing banks, the backflow of for-eign currency balances of individuals was maintained.

On 31.12.2016, the balance of deposits of legal entities record-ed the value of 3,572 million lei, increasing by 740 million lei of 26.15% compared to 31.12.2015. The market share of Victoria-bank in this category represents 20.79%.

Fig.8 Evolution of deposits

Legal entities, million MDL

0

2000

4000

6000

8000

10000

6,348.016,547.006,488.00

3,288.002,831.20

3,571.64

20162014 2015

9,776.009,378.20

9,919.65

Total deposits, million MDL

Individuals, million MDL

ACTIVITY OF B.C. “VICTORIABANK” S.A.

8


On 31.12.2016, the balance of deposits of individuals was 6,348 million lei, decreasing by 199 million lei or 3.04% compared to 31.12.2015. The market share of Victoriabank in this category rep-resents 16.80%.

During the last year, the Bank attracted term national currency deposits at an average rate of 11.18%, compared to the average rate of 13.61% in 2015, while the term foreign currency deposits were attracted at an average rate of 2.28%, compared to 2.27% in 2015. The decrease of the rate for national currency deposits is due to the downtrend of the NBM base rate recorded during 2016 (-10.50 p.p. from the beginning of the year). Practically, the av-erage rate for foreign currency deposits did not change during the previous year because the process of diminishing of the rates for foreign currency deposits was initiated in 2015 and maintained during the previous year.

The expenses for the deposits of individuals and legal entities repre-sented 452.3 million lei, compared to 363.5 million lei in 2015, de-creasing by 24.42% or 88.8 million lei. In 2016, the increase of the volume of expenses was determined by the high level of rates for lei deposits, recorded at the beginning of the year, and by the change of the portfolio structure, depositors being motivated by the high rates of national currency deposits. Therefore, at the end of 2016, the share of national currency deposits represented 54.23% and the share of foreign currency deposits – 45.77%.


9


Lending activityIn 2016, Victoriabank kept the 3rd position based on the vol-ume of the portfolio of loans granted to clients. The market share of loans granted recorded the level of 14.37% of the total of banking system loans.

On 31.12.2016, the net portfolio of loans and receivables was 4,635.22 million lei, decreasing by 997.00 million lei compared to the previous year, recording a decrease of 17.70%. On 31.12.2016, the share of the portfolio of loans in Bank’s total assets was 36.75%, 9.86 p.p. less than in 2015.

During 2016, loans were granted to a large number of clients, indi-viduals and legal entities, in total amount of 3,787.53 million lei, 1,179.86 million lei less than the loans granted in 2015. As a result of the national currency depreciation and increasing the base rate for the main operations of monetary policy in 2015 and their grad-ual decrease during 2016, the lending conditions of the Bank were tightened, fact that led to the diminution of the number of loans granted.

Loans granted to legal entitiesDuring 2016, loans were granted to legal entities in total amount of 3,132.98 million lei.

Loans granted to individuals

The portfolio of loans granted to individuals (excepting the loans granted based on bank cards) increased by 576.13 thousand lei, representing 473.35 million lei or 9.25% of the total portfolio of loans granted by the Bank at the end of the reporting period.

Individuals received loans in total amount of 143.41 million lei, de-creasing by 32.63 million lei or 18.50% compared to the previous year. The volume of loans grated from the beginning of 2016 was moderate, being directly influenced by the NBM policies applied in connection with the difficult macroeconomic situation in the coun-try and, respectively, by maintaining the high costs of lending prod-ucts. As from the 2nd half year of 2016, as a result of the NBM de-cisions of decreasing the base rates, the costs of lending products were gradually reduced in the banking sector, fact that led to the increase of loan demand.

Fig.10 Structure of loans based on sectors of the economy

industry and commerce

supply of services

agriculture, food industry, fishery, forestry, buildings, land improvement

construction of roads and transport ways

non-banking financial environment

buildings and land improvement

loans with a weight of less than 2%

individuals

Fig.9 Evolution of loans

0

2000

4000

6000

8000

4,635.19

2014 2016

5,632.23

2015

5,726.21

Loans, million MDL

26.30%industry and commerce

18.35%supply of services7.46%

non-banking financial environment

12.68%individuals


10


For stimulating individuals to take loans from Victoriabank, cam-paigns of lending products for individuals: “Consumer loan allow-ances – 8%” during the period 01.03.2016-29.04.2016, “Summer magic” during the period 01.06.2016-30.08.2016 and “The winter holiday” during the period 10.11.2016-28.02.2017 were launched in 2016.

In 2016, the prudential regulations of the Bank on the diversifi-cation of the portfolio of loans by division into sectors have been complied with in order to strengthen and increase financial stability.

In 2017, the Bank’s activity remains directed towards increasing the portfolio of loans, attracting new clients for lending and raising the market share of the Bank by offering diversified lending prod-ucts based on attractive conditions, launching promotional lending campaigns for the products “Magic Loan” and “Magic House” during the year, changing the basic products (Magic Loan, Magic House, Common Credit) for adapting to the market circumstances, expand-ing the lending possibilities and increasing competitiveness. For improving the quality and increasing profitability of the portfolio of loans, the decreasing of time necessary for the submission of docu-ments, for processing the loan file and for making the decisions for the loans granted to individuals is anticipated by implementing and developing the concept of on-line credit application. At the same time, the creation of several new services for clients individuals and for the improvement of the existing applications is forecasted.


11


Foreign exchange activityEconomic climateIn 2016, the foreign exchange market was influenced by the do-mestic political stability, the continuation of the embargo applied by the Russian Federation on the exports of Moldovan products, the escalation of geopolitical tensions in Russia and the decline in oil price, all these also contributing to the deterioration of economic growth expectations at international level. Russian got into recession in 2016 and the forecast of negative growth is also maintained for the current year within the context of geopolitical risks related to the conflict with Ukraine.

