Subject 6:

BANK SETTLEMENTS ON
THE SECURITIES MARKET
AND CURRENCY MARKET
CIOBU Stela
Assoc. Prof., Ph.D.
 CONTENT
1. Commission operations
2. Currency operations,
establishment of exchange office
3. Currency position of the
commercial bank
 Bibliography
 Legea cu privire la Banca Naţională a Moldovei nr. 548-XIII din
21.07.1995.
 Law on the activity of banks no. 202 of 06 october 2017.
 BASNO, C.; DARDAC, N.; FLORICEL, C. Monedă. Credit. Bănci.
Bucureşti: Editura Didactică şi Pedagogică, R. A., 2003. 374 p.
 MANOLESCU, Gh. Monedă şi credit. Bucureşti: Editura Fundaţiei
"România de Mâine", 2003. 228 p.
 STOICA, V.; DIACONU, P. Bani şi credit: banii, teoriile monetare,
administrarea banilor şi politica monetară. Bucureşti : Editura
Economică, 2003. 535p.
 TURLIUC, V.; BOARIU, A.; STOICA, O. Monedă şi credit. Bucureşti:
Editura Economică, Bucureşti, 2005. 303 p.
 ЖУКОВ, Е.Ф.; МАКИМОВА, Л.М.; ПЕЧНИКОВ, А.В. и др. Деньги.
Кредит. Банки: учебник для вузов. 2.е изд., перераб. и доп. М.:
ЮНИТИ-ДАНА, 2003. 600 с.
 ЛАВРУШИН, O. И. Деньги. Кредит. Банки: учебник. 2-e изд.
Москва: Финансы и Статистика, 2004. 456c.
 ПОЛЯКА Г. Б. Финансы. Денежное обращение. Кредит. 2-e изд.
Москва: ЮНИТИ-ДАНА, 2004. 507с.
1. Commission
operations
Types of commission operations
 trust,
brokerage,
 dealer,
underwriting activity,
administration of investments,
keeping the register,
safekeeping operations
 Trust
 A trust company is a legal entity that acts as a fiduciary,
agent, or trustee on behalf of a person or business for a
trust.
 A trust company is typically tasked with the
administration, management, and the eventual transfer of
assets to beneficiaries.
 A trust company acts as a custodian for trusts, estates,
custodial arrangements, asset management, stock transfer,
and beneficial ownership registration.
 Trusts are managed for profit, which it may take out of the
assets annually or upon transfer to the beneficial third
party.
 Benefits of a Trust Company
 A trust company is hired to act as a fiduciary, meaning they
act on your behalf and won't take advantage of you. As a
result, a trust company can make all of
the investment decisions and act in the best interest of its
client. The investment management services offered by
trust companies can be helpful to those who are not
experienced or knowledgeable about the financial markets.
 Also, clients who don’t want or care to manage their day-to-
day finances can also benefit from using a trust company.
 Trust companies are often good alternatives for preventing
future family squabbles when dealing with inheritances
and estate planning. If dividing up the assets of
an estate will cause family turmoil, a trust company can act
as a neutral third party.
 Brokerage
 A brokerage company primarily acts as a middleman to
connect buyers and sellers to facilitate a transaction.
 Brokerage companies typically receive one of two types
of commission: a flat fee or a percentage of the
transaction amount.
 Brokerage companies come in several types, offering a
range of products and services at a range of costs and
fees.
 Types of Brokerages
 Full-service brokerages, also known as traditional brokerages,
offer a range of products and services including money
management, estate planning, tax advice, and financial
consultation.
 Discount brokerages: Discount brokers were once brick-and-
mortar operations, but are now most often online platforms that
allow do-it-yourself (or self-directed) investors to make their
own trading decisions for lower commissions. Recently, there has
been a push toward zero trading commissions for ETFs or even
all products on several self-directed online platforms. These
brokerage companies may tout relatively low flat fees for trades
in television, internet, and radio advertising.
 Robo-advisors: Automated investment advisory platforms, or
robo-advisors, are a relatively new form of a digital financial
advisor that offers investment management services carried out
by algorithms with minimal human intervention at a very low
cost. Several robo-advisors offer zero commissions or fees, and
you can start with as little as $5 in many cases.
 Dealer
 Dealers buy and sell securities for their own account.
 Dealers are important figures in the market as they are
market makers, create liquidity, and help promote
long-term growth in the market.
 Dealers must be registered with the Securities and
Exchange Commission and must comply with all state
requirements before they can begin working.
 Dealers are different from traders and brokers—the
former buys and sells for his or her own account, while
the latter does not trade for its portfolio.
 Dealers Versus Brokers
 These are two terms that are generally associated with
securities. Although they may function in a similar
capacity, they do have distinctions between them.
 Contrary to a dealer, a broker does not trade for its portfolio
but instead facilitates transactions by bringing buyers and
sellers together. In practice, most dealers also act as
brokers and are known as broker-dealers. Broker-dealers
range in size from small independent houses to
subsidiaries of some of the largest banks. Firms operating
as broker-dealers perform both services depending on the
market conditions and on the size, type, and security
involved in a particular transaction.
 Another key difference between the two is how they charge
for their services. A dealer will charge a markup when
selling from his or her own inventory because the dealer is
a principal in the account, while a broker charges clients a
commission for executing trades on their behalf.
 Underwriting activity
 Underwriting is the process through which an individual or
institution takes on financial risk for a fee.
 Underwriters assess the degree of risk of insurers' business.
 Underwriting helps to set fair borrowing rates for loans,
establish appropriate premiums, and create a market for
securities by accurately pricing investment risk.
 Underwriting ensures that a company filing for an IPO will
raise the amount of capital needed, and provides the
underwriters with a premium or profit for their services.
 Investors benefit from the vetting process that
underwriting grants by helping them make informed
investment decisions.
 Investment management
 Investment management refers to the handling of
financial assets and other investments by professionals
for clients
 Clients of investment managers can be either
individual or institutional investors.
 Investment management includes devising strategies
and executing trades within a financial portfolio.
Investment management services
 Investment management services include asset
allocation, financial statement analysis, stock selection,
monitoring of existing investments, and portfolio strategy
and implementation.
 Investment management may also include financial
planning and advising services, not only overseeing a
client's portfolio but coordinating it with other assets and
life goals.
 Professional managers deal with a variety of
different securities and financial assets, including bonds,
equities, commodities, and real estate. The manager may
also manage real assets such as precious metals,
commodities, and artwork. Managers can help align
investment to match retirement and estate planning as well
as asset distribution.
 Pros and cons of investment
management
PROS
 Professional analysis
 Full-time diligence
 Ability to time or outperform market
 Ability to protect portfolio in down times
CONS
 Sizeable fees
 Profits fluctuate with market
 Challenges from passively managed vehicles, robo-
advisors
 Shareholder register
 A shareholder register is an active list of owners of a
company's shares, updated on an ongoing basis.
 The term shareholder register is often used in Europe
and other overseas countries.
 Included in the register are the shareholder’s name
and physical address, while some registers detail the
last decade of shareholder transactions.
 Shareholder register
 The origin of a shareholder register is a clear record of
beneficial owners of shares (shareholders, who are
entitled to and may exercise voting rights attached to
the shares, along with other particular rights and
powers, and receive dividends).
 Access is free for current shareholders and may require
a small fee for non-shareholders. This will allow
communication to, and between, shareholders of
information such as the price per share in a takeover
bid.
 Safekeeping
 Safekeeping is storing assets or items of value in a safe
area, such as with a custodian or financial institution.
 Assets placed in safekeeping generally come with a
safekeeping certificate.
 Firms may hold stock or bond securities, physical
valuable, or documents in safekeeping, although an
investor may also hold their own valuables in
safekeeping, possibly renting a safe-deposit box.
 Custodians generally hold valuables for investors,
while a depository can assume additional control,
liability, and responsibility for the items.
2. Currency operations,
establishment of
exchange office
 The limits of withdrawal cash
in/out RM
 No limits of introducing cash in Moldova
 Residents/non-residents can withdraw 10.000 EUR
without declaration
 Residents/non-residents can withdraw 10.000-50.000
EUR with authorization issued by licensed bank of
republic of Moldova
 The amounts exceeding 50000 EUR can be only
transferred through the banking system.
Procedure to open exchange office
 Social capital 500.000 MDL
 Circulating capital 400.000 MDL
 Submitting the application + documents (all the necessary
equipment, certificate from the bank which confirms that
Social Capital was introduced, certificate of registration,
contract with the security company, working schedule,
status, warrant contract for the location)
 Examination of documents -> 3 days (if rejected ->
motivation letter, if accepted-> examination during 15
days)
 The CB will make an inspection of exchange office
 Approval of documents & taking the decision of opening
the exchange office
 Administrator will pay a fee for license 2500
 After 3 days issuing the license (valid for 5 years).
3. Currency position of
the commercial bank
 Regulation on banks open foreign
exchange position, approved by the DCA of
the no. 126 of November 28, 1997
 Foreign exchange position
 Foreign exchange position – the balances of bank`s foreign
exchange assets and liabilities that generate the risk of
obtaining additional incomes or expenditures upon the
modification of exchange rates.

