ACADEMY OF ECONOMIC STUDIES OF MOLDOVA

REPORT
THEME: Banca Sociala

Elaborated by: Checked by:

- Chisinau 2012

CONTENT
CONTENT ..............................................................................................................1 INTRODUCTION: ................................................................................................ 4 Chapter 1 Bank equity 1.1. Shareholders .............................................................................................. 6 1.2. Dynamic of bank equity. ........................................................................... 8 1.3.Total regulatory capital(TRC) ................................................................ 15 1.4..Analysis of capital adequency ................................................................ 21

Chapter 2 Attracted resources 2.1. Banks deposits.......................................................................................... 27 2.2.Analysis of attracted resources ............................................................... 27 Chaper 3 The placement operations of the bank 3.1. Credits ...................................................................................................... 38 3.2. Investments .............................................................................................. 45

Chapter 4 Bank payment and settlement 4.1.Payment operation. Volumes and products ........................................... 49

CONCLUZII ............................................................................................................................ 82 BIBLIOGRAFIE .......................................................................................................................84 ANEXE

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INTRODUCTION
In my report i analyzed the financial situation of Banca Sociala S.A.I have 4 chapter that reflect the financial date about some years.Every chapter is just reflcting a general view of financial activity of the bank. As we know the bank is a financial institution which is attracting resources from the economy in form of deposits and its placin them in form of credits to natural and legal persons on its own account,responsibility and risk.The same activity is doing Banca Sociala.Its name comes from its commercial activity:buy and sell resources.Buy ,,moneyby atrracting deposis and sell ,,moneyby according credits.According to the ,,Low of financial institutions commercial bank. Banca Sociala execute next financial activities: Accept deposits(with interest rate or without). According credits,finance the commercial transactions. Buy and sell-payment instruments(checks,bill of exchange,certificate of deposits). Administrate payment instruments. Administrate currency operation. Administrate the investment portofoliu. Intermediation of payment. According to the property it have a private capital and is a universal bank.All 4 categories of operations(liabilities,assets,payment and consultancy)are present in the bank activity. Administrative bodies of the bank: General meeting of shareholders. Shreholders who hold significant interest in the bank on 01.07.2012-BS Leasing Group SA-24.46 %. Council of directors, Cunev Valentin; Suetnov Vladimir; Crivcianschi Aglaia. Executive Body. Censor comition. Departments: accounting, credit, consultancy, currency deposit operations, investment, audit, coordinate, risk management treasure and cashiered, marketing, legal IT, security. Bank has 19 branches and 48 agencies located on the whole territory of the country. The license of the bank activity was obtained from 26.06.2008 (from NBM) and in the 03.02.2010 it obtained the license for commission operations such as: brokerage, dealer, underwriting, administration of investment.(from NCFM).

Chapter 1 Bank equity

1.1. Shareholders
Shreholders who hold significant interest in the bank on 01.07.2012-BS Leasing Group SA-24.46 %: Approve the internal regulation. Determine the activities direction. Establish the eventual modification. BS leasing company Leasing Group SA was founded in July 2003 as one of the companies that gave rise to the development of leasing relations in our country. Today, BS-Leasing Group S.A. is positioned on the leading places that practice it as one of the most successful leasing companies. BS-Leasing Activity Group S.A. is aimed both at providing leasing of cars and trucks, as well as equipment of any kind.BS-Leasing Group S.A. serves both corporate as well as individuals, ensuring individual approach and professional attitude to customers, which makes leasing available for everyone. BS-Leasing Group S.A. meet the high level of service and ensure timely and effective resolution of complex requirements.

1.2. Dynamic of bank equity

Equity represent the value of an asset after all liabilities or debts have been paid. Bank aquity of the bank represent bank resources and funds available to banks with which it operates in order to exercise the function of finance, containing banks' own funds and attrated funds from financial market. Thus bank capital structure is: Equity (own resources)>are created from capital which is subscripted from

shareholders.Garantee the stability of the bank and have a stable character. Borrowed capital (resources attracted).are temporary,are in the biggest part of the bank ,they mainly generate the risk,are offered in form of aasets and mainly genrate profits.