Tab.3 List of ratings of correspondent banks on 31.12.2016

Correspondent bank

City Country S.W.I.F.T. code Account numberForeign cur-

rency

1The Bank of New York Mellon

New York USA IRVTUS3N 8900690941 USD

2 DZ Bank AG Frankfurt/Main Germany GENODEFF 0006 030226 EUR

3Banca Popolare di Vicenza

Vicenza Italy BPVIIT22 0000729178 EUR

4 Sberbank RF Moscow Russia SABRRUMM 30111810200000000220 RUB

5 Transkapitalbank Moscow Russia TJSCRUMM 30111756100000000084 CHF

6 Transkapitalbank Moscow Russia TJSCRUMM 30111756100000000084 GBP

Divergent decisions of monetary policy of the Federal Reserve System of the USA and the European Central Bank continue to put pressure on the European currency. The maintenance of uncertainties concerning the UK exit from the EU is also having a similar effect.

The assets of B.C. “Victoriabank” S.A. were concentrated in A rated correspondent banks and balances held in banks in Russia, Ukraine and Belarus were maintained at minimal levels by establishing prudential exposure limits and linking them to increased risk levels.

Evolution of non-cash conversion operationsIn 2016, the Bank’s turnover of non-cash conversion operations of foreign currencies against Moldovan leu recorded a decrease of 50.51% compared to the previous year, registering a total volume of 1,138.01 million US dollars. The Bank’s share for these types of operations record-ed a decrease of 53.34% compared to the previous year.

Fig.11 Evolution of turnovers for non-cash transactions (foreign currency against MDL)

0

2000

4000

6500

8000

0

10

20

30

40

3,901.20

2014

1,138.01

2016

2,253.06

2015

32.10

35.79

19.09

Turnover of non-cash conversion operations, million MDL

Market share, %


12


Activity of exchange offices

The foreign exchange cash market for 2016 changed its the nega-tive trend manifested in 2015, meaning higher volumes of foreign currency bought/sold through exchange offices. In 2016, the for-eign exchange cash market recorded an increase of 5.61% com-pared to 2015, representing a total turnover of 3,350 million US dollars. This fact indicates an increase of the population’s reliance on the predictability of the exchange rate evolution.

In 2016, the Bank’s share related to the activity of exchange offic-es recorded a decline by 15.47% compared to the previous year, amounting to 7,17 %.

Activity on remittancesDuring 2016, more than 620,000 rapid money transfers were ex-ecuted through B.C. “Victoriabank” S.A., recording an increase by 2.41% compared to the previous year, that is to say there were more than 14,600 transfers more than in 2015. Similarly, the total amount of transfers in the financial year recorded an increase by 2.67%, with approximately 117.82 million lei more than the previ-ous year. Analysing the general data, it was found that the increase of the total turnover of transfers is also influenced by the rise in the number of transfers. This increase may be seen on the chart below.

The charts below show a considerable decrease of turnovers made in Russian rouble, due to the extension of the economic crisis in the Russian Federation and the bottlenecks posed by the Russian gov-ernment for labour migration from Moldova. It is also worth men-tioning that a part of remittances in the Russian Federation migrat-ed from Russian roubles in Moldovan lei (double money transfers), their share in regard to Russian rouble remittances being about 50%. The turnover in the European single currency through remit-tance systems recorded a slight increase, which demonstrates a rel-atively constant flow of transfers through the Western corridor sup-plemented by reorientation of the workforce towards the Western labour market.

Fig.12 Evolution of turnovers in exchange offices Fig.13 Evolution of remittances of funds

Fig.14 Evolution of remittances by foreign currencies

Turnover of foreign exchange operations, million USD

Number of rapid transfers, thousand

Volume of transfers, million RUB

Turnover of rapid transfers equivalent, million MDL

Volume of transfers, million EUR

Volume of transfers, million USD

0

100

200

300

400

500

600

700

800

900

1000

0

2

4

6

8

10

12

14

16

18

20

471.52

2014

240.40

2016

285.30

2015

11.29

8.72

7.17

0

100

200

300

400

500

600

700

800

900

1000

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

730,687

2014

621,501

2016

606,880

2015

4,887.214,419.73 4,537.55

0

30

60

90

120

150USD/EUR RUB

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2014 20162015

4,756.75

3,147.43

1,844.61

83.75

110.83

80.55

86.83

85.68

86.59

Market share, %


13


Activity on bank cardsIn compliance with the objective to react to the requirements of the market of the Republic of Moldova, the trend of increase of the capacity to compete by the innovation in the products and services proposed and by providing new channels to serve clients was main-tained during the reporting year.

Emphasis was put on increasing the added value of the products offered and qualitative and accessible services to its clients. As a result of these measures, 104,013 new cards were issued during 2016; the number of cards in circulation reached 269,200 units, increasing by 12.35% compared to the end of the last year. In or-

der to improve infrastructure, the Bank’s network of ATMs was ex-panded to 170 units and the network of POS-terminals has reached 3,479 units.

For meeting the determined objectives, the following projects were carried on:

• Mass launching of “Da! Mobile Banking” service.During 2016, the number of clients using every month the re-spective service increased from about 250 to about 2,700.

• Geographical extension of the destination of P2P transfers for Visa cards.P2P transfers represent a service of money transfer between cards.

Currently, P2P transfers may be directed to any country of the world.

• Finishing “MasterCard contactless” project on the part of issu-ing and accepting.At the end of the reporting period, about 800 contactless POS-ter-minals were installed.

• Mass launching of “Shoppy” project.Individuals were offered cards with or without credit lines, which may be used for the payment of goods and services in the net-work of the project’s partners, by installments, involving inter-est-free rate, or to benefit of discounts by paying with this card, within the project.

Fig.15 Number of POS-terminals and the volume of retail operations in Victoriabank network

Fig.16 Share of retail transactions in Victoriabank merchant network

Number of POS-terminals Total transactions, % Transactions with cards issued abroad, %Volume of operations, million MDL

500

1000

1500

2000

2500

3000

3500

4000

0

500

1000

1500

2000

2500

3000

3500

2,759

201620152014

3,105

3,479

2,082.21

1,389.471,258.28

0

10

20

30

40

50

60

70

80

90

100

201620152014

39.2436.93

40.13

48.3041.43

48.64


14


On 31.12.2016, there are active more than 4,014 cards issued within the project. The functionality on offering the possibility to pay the loan by 10 installments within Shoppy product was set at the POS-terminals installed in partner's shops.

• Launching of the service of online funding of card accounts at the Bank’s counters.

