Along with International Players | An exclusive interview with the Director of the Moldova Central Securities Depository

Clea McElwain
October 29, 2021

An exclusive interview with Alexandru SAVVA, Director of the Moldova Central Securities Depository for the Russian-language newspaper “Economic Review”.


– Mr. Savva, October will mark five years since the entry into force of Law No 234 of the Republic of Moldova on the Central Securities Depository. Three years ago, CSD started its practical work, gradually expanding the range of services for the country’s financial market. Please, remind our readers of the steps of your path, as you followed the whole way since the very beginning, as an organizer, then evolving as a director.  

Together with our development partners, we clearly understood that progressive development of the country’s financial market would be impossible without a Central Securities Depository. A lot has been achieved during the three years of our practical work.

First of all, we have implemented an advanced securities settlement IT system and connected banks to it. As a result, we started operations with government securities and central bank instruments in a new format in less than six months. In the first year, we managed to establish connections with the interbank payment system and Bloomberg Auction platform for placing securities. As a consequence, transfers and payments for transactions involving a variety of financial instruments were fully automated.

During the second year, we launched operations with corporate securities, shares of Moldovan companies. We attracted non-banking financial institutions to the CSD and connected Moldova Stock Exchange (‘Bursa de Valori a Moldovei’) to our system. During the same period, we started receiving registers of joint stock companies (JSC) and working with them. So far, about 200 shareholders’ registers were transferred to CSD. These included the registers of banks, insurance companies, joint-stock companies with Government participation, and some others. Transactions with shares of these JSCs are performed exclusively through the CSD.

This year we are working hard to improve the internal technological processes and specific processes of running our business. This refers to internal control and audit systems, compliance, risk management and other related aspects. This is primarily necessary to improve the quality and stability of our work and services. Secondly, we must clearly understand that cooperation with depositories of other countries, including of more developed economies, is only possible if we comply with particular standards.

During a three-year period – a quite short period for such large-scale transformations – we managed to create in our country a single depository center that truly meets modern advanced requirements. Our clients, foreign experts and market participants qualify the achieved results as good and very good. Generally, myself and my colleagues are also content, given that we started the process from scratch and encountered many obstacles.

– So can we certainly state that we have currently in our country a really functional central securities depository? What benefits have market stakeholders gained from this and what opportunities are open to them?

By creating the CSD, we implemented a normal and fully functional infrastructure for financial instruments in our country. From this point of view, our CSD has no difference compared to central depositories of other countries. What advantages does CSD provide to market players? First of all, it ensures safety and security of data about securities’ owners and transactions with securities. Before CSD was established, there were cases when registers were missing or reported unclear transactions with some shares. Currently, such manipulations are absolutely impossible within the CSD.

Secondly, we introduced a classic settlement mechanism for all types of securities. I will not go into technical details now, but I will emphasize that it offers significant advantages to both issuers and professional intermediaries. I am sure that market players will be able to use the new mechanism more widely for corporate securities in time. It will not be focused to perform transactions on the secondary market only, but also to place securities, pay coupons, pay dividends, and buy back securities.

Thirdly, we granted online access to our centralized system to financial intermediaries. It allowed direct transfers of securities between banks, brokers and their clients. At the same time, it excluded numerous visits to the registration office, broker, depositary in order to perform even one single transaction. Currently, a shareholder interacts solely with the broker, while all the other procedures are carried out online between the broker and the CSD.

Also, I would like to mention the services related to shareholders’ lists. CSD provides issuers the opportunity to receive lists and statements electronically and in convenient formats, both for regular monitoring and accounting, as well as for proper nominal notification of shareholders about meetings. This form is more reliable and cost-effective.

– CSD became a reliable support for transactions with NBM certificates and government securities. However, so far, the presence of a centralized depository has an insignificant impact on the development of the stock market in our country. What are the reasons, from your point of view?

You are absolutely right. At present, CSD mainly carries out transactions with government securities and central bank instruments. These areas are well developed, due to a clear policy and effective regulations that the National Bank and the Ministry of Finance have been implementing for many years. On the other hand, the volume of transactions with corporate securities is so small that we have to admit that a stock market, in the true sense of this word, does not exist in our country. This is unfortunate. However, it is necessary to understand that CSD is not a panacea for all challenges on the stock market. CSD was created with a specific goal – to establish a strong, safe and modern financial infrastructure – thus in my opinion, the National Bank of Moldova, as a responsible state institution, coped with this task perfectly.