Own resources
belongs to under right of bank property does not require repayment is extempural (no terms of maturity) is used to finance long-term projects and the bank's own needs does not generate costs as interest is payable by Dividend

Attracted resources
belongs to No under right of bank property, is only in its custody Does terms of matrity Requires reimbursement depending on the maturity Short-term finance projects Interest is payable It is relatively less expensive

Componets of bank equity:

Social capital-quantity of issued shares*nominal value of shares Capital surplus-Equity which cannot otherwise be classified as capital stock or retained earnings. It's usually created from a stock issued at a premium over par value. Retained profit-Current earnings may be credited to the undivided profits account and will eventually either be distributed to shareholder in the form of dividends or will be held within the company in the form of retained earnings.

Reserve funds-the fund is simply a savings account or another highly liquid asset, as it is impossible to predict when an unexpected cost may arise

4E+09 3.5E+09 3E+09 2.5E+09 2E+09 1.5E+09 1E+09 500000000 0 Capital propriu Total resurse

For my bank as indicators i analyse 3 years :2008,2009,2010.The date about the bank equity of this bank i has incuded in the following table: (thousand.lei)

2008
376947344 65000000

2009
409583451 65000000

2010
480680252 100006700

Bank aquity

Social capital

Capital surplus Nondistributed profit Reserve fund

177700 2457855043 65984601 328000000 =<25%

177700 2776023777 66803374 360000000 =<26,2%

177700 310418585 70077267 428000000 =>29%

TRC Capital adequency

As we observe the dynamic of bank equity is positive and is increasing.In 2008 bank quity was 376947344(mil.lei)but in 2010 480680252(mil.lei) which determine the icrease of share capital by 19%. And totaled more than 100 mil.The total assets increased by 15% exceeding the figure of2.8 bilion.The activity results for net income totaled 54 mil but delimited a decreasing rate in compared with 2008-60mln.Capital surplus remain the same over 3 years-177700mil.Socialll capital increase semnificativly in 2010with 12%.Bank confffirmed its reputation as a satble financial institutions,part of the leading banks in Moldova.

1.3.Total regulatory capital(TRC)

TRC- mean own funds per which the financial institution must maintain them in accordance with the regulations of the National Bank which sets out the components of regulatory capital and the minimum amount that the institution must maintain in relation to risk-weighted assets or total assets. TRC=I taer cap.+II taer cap.-quata of participation to the capital of other banks.

I taer cap=(ordinary shares+pref.shares with non fixed divedent+pref.shares with fixed divident non cumulative+cap.surplus+retained profit)-non compledt risk fund-net non material assets. IItaer cap=(cumulated and part cumulated ref shares with non fixed maturity+capital surplus+subordonated debts with non fixed maturity+subordinated debts with fixed maturity- Cap II-Cap I.

Fig. 1 Evolution of total regulatory capital to the banking system of Moldova (million)
Capital Normativ Total

3000

2500 2029.24 1640.74 1500 1400.40 1695.72

2441.92

2000

1000 735.71 500 593.52

918.90

0 1997 1998 1999 2000 2001 2002 2003 2004

Based on the same date included in my table we observe that in 2008 TRC was 328 mil.lei,in 2009 increase with 10% at 360 mil but in 2010 increase with 19% and was 428 mil.This result demonstrate that bank has a stable financial position.During thsese years bank resisted stalemate maintaining its market position and has ensured all regulations established by National Bank. The contribution of bank capitalization to shareholders in the entire banking system of RM