• Offering the possibility to change the PIN code for Victoria-bank's cardholders at the Bank’s ATMs.

To stimulate the use of products related to banks cards by the Bank’s clients, a number of promotional campaigns were conducted during 2016:

• Campaigns of crediting on payroll cards based on a reduced inter-est rate, which took place in the spring and winter of 2016.

• The campaign called “Be part of the history of the Olympic Games” pertaining to 2016 Summer Games from Rio de Janeiro, Brazil, organised in co-operation with Visa Inc. The campaign aimed at stimulating the non-cash transactions performed with bank cards.

During 2016, the number of POS-terminals installed increased by 12.05% compared to the previous year.

The expansion of the network of POS-terminals has led to an in-creased volume of transactions carried out in the Bank’s merchants

network. Thus, compared to the previous year, their volume in-creased by 49.90%, resulting in a turnover of 2,082.80 million lei.

At the end of 2016, 39.24% of sales/retail transactions made in the merchants network of banks in the Republic of Moldova were carried out through Victoriabank POS-terminals, i.e. Victoriabank maintained the leading position in the given segment. The largest share in the banking system of the Republic of Moldova in cashless transactions made with cards issued abroad, also belongs to B.C. “Victoriabank” S.A. and amounts to 48.30% of total operations. This indicator is of a major influence since it impacts the Bank’s profitability and reflects the degree of optimal location of Victoria-bank’s merchants network.

During 2016, 310 new payroll projects were contracted. The total volume of transfers to salary cards increased by 29.15% compared to 2015, reaching the value of 5,873.66 million lei for 2016.

The number of clients having active cards increased by 12.28%, reaching 241,130 persons.

The increasing number of active cards favored the growth of bal-ances on card accounts compared to the previous year. Thus, aver-age daily balance on card accounts amounted to 1,031.86 million lei, 13.26% more than in 2015.

The lending activity through bank cards also increased during 2016. Therefore, the total balance of loans granted by cards reached the level of 157.43 million lei and increased by 18.92% compared to the end of 2015. The portfolio of loans granted to individuals on bank cards represents the third part of the total portfolio of loans granted to individuals within B.C. “Victoriabank” S.A.

Fig.17 Active payroll projects

Number of active payroll projects Volume of payroll transfers, million MDL

0

500

1000

1500

2000

2500

3000

0

1000

2000

3000

4000

5000

6000

1,539

2014 2015

1,914

2016

1,728

5,873.66

4,547.79

3,934.42


15


The total volume of retail/sales transactions made with cards issued by the Bank in merchants units increased by 28.54% and amounted to 1,744.81 billion lei.

Out of the total volume of operations carried out by cards issued by Victoriabank, 19.35% are made in merchant locations. The annual average of non-cash operations performed by means of cards issued by all banks in the Republic of Moldova represents only 15.61%.

Perspectives of development• Extending the SMS-banking service for Moldcell and Unité sub-

scribers.

• Installing ATMs with cash-in option.

• Implementing self service points.

• Launching the new versions of Da! WebBanking and Da! Mo-bile-Banking services.

• Launching digital cards for making contactless payments by means of smart phones through Host Card Emulation functionality.

• Implementing P2P service for MasterCard cards.

• Launching of a new product designed for travelers in partnership with Tickets MD.

• Implementing 3D Secure technology on the issuing part.

Fig.19 Evolution of the number of active cards Fig.20 Evolution of balances on card accounts Fig.21 Volume of transactions performed with Victoriabank cards

Total balance of card accounts at the end of the year, million MDL

Volume of cash operations

Volume of operations in the merchant network

Market share of active cards, %

Average daily balance of card accounts, million MDL

0

50

100

150

200

250

300

350

0

4

8

12

16

20

22

24

189,596

2014 2015

239,601

2016

269,200

17.6618.46

14.94

0

250

500

750

1000

1250

1500

1750

821.16

2014 2015

933.22

2016

1,223.39

1,031.86

911.04784.39

0

2000

4000

6000

8000

5,146

1,275 1,357 1,745

2014 2015

6,066

2016

7,271

Number of active cards, thousand


16


Activity on the capital marketIn 2016, the activity of Victoriabank was directed towards the improvement and expansion of activities in the fields already har-nessed – dealer operations on the securities market, brokerage operations on the corporate securities and state securities (SS) market, raising the profitability of the Bank’s operations on the capital market.

Operations with debt instruments (SS and NBC)As a Primary dealer, the Bank participates in all auctions of placing SS and conducts transactions with the National Bank Certificates (NBC) and SS on primary and secondary markets.

Fig.22 Bank investments in state securities and NBM Certificates

Investments in NBM Certificates, million MDL Investments in State Securities, million MDL

0

3000

6000

9000

12000

15000

18000

21000

0

50

100

150

200

250

300

350

170.90

12,592.09

2014 2015 2016

18,189.01

91.47

284.52

8,572.36

1,869.20 1,395.74 2,143.90

Investment incomes, million MDL

Because of the increase of financial resources available to be invest-ed in SS and NBC, on 31.12.2016, the balance of the portfolio of securities (SS and NBC) recorded an increase compared to the fore-casted balance and the balance at the beginning of the year.

On 31.12.2016, the average interest rate for the portfolio of SS and NBC was 10.25%.

In 2016, the Bank’s income derived from investments in debt in-struments represented 284.52 million lei, increasing by 66.48% compared to the previous year. The increase of income is due to the increase of volumes of liquid assets placed in SS and NBC and of rates until the first quarter of 2016.


17


The bank, as a Primary dealer, provides brokerage services in the purchase of SS for clients. During the reporting period, upon the clients request, 788 SS sale and purchase transactions on the pri-mary and secondary market were conducted, with a total volume of 829.48 million lei.

At the end of 2016, 88 clients of the Bank held portfolios of SS in total volume of 767.94 million lei, increasing by 30.30% compared to the period of the previous year. The Bank’s income derived from SS trans-action brokerage fees paid by clients represented 484.71 thousand lei.

Operations with equity instruments (shares and participating interests)

During 2016, the Bank maintained unchanged the structure of the portfolio of participating interests in the share capital of economic entities.