 The foreign exchange position shall be considered closed in

the event when foreign exchange assets in a certain foreign
currency are equal to foreign exchange liabilities in the
respective foreign currency.

 The foreign exchange position shall be considered open in

the event when foreign exchange assets in a certain foreign
currency are not equal to foreign exchange liabilities in the
respective foreign currency.
 Open foreign exchange position

 The open foreign exchange position shall be long in

the event when the amount of foreign exchange assets
in a certain foreign currency exceeds the amount of
foreign exchange liabilities in the respective foreign
currency.

 The open foreign exchange position shall be short in

the event when the amount of foreign exchange
liabilities in a certain foreign currency exceeds the
amount of foreign exchange assets in the respective
foreign currency.
 Limits for open foreign exchange
position
 In order to reduce banks’ foreign exchange risk, the National
Bank of Moldova shall set the following limits:
a) the long open foreign exchange position ratio for each
foreign currency shall not exceed “+10%”;
b) the short open foreign exchange position ratio for each
foreign currency shall not be less than “-10%”,
c) the sum of long open foreign exchange position ratios for
all currencies shall not exceed “+20%”;
d) the sum of short open foreign exchange position ratios for
all currencies shall not be less than “-20%”.
 The ratio between the amount of balance-sheet foreign
exchange assets and the amount of balance-sheet foreign
exchange liabilities shall not exceed “+25%” or be less than “-
25%”.
Reporting on open foreign exchange
position
 The foreign exchange positions opened by banks
during the day shall not be covered by this Regulation
and shall be monitor independently by the licensed
bank, based on the assessment of foreign exchange
risk.
 In order to supervise the observance by banks of limits
of open foreign exchange position, banks shall submit
to the National Bank of Moldova the report ORD 3.19
“Bank`s Open Foreign Exchange Position”, as in
accordance with the provisions of this Regulation.
 The banks shall submit daily to the National Bank of
Moldova reports on open foreign exchange position.
 Thank you very much!!!
HAVE A WONDERFUL WEEK!