3E+09 2.5E+09 2E+09 1.5E+09 1E+09 500000000 0 1997 1998

Capital acionar 1999 2000

Capital de gr. I 2002 CNT 2001

2003

2004

The share of bank capitalization various commercial banks

Capitalul normativ total
MOLDOVAAGROINDBANK Banca de Economii VICTORIABANK

4% 4%

2% 3%

20% 3% 4% 4% 4% 5% 9% 3% 7% 7% 8% 12%

Moldindconbank BANCA SOCIALA MOBIASBANCA EXIMBANK FinComBank UNIBANK ENERGBANK INVESTPRIVATBANK COMERTBANK

1.4.Analysis of capital adequency

Capital adequacy is, in fact, establishing conventional capital value certain criteria that have been proposed and accepted by the partners.The sufficiency of its capital under the Basel Agreement, "Cooke standard"=TRC / assets weighted to risk. Acording to Basel agreement assets weighted to risk : 0%(cash,T-bonds up to 1 y) 20%(Tbond more than 1 y,cash to incash)50%(sate bonds,credits with primary garanties)100%(buildings,equipment,non reimbursed credit,nonguaranted credits). According to my results he capital adequency has a stable character2008

<=25%,2009<=26.2% and 2010 =29%.In 2009 bank assets grew with 10% and amounted 2.5%.Bank capital adequency stood at 26.2%,exceeding the normative 2 times.In 2010 total assets increased by 15% exceeding 2.8 bil and capital adequency increase with 2,8% and reached at 29% .The actual value of capital adequency in RM is 16%,is the minimal requirement.

Capital adequency
30% 28% 26% 24% 22% 2008 2009 8 2010 Capital adequency

Chapter 2 Attracted resources

2.1 Bank deposits
Attracted resources allowed the bank to get profits.Attracted resources of the bank are: - Depositary - they appear as a result of cooperation with clients - Resources arising from the issue of securities (bank certificates, bills, bonds) - Resources purchased from other banks (bank loans centralized from National Bank of Moldova, and decentralized to other commercial banks).>nondepositary Bank depositsum of money which is deposit in certain period of time and can be withdraw at maturity +interest. According to the term we have:

a) Sight deposit(are deposed in the bank with a high degree if liquidity and can be withdraw at any time without interest rate. b) Saving or deposit at term(should include 3 term:short-up to 1 year,middle-1-5y and long term more than 5 years. Could be with capitalazation or without. According to the category of deposits

a) Natural. b) Legal. c) Other financial institutions. According to the currency:

a) National. b) Foreign. According to the methods of calculated interest rate

a) Simple interest rate. b) Composed interest rate.

The importance of bank deposits Individual bank deposits provide the least expensive cost of new money for the bank to loan out. The large amounts of people and deposits help the banks make lots of profit since the banks charge at prime rate (set indirectly by the country's bank) and the banks pay a low nominal interest on the deposits.Money is needed to add new infrastructure (road, bridges, sewers, factories, etc) and capital equipment (machinery, assembly robots, etc) in order to grow the economy. The banks are reluctant to borrow from other banks or other sources (such as rich persons) since the interest rate charges is much higher than the banks would pay inidividual deposits.Since the amount of deposits are very high in some countries, such as Japan and China, this new capital (or money) has fueled growth over the past few years. As a consequence, economists always consider bank deposits as part of the overall money supply for the economy. In my report analysing this chapter i included the date in following table: Thousand Moldovian lei

2008 247237 7365 239872 1125362 849787 259332 16243

2009 293922 7181 286740 1220156 907640 309630 2887

2010 344348 10690 7181 1446892 1023770 423122 2523 1791240

2011 534376 8023 526353 1635716 1107693 528023 1475 2170092

Deposits without interest rate Deposits for natural person Deposits for legal person

Deposits with interest rate

Deposits for natural person Deposits for legal person Deposits from other banks Total

1372599 15140780

As we observe the volume of deposits in 2007 increase with14% and was 156 mil.lei.The number of deposits for natural person indicates 938 mii.and share exceed 64%.In 2008 the total amount of deposits increase with 5% and was 1372 mii.lei.The important value was register at deposits for natural deposits with 62%.In 2009 the value of all deposits was 1514078 mii.lei and
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also has a increasing character.In 2010 the value of liabilities increase up to 2,3 mil with 14% including 76% the value of deposits, 32% for legal person and 44% for natural person.
2500000 2000000 1500000 1000000 500000 0
Total Deposits with interest rate Deposits without interest rate

Also the information about the conditions and terms,interest and amount about deposits according to the quaters of each year are attached to the end of report.