Therefore, in compliance with the International Financial Reporting Standards, at the end of the financial year, the Bank’s participating interests in the share capital of economic entities represent 170.41 million lei. The value of these financial assets available for sale rep-resents 1.35% of the Bank’s assets, exceeding by 2.6% the value recorded on 31.12.2015 (166.08 million lei) and by 10.88% the value recorded on 31.12. 2014 (153.68 million lei).

The increase is largely due to the increase of the value of shares held in the companies VISA Inc. and MasterCard Incorporated, whose re-assessment is performed monthly depending on the market price recorded on international stock exchanges.

Activity as an intermediary on the corporate securities market

VDuring 2016, the volume of transactions recorded on the regu-lated market and within MTF (securities market) amounted to 1.87

million lei, increasing by 1.27 million lei compared to the volume registered during 2015.

This result is largely due to high interest in the shares issued by com-mercial banks and the trend of the majority shareholders of trading companies to consolidate their controlling interest for the purpose to reorganize subsequently the companies.

In the aggregate, the volume of transactions recorded on the capi-tal market by the Bank as an investment company represented 1.93

Fig.23 Brokerage activity on the SS market

Fig.24 Bank’s activity on the capital market

Number of clients' transactions, units

Number of contracts entered into

Volume of clients' transactions, million MDL

Number of transactions recorded

Incomes derived from brokerage fees, thousand MDL

Total volume of transactions, million MDL

million lei, being in decrease compared to the volume registered during the previous year by about 50.70 million lei, due to the fact that, in 2015, transactions were largely subject to the brokerage performed outside the regulated market / MTF.

Therefore, during the financial year, the Bank entered into 47 con-tracts for brokerage services, recording 92 transactions on the se-curities market – in volume of 1.87 million lei and 2 transactions outside the securities market, based on the sale and purchase con-tracts – in volume of 64.56 thousand lei.

0

200

400

600

800

1000

0

100

200

300

400

500

20152014 2016

484.71

348.65

140.30

131

262.20

371

540.23

788

829.48

0

50

100

150

200

0

4

8

12

16

20152014 2016

10.87

0.601.87

31

15

47

134

36

94


18


Fig.25 Personnel structure by age

Fig.27 Bank’s personnel structure by categories of speciality

Fig.26 Personnel structure by studies

Fig.28 Personnel structure by the work experience

Personnel management

On the 31st of December 2016, the staff of B.C. “Victoriabank” S.A. included 1,285 employees.

Training and development of personnelAn important element of the Bank’s development strategy is to increase the level of qualification and professional competence. In 2016, a total number of 1,431 employees were trained. The training plan for the Bank’s employees was directly focused on topics that have increased their skills and competences.

Activity on the personnel reserveThe activity on the personnel reserve was carried on in compliance with the Personnel Policy and strategic requirements of the Bank at the current stage. The human resources department studied the offer of the specialists market, organized courses, tested the candidates at the vacancies in the Central Body and in the Bank’s subdivisions, maintaining interconnection relationships with the district management bodies,

District Employment Agencies, the management of chairs of Finance and Insurance, Banks and Stock Ex-changes from the Academy of Economic Studies of Moldova (ASEM), Information Technologies from the Technical University of Moldova (UTM), the chair of Economics of the Moldova State University and the Free International University of Moldova (ULIM). Meetings and conversations took place with the gradu-ates of these educational establishments and the personal qualities and the level of knowledge of the 64 students that passed the specialised practical training within B.C. “Victoriabank” S.A. were analysed and studied.

Specialists of 34 Branches, including of other financial institutions, organisations and companies, were selected and included in the reserve to be promoted in managerial positions within the Bank’s Branches (the position of manager, deputy manager, chief accountant, head of departments) by mutual agreement with the Branches Managers.

43%

34%14%

5%3%

1%

< 1 year< 29 years

11-15 years50-59 years


16-20 years> 60 years


> 20 years

6%

40%

54%

specialistshigher education

auxiliary personnel

short term higher education

operatorsmaster’s degree

secondary education

9%

66%

6%19%

3%8%

13%

37%

39%

19


Major objectives on the Bank’s personnel activity in 2017The increase of the level of personal, professional and team integra-tion competence is an important element of the Bank’s personnel policy.

The Bank’s Management submits the following objectives for the development of human capital:

• Result and performance orientation.

• Personal qualities consistent with a bank worker: integrity, cor-rectitude, honesty, responsibility, accuracy, receptivity and disci-pline.

• Professional qualities superior to competitors, consistent with the level of upgrading, flexibility and availability for the personal and professional development.

• Team integration qualities: respect, lack of hostility in relation to colleagues, lack of tendentiousness and intrigue, any other per-sonal actions that could shatter the team spirit of the community.

• Positive attitude in creating and maintain of our Bank’s image and strengthening its competitiveness positions on the market both during the working hours and out of working hours in com-pliance with the provisions of the Bank’s Ethics Code.

The following steps shall be taken: • Organizing and adopting the reorganization process within the

Bank’s subdivisions, considering the international practices.

• Selection of employees consonant with the values included in the Bank’s mission, considering the following qualities: intellectual potential, communication and organizational capabilities, re-sponsibility, efficiency, prudency, initiative, creativity and good command of modern languages.

• Training of the Bank’s personnel in various fields, including in the field of banking risks.

• Training of personnel for the improvement of the Bank’s opera-tional activity, the training being oriented both towards the ob-taining of some technical skills and an adequate qualification and towards the providing of an efficient and full servicing of clients.

• Development of linguistic competences.

• Assessment of personnel and planning of professional career, car-rying on training activities focused on segments of activity.

• Raising the position salaries for Bank's employees.

• The use of the Bank’s personnel motivation system as an import-ant leverage oriented towards result and performance.

• Attracting the Bank’s employees in the decision-making process, active participation in the Bank’s development process and not only as passive executors, fact that shall contribute to the increase of personal responsibility and effort put out by every employee.

PERSONNEL MANAGEMENT

20


Risk management

In 2016, the risk management activity was carried on within B.C. “Victoriabank” S.A. under the co-ordination of the Asset Liability Com-mittee and the Executive Committee and in compliance with the Bank’s Policy of risk management.

The Bank assesses and monitors permanently the credit risk, the interest rate risk, the foreign exchange risk, the liquidity risk and the capital ad-equacy risk.