– It turns out that, for example, there is a modern highway with all the components necessary for safety and maintenance, but there are few road users on this highway?

The depository is an important, but hardly the only element of the market. The approach and measures we applied in creating the depository should be also applied to other market components: trading platforms, collective investments undertakings, approaches for attracting and interacting with investors and issuers, methods of providing investment services and mechanisms of registration, issuance and circulation of corporate securities. All these elements should be reconsidered and significantly optimized. This is the first priority task to be solved by the authorized regulator of the corporate securities market, i.e. the National Commission for Financial Markets (NCFM).

Speaking about the need for reforms in this field, I mean an approach that will activate the stock market, rather than operating only legal amendments. In other words, it will generate make companies interested to issue securities, investors interested to invest through the stock market, and financial intermediaries interested to actively promote and provide investment services.

– Quite recently, in July, CSD became a full member of the European Central Securities Depositories Association (ECSDA). What advantages does the membership to this authoritative and prestigious international organization bring? In this regard, what practical opportunities have emerged and will emerge for financial market participants in our country? Are there any ways to enhance the attractiveness of the Moldovan financial market to foreign investors? Previously it was announced that CSD aimed at establishing direct connections with depositories of European countries. Is CSD ready to provide services to the Moldovan companies that expect to enter the foreign stock markets in search for capital? 

Membership in ECSDA brings a lot of opportunities to CSD and market as a whole. It gives us the possibility to learn from the experience of developed depositories and adopt technical standards and procedures, which will allow integrating our systems with systems of foreign depositories. In turn, this membership will allow foreign individuals to invest directly in Moldovan securities and will allow our investors to have access to securities of other countries.

You are right, one of our goals is to establish connections with other depositories and ECSDA, as I said, will help us in this process. There is progress in this regard, as we have been already communicating with other depositories on this matter for a long time. The Government and, most recently, one of the largest Moldovan banks expressed the intention to enter other countries’ financial markets. This enhances foreign partners’ interest in the Moldovan stock market and will certainly help with the integration with other depositories.

By the way – although this issue does not relate directly to CSD – there are particular issues, mainly of regulatory nature, related to the transactions with Moldovan companies’ shares on foreign stock exchanges. I hope that in this regard, the new NCFM management will take on the experience of other countries and the EU law. In any case, CSD will do its part of the work and will establish connections with foreign depositories. I have no doubts in this respect.

– Nevertheless, domestic market remains the main CSD activity area. Can you tell us about any innovations for the near future?

I can give you assurance that we do not stand still. The continuous improvement and development of the CSD activity is important for me, as a manager. I can mention some important projects we are currently working on. In short term, we plan to introduce netting settlements for transactions with government securities –this mechanism is currently used for stock exchange transactions only. It is a very effective mechanism for liquidity and credit risk management. We are also working to connect our system with Bloomberg E-bond platform for secondary market transactions with government securities.

Another important project – we are developing and will propose a new model for registration, placement and settlement of transactions in municipal and corporate bonds, because the current regulatory framework needs to be updated significantly. In longer term, we plan to fully transfer the functions of interacting with investors to banks and investment companies. These measures will require both our and other market participants’ efforts, but their implementation will significantly expand market opportunities.

– All the work of CSD is carried out by a small team of employees – is this thanks to modern technologies and the appropriate level of professional training? Where do you find support in acquiring new competencies? What is the role of external partners in the creation and establishment/upgrading of the central depository in our country?

Indeed, the young CSD team is the main driver and executor of the project. You are absolutely right, that we would not achieve results without the help of other organizations. CSD was created with the support of the USAID and IMF. We have received tremendous support from the National Bank – technical equipment, high-quality IT services, interaction with the interbank payment system and participation of qualified specialists in the Depository Board. One of our main partners is the USAID Moldova Financial Sector Transparency Activity (FSTA), which participates directly in many of our projects. With USAID’s support, we are introducing new internal risk management mechanisms and processes to prevent money laundering in transactions with securities. Currently, together with USAID experts, we are considering opportunities to find optimal solutions for establishing links with foreign depositories. I want to mention the help of USAID experts in developing a comprehensive roadmap, which included an analysis of the current CSD structure, a strategy for accessing the international securities market and recommendations on participation in the capital market organizations. We also work jointly on the development of the government securities market for retail investors.