2.2Attracted resources
Thousand lei Cash from BNM Credits from BNM BERD Banca Mondiala EFSE Ministry of finance(FIDA) Ministry of finance(RISP) 2008 347448 17931 168780 10672 206371 25309 13859 2009 121337 35901 162125 4343 246753 26285 18837 2010 213109 12439 148994 193254 43896 25307 2011 377761 9962 185965 102501 34010 25316

The average level of the amounts in MDL held at the National Bank of Moldova for the period ended December 31, 2011 was of 171,655 thousand MDL (2010: 100,690 thousand MDL), while the minimum reserve calculated for the period was of 159,231 thousand MDL (2010: 96,764 thousand MDL). The average level of the reserves in currency held in the special account with National Bank of Moldova for the period ended at December 31, 2011 amounted to the equivalent of 116,848 thousand MDL (2010: 85,670 thousand MDL). As at December 31, 2011 and December 31, 2010, the balance with National Bank of Moldova is held as collateral for long-term loan received from National Bank of Moldova.
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400000 350000 300000 250000 200000 150000 100000 50000 0 2008 2009 2010 2011 Cash from BNM Credits from BNM BERD Banca Mondiala EFSE (FIDA) (RISP)

(thousand) Up to 1 year From 1 to 5 year Over 5 year Total

2008 54923 274388 113691 442922

2009 149694 253859 110691 514244

2010 201893 243641 75587 521121

2011 462469 261942 15990 462469

In 2008 bank continued colaboration with international financial organisation.EBRD ofer the line of credit in the sum of 3 mil of Euro.Also RISP ofer credits in value of 40 mil lei for development.MMN release credits in value of 32 mil.The total volume of credits increase with 5%.In 2009 EBRA offer a new line of credits in amount of 5 mil.Euro.EFSE operate with 4 lines of credits in amount of 14 mil.RISP and FIDA credits the total volume of 44 mil lei.In 2010 the level of attracted resources increse in the higher level with 25%,were grented the amount over 1 bilion. Borrowings from the Ministry of Finance have been granted for financing the small and medium enterprises operating in agricultural sector and rural area, except for those located in the cities of Chisinau and Balti, through resources borrowed by Republic of Moldova from International Fund for Agricultural Development (IFAD) and from the Association for International Development (AID). Borrowings from the European Bank for Reconstruction and Development (EBRD) were granted for financing medium and small size private enterprises. Borrowings from the National Bank of Moldova are long-term borrowings focused on development of buildings construction. Borrowings from the European Fund for Southeast Europe (EFSE) were granted for financing medium and small size private enterprises, as well as for granting mortgage loans to population. Borrowings from the Black Sea Trade and Development Bank (BSTDB) were granted for financing all projects within applicable law, with exception of interbank loans and activities prohibited by International Conventions.
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500000 400000 300000 200000 100000 0 2008 2009 2010 2011 Up to 1 year From 1 to 5 year Over 5 year