The Bank has determined a set of indicators and thresholds for each type of financial risk and appreciates monthly the risk level. During 2016, the general risk level calculated based on the indicators varied between minimum and medium.

On the 31st of December 2016, the risk weighted capital adequacy ratio, characterized by the ratio of the value of risk-weighted assets and the amount of the total regulatory capital, was included within the determined thresholds and recoded the level of 22.60% (norm min. 16%), present-ing a minimum level of solvency risk.

The Bank used stress tests in the risk management process, with systemic and idiosyncratic scenarios.

The stress tests allowed the identification of vulnerabilities and the adoption of some plans of corrective measures.

During 2016, the process of assessment of the impact of implementation Basel III in the light of risks was carried on and the exercises performed by the Bank proved its capability to comply with the requirements.

Fig.29 Dynamics of the risk weighted capital adequacy

Risk weighted capital adequacy, % Norm, min. 16%

10

16

22

28

Dec-2015 Jan-2016 Feb-2016 Mar-2016 Apr-2016 Mai-2016 Jun-2016 Jul-2016 Aug-2016 Sep-2016 Oct-2016 Nov-2016 Dec-2016

25.49 25.92 25.99 25.43 25.46

22.44

20.01 19.83 20.2121.61 21.41

22.26 22.60

21


Corporate governance

Corporate Governance Code applied by the Bank, with reference to the source and place of publishingThe Corporate Governance Code of B.C. “Victoriabank” S.A. (hereinafter called the Code) mainly presents the working methods, duties and responsibilities of the Bank’s monitoring and management structures or the distribution of rights and liabilities of all those interes-ted in the Bank, the Board of Directors, the Executive Committee, shareholders, employees, clients, etc. and is developed in accordance with the Basel Committee document of February 2006 ”Consideration of corporate governance for financial institutions”, the Corporate governance code approved by NCFM Decision no. 67/10 of 24.12.15 and the provisions of the Law on Joint Stock Companies no. 1134-XIII of 02.04.97, with further additions and amendments.

The Bank is guided by the idea that good Corporate Governance contributes to the economic development necessary by improving thr Bank’s performance and its access to external capital.

By its Corporate Governance, the Bank aims to ensure the accuracy and transparency regarding the financial results of the Bank and, at the same time, to provide all shareholders with equal access to relevant information about the Bank.

This Code is based on ensuring equal, non-discriminatory treatment for all investors, achieved through the practical application of a set of principles, including: the access to the Bank’s (public, not confi-dential) information and the transparency of the decision-making process (provided by the participation in ordinary and extraordinary general meetings).

The goal of this Code is to establish a set of principles and rules that would guide the conduct of the Bank and all its employees in exe-cuting their duties and in their trade and professional relations, in accordance with the law in force and complying with their cultural differences. This Code does not pretend to cover all situations that can arise in the workplace, but to establish some guiding principles that will guide the actions of all and of each individual employee in their professional activity.

Corporate Governance aims to bring closer the interests of custom-ers and investors.

Corporate Governance structures determine the appropriate roles of the members of the Board of Directors and the Executive Commit-tee, as well as their competence and responsibilities.

22


Principles of corporate governanceThe corporate governance principles include the following direc-tions: compliance with the shareholders rights; the protection of minority shareholders; the transparency and continuous update of investors about the Bank’s activity and strategy; the relationship with majority shareholders; the management membership (respon-sibilities of the Board of Directors and the Executive Committee of the Bank).

In the process of establishment, operation and improvement of its corporate governance system, the Bank is guided by its principles, which include efficient administration, the management of the cur-rent activity, the control of the economic and financial activity and information disclosure.

From the perspective of the banking activity, corporate governance implies the manner in which the Bank’s activity and business are managed by the management bodies and refer to the following:

• establishing of corporate objectives, based on the specific nature of activities and the level of risks where the Bank is involved in;

• the proper and transparent management of the daily operations of the Bank;

• ensuring the Bank’s operation in a secure and prudent manner, in compliance with the legislation and regulations in force.

The Bank promotes among its employees the recognition of be-haviours that comply with ethical principles of loyalty and good faith, demonstrated by the following exigencies:

Loyalty to the Bank: During the execution of professional responsibilities, the employ-ees and managers must act with loyalty, contributing to the pro-

tection of the Bank’s interests. At the same time, situations that could generate conflicts between personal and Bank’s interests should be avoided.

Respect for the law: The Bank’s employees and managers must observe the laws in force, acting in compliance with their spirit and determination, and showing ethical behaviour in all their actions.

Honesty in administration and objection to bribery and corruption:

The Bank prohibits the bribery of public authorities and civil ser-vants and prohibits its employees to offer to third parties or to receive from third parties any kind of inappropriate payments, gifts or favours, which are not present on the market or which, by their value, characteristics or circumstances, may reasonably alter the development of commercial, administrative or profes-sional relations established by their enterprises. The personnel is not allowed to undertake actions on behalf of the Bank, which may contribute, directly or indirectly, to the so-called “money laundering”.

Confidentiality: Each employee or manager shall strictly comply with the obliga-tion of permanent confidentiality of information which, if dis-closed or advertised, may affect the interests of the Bank.

Transparency: All employees of the Bank are bound to provide truthful, necessary, complete and concrete information on the progress of activities related to the execution of their duties or field of competence.

CORPORATE GOVERNANCE

23


Equality of opportunities: The Bank promotes the professional and personal development of all its employees, ensuring an equality of opportunities by means of its action policies. The selection and promotion of Bank’s employees is based on the objective criteria of their merits and capabilities. Also, the selection processes shall include not only an evaluation of candidates’ professional skills, but also an appreciation of his/her behaviour and interaction abilities.

Non-discrimination: The Bank tries to ensure a working environment free of any dis-crimination prohibited by the law and, in particular, on the grounds of race, religion, culture, nationality or gender, and any behaviour that would imply personal harassment.

Training: The Bank considers that the professional development allowing the obtaining of a high efficiency in executing the job duties is closely related to full development of persons.

Occupational health and safety:Employees shall strictly comply with the norms stipulated by the low and those established by the Bank in the field of labour protection, prevention of occupational risks and environment policies.

Professionalism:The Bank’s employees and managers must act with professionalism and manifest it in a honest manner and in line with corporate values. Also, they should be distinguished by high professionalism based on an efficient activity and approached from the perspective of excel-lence and quality of service. Their behaviour must be based on the following principles:

• Quality: The Bank is committed to provide high quality services and to favour innovation, development and continuous improve-ment in order to achieve a maximum level of quality, starting from the profitability criteria.

• Customer orientation: the Bank’s employees and managers shall apply their working professionalism, collaboration and mentality to obtain customer satisfaction. At the same time, they will make every effort to meet the maximum level of customer expectations and to anticipate the knowing of their needs.

• The use and protection of the Bank’s property: The assets made available by the Bank to its employees shall be used to carry out the activities related to its interests, in a responsible, efficient manner and adequate to their field of professional activity. Also, the employees commit to protect those assets given to them in order to exercise their job duties.

• Relations with customers and partners: The Bank considers its customers and partners as an indispensable part in the achieve-ment of its objectives on growth, profitability and improvement of the quality of services, aiming at establishing with them a re-lation based on trust and mutual benefit.

• Employees participating in the selection process of partners, sup-pliers and foreign co-workers are bound to act impartially and objectively: it is not allowed to obtain any private advantage, the employees will avoid the favouring of persons or companies due to kinship or friendship reasons, the overlap of personal and com-pany interests shall be avoided.

Transparency, financial reporting and auditingThe Bank shall arrange suitable on-going periodic reports on all ma-jor events, including the financial statement, performance, own-ership and management. In accordance with the provisions of the National Bank of Moldova and the National Commission of Financial Market, the information is published on the official webpage of the Bank: www.victoriabank.md.

The Executive Committee is responsible for the quality and com-pleteness of the annual financial report, publicly disclosed in ac-cordance with the regulations in force. The Executive Committee is committed to the transparency of reports submitted by the external auditors.

The external audit is performed by an independent company bearing the responsibility for the audit executed. The external auditor and its remuneration are approved by the general shareholders’ meeting of the Bank.

The Corporate Governance Code is published on the Bank’s webpage www.victoriabank.md, in the section called “Information disclo-sure”, subsection “Governance of the Bank”.


http://www.victoriabank.md

http://www.victoriabank.md/uploads/default/0001/02/fc7040ba9f9f022a3fde28d65f09c0d03ea906aa.pdf

http://www.victoriabank.md

24


The degree of compliance with the provisions of the Corporate Governance CodeDuring the reporting period, the Executive Committee of Victo-riabank and the body of employees acted in compliance with the Corporate Governance Code approved by the Board of Directors of the Bank, ensuring maximum transparency in the activity of the Bank, acting in accordance with applicable laws.

Efforts were made to follow an effective model for Corporate Gover-nance, which monitors and evaluates the performance of the Bank, while satisfying the needs of all stakeholders, i.e. shareholders, management, employees and customers of the Bank, and, implicit-ly, provides added value in growth.

The principles of corporate governance were complied with, includ-ing:

• Observing the rights and equitable treatment of shareholders of the Bank;

• Observing the rights and interests of all the stakeholders;

• Integrity and ethical behaviour of the management team.

Transparency and fair presentation of financial results.

The Executive Committee fulfilled its role as manager of the Bank’s activity, reaching the objectives set in the Bank’s development strategy.

Daily, monthly and quarterly reports have been prepared for all fields of activity, and submitted to the Executive Committee for making the appropriate decisions in the activity management process.

The banking risk management was an important component of the strategy for obtaining an expected level of profit by the Bank, main-taining an acceptable risk exposure. The achievement of a high level of profitability is an indicator of the management quality.

The Bank’s clients and shareholders have been constantly informed by publishing of Reports in

the press and on the webpage of the Bank, on the information boards in all Bank offices, about the development strategy, the business risks, the financial results, the products and the services offered by Victoriabank.

Bank’s internal control and risk management systemsThe main goals of the Bank’s internal control are to ensure ef-ficient management of the Bank, to conduct financial activities in a safe and prudent manner, to protect the interests of depos-itors and clients.

The main objectives of internal control are the minimization of the risks related to financial activities, the exercising of the control over the observance of the applicable legislation, the providing of in-formation security, transparency of ownership structure and con-trol over the Bank, solving conflicts of interest, providing a security level in line with the nature, character and volume of transactions performed.

The Bank’s internal control systems are a process involving the man-agement bodies of the Bank and its employees, regardless of their

position. The internal control systems are based on procedures, methods, standards, measures, including restrictions (limitations), relationships of issuance / authorization-execution-reporting-con-trol of transactions and operations, and the orders of the manage-ment bodies of the Bank, based on genuine, complete and updated information, adopted to achieve the goals and objectives of the internal control.

The Bank’s internal control systems help increasing revenue and mini-mizing expenditure. Their purpose is to ensure that expenditure is au-thorized and performed as intended, that assets are adequately pro-tected, that liabilities are recorded correctly and the risks are limited.

The Bank prepares, organizes and implements its own internal control systems, based on the Regulation, taking into account the generally accepted practice in this area, including the Basel Committee docu-ments and European Community Directives and adapts them to their activity.

In order to ensure conditions for achieving the goals and objectives of internal control, the development, organization and implementation of internal control systems take into account the volume, number, type and diversity of transactions, the degree of risk associated to each area of activity, the volume control of the daily work by the man-agement bodies, the degree of centralization and decentralization of the Bank, the degree of use of information technology resources.

The internal control systems are developed and adopted by the Bank in the form of written internal rules (policies, procedures, regulations, instructions, etc.).


25


Risk management The banking risk management is an important component of the strategy for obtaining an expected level of profit by the Bank, main-taining an acceptable risk exposure. The minimization of risks in-curred by the Bank contributes to the minimization of losses regis-tered thereby and the maximization of the Bank’s profitability.