In accordance with National Bank of Moldova, the average reserve held at the National Bank of Moldova, calculated for minimum reserve period, has to be at least equal to the level of minimum reserve calculated for the observation period. As at December 31, 2011 the level of minimum mandatory reserve in MDL held at the National Bank of Moldova was established at 14% for current accounts and deposits in MDL and currency (December 31, 2010: 8%) On 27 December 2007 the Bank filed a request with the Main State Fiscal Authority with respect to exemption from payment of 50% of corporate income tax due for 5 fiscal periods starting from 2007. On 29 December 2007 the Bank and the Main Fiscal Authority concluded Agreement # 59, in accordance with which the Bank has been granted 50% exemption applicable to corporate income tax calculated for 5 consecutive years starting from 1 January 2007 and ending 31 December 2011, pursuant to provisions of article 49.2 par. 1 of the Moldavian Fiscal Code. In accordance with this agreement the exemption is contingent upon the compliance of the Bank with the following conditions during the fiscal periods for which the exemption has been granted: a) to reinvest not less than 80% from income tax exempted amount into own production development (services, works) or in state program of national economic development no later than during the fiscal period in which the fiscal benefits term expires; b) to maintain the contribution in its own social capital during the 5 years; c) to present the Declaration regarding the corporate income tax and other reports

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Chapter 3 The placement operations of the bank

3.1. Credits
In a market economy, credit reports have sizeable and multiple varieties. In general, the credit is monetary exchange value against for a future currency values. Credit as means of payment may contribute substantially to economic growth by stimulating the development of new activities, small and medium private enterprises, their early work, and recovery of vital areas of the economy. Credit is amount of money wchich is allocated by bank to natural and legal person in the conditions of reimbursment,maturity and guarantee. Principles of the credit are:the object, maturity, participants, guarentee, interest, amount. The importance of credit in the economy is marked by role and functions it performs. Credit serves as mobilization of money resources available in the economy at a given time and then distribute money via crediting the sectors that need cash. Another function of thecredit is to create currency. Credit contribute to the price stability by adjusting the size of the demand and supply of goods by crediting consumption as stocks. Credit is a factor of speed rotation of money by streamlining economic flows. Another function of credit is to support the imports and exports.

The information about th crediting activity of Banca Sociala is related in next table Credits(thousandslei) Current credits Overdue credits Up to 1 year From 1 to 5 year Over 5 years Total 2008 1394810 21172 684654 465479 191913 1342046 2009 1511952 93093 747513 542750 204663 1494926 2010 1751096 124128 910465 679044 88664 1849139 2011 1985870 293693 974000 865964 279503 2177919

In our country the total balance of credits in the economy the end of 2010 reached 26 billion value of 915.5 million, 12.7% above its level at December 31, 2009, according to National Bank. The balance of medium and long-term loans increased by 15.0%, while the short-term loans by 4.8%. Bank loans in national currency became cheaper in 2010 by 13.3%, while credits in foreign currency by 12% amid economic recovery and improved loan portfolio of banks. Thus, if in January the banks to give loans in lei at an average interest rate of 17.03%, and the last month of the year - with 14.76%.NBM also points out that rates on New granted loans in MDL decreased from
14

15.2% inJanuary to 14.1% in the first three weeks of February 2011. In January 2010 the rate for loans in lei was 17.0%, and in three weeks of February 17.9%.Banks have granted at the beginning of the year until 18 February 2011, new credits totaling 1 billion 248.7 million lei, by 31.9% more than the same period last year. As a result of promoting a weighted lending policies, during the reporting year the Bank's loan portfolio increased by26% and reached 1322 million. Investment lending to individuals showed 103mil.lei 29.12.2007 including 54 mln back loans in the new product - mortgage lending, implemented in the second semester of 2007. As a result the share of credits to individuals in total loans increased during the year from 4% to 8%. The implementation of the most populous type of consumer loans without providing collateral - "Social" - increasing investment credit for the 12 mil or 81%. Bank's loan portfolio increased by only 7% or 94 million and totaled at the end of the year 2008- 1416million. The number loan recipients increased and reached 4000.