The key objectives of the risk management system are:• To identify, assess, monitor and control the existing and poten-

tial sources of internal and external risks; to assume, eliminate or avoid risks, to protect against risks and/or to build reserves for various types of risk;

• To establish clear responsibilities in the field of risks manage-ment, to separate duties and obligations, to ensure the execution of organizational and administrative controls, to develop activity management methods;

• To develop procedures for authorization and approval of activities, record-keeping, safety, monitoring, evaluation, management and control of risks, ensuring continuation of the activity;

• To ensure transparency, through a comprehensive monitoring and reporting system, by which to analyse and communicate actual exposures to the Bank’s management;

• To develop a system for measuring financial performance that would consider the forecasted loss (cost of activity), the unforeseen loss (risk measurement) and the adjusted earnings for each risk (risk adjusted return on capital);

• To define and use the principles of risk diversification and port-folio management, to assess the risks as a whole, since they are interrelated;

• To identify the acceptable level of risk and to set the exposure limits according to this level, to use and to constantly improve the stress tests;

• To permanently analyse the achievements and failures of the risk management system, separate of the activity carried on, through the internal control system, internal and external audit;

• To ensure a professional and specialized knowledge in the identi-fication and control of various types of banking risks.

Financial risk management is carried out in accordance with the following principles:

• The Bank has adequate information systems for assessing, moni-toring and reporting the risk exposure;

• The Bank develops internal procedures and instructions regard-ing the stress tests that provide periodical tests, with a variety of short and long term scenarios, taking into account the specific circumstances of the market and the Bank;

• Stress tests are tools that supplement the other approaches and risk management measures, with a particular role in:

- providing future risk assessments;

- exceeding the limits of models and historical data;

- supporting internal and external communication;

- including procedures for capital and liquidity planning;

- informing about the established risk tolerance of the Bank;

- facilitating the development of plans for risk mitigation or con-tingency stress.

• The Bank has management plans for different stress scenarios based on unpredictable circumstances;

• The Bank permanently improves the stress tests, both in terms of presentation level of the risk and in terms of the range of risks taken into account. Thus, the Bank will constantly review the sce-narios and will seek new scenarios, will examine new procedures for identifying potential risks, will improve the identification of correlated risks aggregation and of the interaction between fi-nancial risks;

• Responsibility for the stress tests control rests on the Executive Committee, while responsibility for the implementation, man-agement and supervision of the tests lies with the Asset Liability Committee.

The Bank uses stress tests to identify, monitor and control risk concentration. Stress tests are integrated in the process of fore-casting of capital and liquidity:

• The types of stress tests range from simple to complex, depend-ing on the number of input data, variables of the model and the number of output data (modelled indicators):

- Simple tests are flexible ad-hoc stress tests, which must be filled in quickly and must respond to issues related to emerging risks (e.g. liquidity risk). These are actually simple sensitivity analyses based on changes in a particular risk factor;

- Complex tests are stress tests that evaluate the impact of de-velopments of several risk factors, combined in an unique sce-nario, on the financial statement of the Bank, assessed through a set of indicators.

• The frequency of test scenarios is depending on the type and pur-pose of the stress test. The mandatory minimum frequency of testing is quarterly for complex stress tests and monthly for tests with risk factors taken individually (simple tests).


26


Powers and rights of the management and shareholders’ bodies, as well as the manner of exercising these powers and rights. The composition, the operation and the structure of the management bodies

Shareholders’ rightsThe Bank observes the rights of its shareholders, stipulated by the applicable legislation, the Bank’s Articles of Association and the Regulation of the General Shareholders’ Meeting of the Bank. All shareholders of the same class of shares are treated fairly; all se-curities of the same type and the same class confer equal rights.

The Bank ensures the exercise of ownership rights of shareholders on the shares through effective mechanisms. The register of sharehold-ers is kept by the registry company called “Grupa Financiara” S.A. (address: Chișinău Mun., 55 Armeneasca Str., office 301, telephone 022-271845), enjoying a high professional reputation on the secu-rities market and it is independent of the Bank, the members of the management bodies and its affiliated persons.

The Bank informs the shareholders about their rights and about how these rights can be exercised, about the capital structure and the ar-rangements that allow co-shareholders to exercise the control over the Bank, about the identity of shareholders individually or in concert holding a participating interest in the Bank’s share capital equal to or greater than the substantial interest.

The information about the calling of the General Shareholders’ Meeting (place, date and time of holding the Meeting and its agenda) is sent to each shareholder to the address indicated in the list of sharehold-ers of the Bank or via electronic mail, upon the shareholder’s request, within the deadlines provided by the Law on joint stock companies.

The Bank establishes a transparent and clear mechanism for calculat-ing the amount of dividends and paying them to shareholders.

Shareholders have the pre-emptive right to subscription of newly is-sued shares. To this end, the Bank allows sufficient time for share-holders to be able to exercise this right.

The members of the management bodies of the Bank act in the inter-est of all shareholders, not just in the interest of residing sharehold-ers, holding a majority or controlling stake.


27


Manner of providing the shareholders’ access to the Bank’s documentsThe bank submits to its shareholders, upon request, for initiation, the following documents, unless they are subject of a state or com-mercial secret:

• The Articles of Association of the Bank and all additions operated in them;

• Certificate of state registration of the Bank;

• Rules governing the functioning and organization of the Bank, with all additions and amendments operated in them;

• Contracts signed with the register company and the auditing firm of the Bank;

• Minutes of the General Shareholders’ Meetings and the meetings of the Board of Directors of the Bank;

• The list of members of the Board of Directors of the Bank, mem-bers of the Executive Committee and the rest of persons holding managerial positions in the Bank;

• The list of stakeholders, in compliance with the provisions of ar-ticle 85, paragraph (2) of the Law on joint stock companies. The stakeholder in the transactions performed by the Bank is also deemed the person that is:

- the shareholder holding alone or together with its affiliated per-sons more than 25% of voting shares of the Bank;

- the member of the Board of Directors of the Bank or the Exec-utive Committee of the Bank;

- the partner of the Bank in the given transaction or in several interconnected transactions;

- the holder of a substantial share (over 10%) in the share capi-tal of its partner or an associated thereof with full liability;

- the representative of the Bank’s partner in the given transaction or in several interconnected transactions or the intermediary in these transactions.

• The person affiliated to the persons specified. Statements of public offers of the Bank’s securities, all additions and amendments oper-ated in them, as well as the reports on the total of issuing securities;

• Data on the monthly volumes and average prices of transactions recorded in the register of security holders of the Bank;

• Financial Statements of the Bank;

• Reports of the Auditing Committee, control papers and reports of the auditing organization, control papers and decisions of the State Bodies that exercised the control over the Bank’s activity;

• Annual reports of the Board of Directors of the Bank and the Au-diting Committee of the Bank;

• The correspondence with shareholders;

• Other documents provided by the Articles of Association or the Reg-ulations of the Bank.

The Bank ensures the keeping of provided documents at the Bank’s registered office, in compliance with the requirements of the State Body for the Supervision and Administration of the Archive Fund of the Republic of Moldova.

Upon the request of any shareholder, submitted in writing at the Bank’s registered office or sent by e-mail at [email protected], the Bank shall lodge for payment excerpts and/or copies of the above-mentioned documents and other documents provided by the Articles of Association and the Regulations of the Bank, excepting the documents which are subject to a state, commercial or bank secrecy, within 5 working days.

If the shareholder wishes to inspect the documents of the Bank, it shall be provided the access to the Bank’s registered office during the working hours and on the date agreed between the Bank and the shareholder.

The Bank presents excerpts and/or copies of documents in the lan-guage in which they were executed.

The shareholder (authorized representative thereof) will confirm the receipt of excerpts and/or copies of the required documents or will take note of these documents.

The amount of payment for the documents issued to shareholders is determined by the Bank’s Executive Committee and cannot exceed the volume of expenditure for presenting the excerpts, for making copies of the documents and for sending them.

The responsibility for providing the access to the Bank’s documents, excepting the documents of the Board of Directors of the Bank, lies with the Bank’s Executive.

Committee, and for the documents of the Board of Directors of the Bank – with the Board Secretary.

Management bodiesGeneral Shareholders’ MeetingThe Bank is led by the General Shareholders’ Meeting, which is made of the Bank’s shareholders, and is the supreme management body of the Bank. The Corporate Management of the Bank is adequate in the sense that it encourages the full involvement of all shareholders in the Bank’s activity and in the decision-making process within the General Meeting. For this end and in compliance with the legisla-tion, the Bank calls, at least one a year, the General Shareholders’ Meeting and, as often as necessary, the Extraordinary Shareholders’ Meeting. The manner of organization and operation and the com-


28


petences of the General Shareholders’ Meeting are indicated in the Chapter VI of the Articles of Association of the Bank.

Board of DirectorsThe Bank is administered by the Board of Directors, which is responsi-ble for carrying on all the necessary and useful activities for achieving the object of activity of the Bank, except as provided by the law for the General Shareholders’ Meeting. The Board of Directors meets at regular intervals and makes decisions that allow it to fulfil the duties in an effective and efficient manner. The Board of Directors acts in the interest of the Bank and protects the general interests of its share-holders by ensuring the sustainable development of the Bank. The Board of Directors supervises the work of the executive body by is-suing binding decisions and providing guidance. The most important aspects of the work of the Board are included in the report examined and approved by the General Shareholders’ Meeting. Responsibilities of the Board of Directors are set out in the Articles of Association of the Bank and the Regulation of the Board of Directors. The Board of Directors shall avoid conflicts of interest or the occurrence of conflicts in their activities with commitments to other institutions.

New members of the Board are elected through a formal, rigorous and transparent procedure, and any change in the numerical structure of the Board requires the approval of the General Shareholders’ Meeting.

Executive CommitteeThe executive body of the Bank is represented by the Executive Com-mittee, which is responsible for the daily management of the Bank in order to achieve the objectives stipulated in its strategy and business plan. The Executive Committee is supervised by the General Share-holders’ Meeting and the Board of Directors and acts in the interests of shareholders. The responsibilities of the Executive Committee are set out in the Articles of Association of the Bank and the Regulation of the Executive Committee. The Executive Committee is responsible

for providing full, accurate and essential information to the Bank’s Board, the Auditing Committee and the external audit.

Working committeesAuditing CommitteeThe Auditing Committee is a consultative, standing and indepen-dent committee assisting the Board of Directors in the meeting of its tasks in the field of accounting, audit and internal control as part of the Corporate Governance.

The primary objective of the Auditing Committee is to grant assis-tance to the Board of Directors in issues relating to: the book-keep-ing system, the financial and accounting reporting, carrying on of internal audit missions, the internal control system and the mana-gerial processes of the Bank.

ALCO Committee (Asset Liability Committee)ALCO Committee is a standing committee that meets once a month and whenever deemed necessary.

ALCO Committee is a standing analysis and decision-making com-mittee that gives recommendations and makes decisions in line with its duties, namely:

• prepares financial risk assessment standards and systems, in compli-ance with the Risk Management Policy of B.C. “Victoriabank” S.A.;

• provides the maintenance of an adequate structure of assets and liabilities in compliance with Bank’s strategy, manages the Bank’s exposure to interest rate risk and liquidity risk.

Credit Committee

The Credit Committee is a standing committee that meets whenever deemed necessary.

The Credit Committee has the following duties and rights that include, but are not limited to the following: reviewing the issues related to the lending activity of the Bank, except for those falling under the com-petence of the General Shareholders’ Meeting, the Board of Directors, the Executive Committee and the Bank’s independent subdivisions; determining/cancelling the crediting limits for Bank’s branches, in-cluding delegating to the Credit Commissions of the Bank’s branches special powers on decision-making with respect to debtors’ requests (potential debtors) as part of exclusive and unique crediting transac-tions; making decisions with respect to the applications for granting / prorogation / negotiation of interbank loans.

Personnel CommitteeThe Personnel Committee is a standing committee that meets whenever deemed necessary and examines the issues related to the Bank’s personnel, except for those falling under the competence of the Board of Directors and the Executive Committee of the Bank. The Personnel Committee examines and submits proposals on the selection, employment, promotion and dismissal of the managers of the Bank’s subdivisions and the administrators in line with norma-tive documents in force.

Procurement CommitteeThe Procurement Committee is a standing committee that meets whenever deemed necessary.

The goal of the Procurement Committee is to select offers for the procurement of goods, service contracts and/or construction works by the Bank.

The Procurement Committee analyses and selects, as a result of ten-ders or requests for proposals organized, the supplier of goods and services, approves the contracts signed with the selected suppliers and verifies the execution of the clauses of procurement contracts by the supplier.


2016 - victoriabank · and imports totalled 4,020.30 million usd. in 2016, the export to import...

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