2500000

2000000

1500000

2008 2009

1000000

2010 2011

500000

0 Current credits Overdue credits Up to 1 year From 1 to 5 year Over 5 years

According

to prevailing credit terms

medium-term

loans -

66%, short-term

credit back 25%. ofn new account product implementation (mortgage lending) twice increased (from 4% to 8%) long-term loans. Despite the global financial crisis in 2009 banking system in Moldova has been a reduction in the loan portfolio (-5%), BC "BS" SA, following the principles set out in policies promoted not only the loan portfolio increased by 1.6 billion lei (13%), but also increased the Bank rate loans system. Loan portfolio growth in 2010 has made over 284 million at the end of the year

reachedabout 2.0 billion of credit policy promoted during 2010 granting loans worth over 1 billion USD. Loan portfolio growth in 2011 has made over 320 million at end exceeded 2.0 billion.
15

Growth tempo portfolio credit (17%) was higher than the banking system and bank group, Bank would share the credit market remained at the level of 2010 - more than 7%. Bank gives its clients a wide range of credit products: overdrafts, mortgages, consumer credit, bank guarantees, letters of credit, lines of credit in local currency and foreign currency.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 2011 2010 2009 2008

Credits(thousand) Commerce Development and reconstruction Agriculture and food industry Other sectors Energy and fuel Consumer goods Building Governamental Transpotation Total

2008
692098 124726

2009
854682 126738

2010
1081029 137870

2011
1573941

369192

440501

487577

102626

7684 2333 114158 42705 58859 4227 1415982

8609 2754 67769 29498 72262 2232 1605045

85315 11055 29325 138700 1281 2933 1975085

414252 92809 9219 21855 106936 4974 2326644

16

Short Companies and individualas term

2008 Medium and long term

Short term

2009 Medium and long term

Short term

2010 Medium and long term

Short term

2011 Medium and long term

In MDL In foreign currency

16%28% 10%17%

15,9%30% 10%-17%

7,0%28% 11,5%16%

7,7%-30% 10%-16%

9,0%28,0% 1,5%13%

7%-28% 10,0%16,0%

9%-25% 6,8%12%

6,5%23% 9,5%-13%

Cooperative companies

05%-5%

0,5%-5%

0,5%-5%

0.5%-5%

1600000 1400000 1200000 1000000 800000 600000 400000 200000 0

2008 2009 2010 2011

As we observe from the chart the highest position have the commerce credits (more than 50%) and in the year 2010 it was in the bigest proportion. In 2011 a semnificant quata has the credits for development (more than 80%). The 2008 year has the bigest value of credits. In 2009 the largest share has industrial-commercial credits - 53%, and credits extended to food and agricultural purposes - 27%. In 2011 more than half (57%) have got a commercial and industrial credits and

approximately one quarter (22%) - credits to food and agricultural purposes. The credits offer for building are also widely used with a big share (more than 25.2%).
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Banca Sociala makes the following credit operations including: - Commercial loans and lines of credit; - programs for micro and small business lending, and rural enterprises; - Overdrafts; - Mortgage individuals; - Overdtarfturi the cards and consumer lending; - Bank guarantees and letters of credit. The Bank takes on exposure to credit risk which is the risk upon credit approval and when counterparty will be unable to pay amounts in full when due. The Bank's objective regarding the credit risk management is to improve and to maintain the loan portfolio quality by monitoring the percentage of overdue and doubtful loans. Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing the lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees. The Bank's strategy regarding the credit risk management includes in particular: Loans extending with power delimitation through the system of credit committees which insures the application of a collegial decision making instrument; Regular monitoring of established credit limits; Regular monitoring of limits on credit risk concentration at the level of a single person, group of connected borrowers, industry level or of the loan portfolio, in general; Insuring compliance with internal regulations with respect to the types of acceptable collaterals and regular monitoring of physical existence of tangible collaterals; Application of exceeding ratio system on pledge, as well as assessment by independent experts of pledged collaterals; Diversification of loan portfolio by industry segments and collateral types;

3.2 Investments
In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use money in the hope of making more money. Investments in banks is a type of financial service that focuses on helping companies acquire funds and grow their portfolios. Much of this comes in the form of stock and bonds transfer, but investment capital and wholesale corporate acquisitions are also part of the equation. Bankers within this sector are usually highly trained, and are widely recognized as some of the most elite participants in the financial marketplace. They are often sought as much for their consulting and advising services as they are for actually executing transactions.
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Investment securities are classified according to destination in the following categories: Investment securities are values that bank management intends to hold to maturity and are recorded at nominal value, corrected the prize or discount to maturity of their operations. Interest investment values is reflected in interest income Bank in its portfolio has two types of investment securities: State securities investments are initially recognized at nominal value. State securities (SS) can be purchased at a discount or premium that pays linear method. VMS can be made if necessary. At the time of values Investment securities are recorded in portfolio securities available for sale and carried Reviews. The units are valued at purchase price. Marketable securities that intended to be held for a period of time indefinite, and can besold for liquidity purposes are considered as investments. Securities participation of the bank is holding in the capital of other companies. Securities available for sale are purchased on a short term in order subsequent sale and are recorded at cost. All gains and losses realized from transactions with these securities are reflected in net income trading.
Investment State securities 2008 143826 6279 149980 22091 45470 82643 492 150696 2009 301008 7282 307926 93537 103060 110326 70 3069963 2010 382561 7295 389491 108539 72705 208016 201 382561 2011 173854 7388 180871 69481 45330 62535 120 177466

Equity securities
Net securities Up to 1 year 1-3 month 3-12 month More than 1 year Total(thousand lei)

According to this results we can say that during 3 years 2008,2009,2010 investments in state securities has a positive figure but in 2011 it decrease semnificant.In 2008 investment increased by 13% and exceeded 1.6 billion.lei. In 2009 there were 100 operations performed over the purchase of values. State securities on behalf of the Bank at their means in the amount exceeds 420 million. In 2010 the volume of investments in securities reached about 400 million and increased at 27%. During the year 2011 the Bank made 112 investment transactions with values State securities from own funds amounting to over 1.5 billion. Investment portfolio at the end of 2011 exceeded 177 mln with weighted average return rate of 11.61%. In this activity the Bank has obtained an income amounting to more than 21 million. They activeness work related to providing brokerage services. in2011 were received about 160 requests for execution of sale / purchase of securities. Stock Exchange

19

of Moldova office Brokerage Bank completed 154 transactions totaling pste 16 million. Revenues from providing these services have made EUR 300 thousand, which practically 2 times more than in 2010 income.

400000 350000 300000 250000 200000 150000 100000 50000 0 State securities Equity securities Net securities 2008 2011 2010 2009 2008 2009 2010 2011

Investments in share capital of other companies

Unquoted equity securities Moldmedia Card SRL

Amounts % share 2011 capital

Amounts % share 2010 capital

Amounts % 2009 share capital

Amounts % 2008 share capital 2718 98.99

2,890

31.70

2,890

31.70

2.781

98,99%

Ceproserving SA Depozitarul Mobiliare Victoria Asigurri Garantinvest Biroul de credit SRL Bursa de valori a Moldovei Total 4,290 7 440 1,019 232 19

2,781

98.99

2.890

31,70%

2890

31.70

4.69

19

4.69

63

13%

3.13

1.55

139

1.55

139

1,55%

62

1.55

9.92 6.70

440 1,019

9.92 9.27

440 1.019

9,92% 10,22%

440 100

9.92 9.51

2.56

2.56

72

,56%

6,930

6.918

6154

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As at December 31, 2011 and December 31, 2010, the Bank held investments in the share Capital of four commercial companies that exceeded 5% of the share capital of those companies. The investments were approved by the National Bank of Moldova. As at December 31, 2011 and 2010, the equity investments include investments in Moldmedia Card SRL, an associate. Ceproserving SA has been consolidated in the financial statements of the Bank beginning with 1 January 2011. At December 31, 2010 and December 31, 2009, the Bank had equity investments in four companies, which exceeded the limit of 5% of the share capital of these companies. these investments were approved by the National Bank. In accordance with legislation, a company is considered to be associated enterprise if a bank has a significant influence on its significant influence is given by a shareholding worth more than 25% to 50% in capital of the company If the company is controlled by the bank, by holding a share participation of more than 50% of the share capital of the company, then that company is considered to be the daughter company. At 31 December 2010 and 31 December 2009, the Bank held a company equity securities beyond 50% of the share capital of the company. value investment has not diminished so significantly affect the financial statements. Since companies in which the Bank holds shares are publicly traded bank could not determine the exact value of the shares. Bank's management estimated that the The accounting does not differ substantially from their fair value. All companies listed above are established in Moldova. Ceproserving SA, a subsidiary, and

21

Chapter 4 Bank payment and settlement

4.1.Payment operation. Volumes and products What is Interbank Payment And Settlement Mechanisms Interbank funds transfer systems are arrangements through which funds transfers are made between banks for their own account or on behalf of their customers. Of such systems, largevalue funds transfer systems are usually distinguished from retail funds transfer systems that handle a large volume of payments of relatively low value in such forms as cheques, giro credit transfers, automated clearing house transactions and electronic funds transfers at the point of sale. The average size of transfers through largevalue funds transfer systems is substantial and the transfers are typically more timecritical, not least because many of the payments are in settlement of financial market transactions. The report focuses on these largevalue systems. The processing of funds transfers involves two key elements. The first of these is the transfer ofinformation between the payer and payee banks. A funds transfer is initiated by the transmissionof a payment order or message requesting the transfer of funds to the payeeThe second key element is settlement - that is, the actual transfer of funds between the payer's bank and the payee's bank. Settlement discharges the obligation of the payer bank to the payee bank in respect of the transfer. Settlement that is irrevocable and unconditional is described asfinal settlement. In general, the settlement of interbank funds transfers can be based on the transfer of balances on the books of a central bank (i.e. central bank money) or commercial banks (i.e. commercial bank money). Interbank settlement is fighting a mutual payment obligation between two banks. There are several types of settlements. After relatively stable: Settlements with direct relationship between banks, called correspondence relationship (decentralized settlements). Settlements through a settlement agent (in centralized form). Transcribed correspondence relationships are contractual relationships between two banks that contain an agreement on the mutual enforcement of financial obligations. After operations affected interchange: Operations on behalf of clients in the settlement process. Operations own involving interbank borrowing, placing deposits, payment services, etc.. After the account type used: Operations that require opening mail account. Operations without opening the mail account.
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After the relationship between bank: Relations binding correspondence involving accounts at the central bank settlement center. Relations soft, when one seeks partner bank that wants to establish relationships. Distinguish accounts: NOSTRO - our bank account to another commercial bank. Vostro internationally. LORO account is opened by banks in the country to Bank current account is required and used for the following operations: Interbank funds transfer operations on behalf of clients. Operations of payment and transfer of funds between banks or between banks and NBM that pertaining to the grant and of credits repayment interbank placement and withdrawal of interbank deposits, etc. To make current payments in favor of interbank agent (State taxes, service lease). 2008 Bank strives to meet customer requirements at the maximum expense of providing new competitive banking products and services.In these purposes in 2008 were 3 types implementing this new fast transfers. So at the end of the year bank customers could transfer and receive money through your already fast transfers of 11 systems: Western Union, Anelik, Unistrut, , Interexpress, Migom, Contact, Blizko, Moneygram, Smith & Smith and Allure. A large attention is given retail and business development. Range of services to individuals in foreign currency is quite large - exchange rate, nominal checks and travel sales, international transfers, especially through international money transfer systems, etc.. Bank retail market tends to satisfy customer needs by offering maximum new products and services competitive. For these purposes, and for the expansion of geography transfers and attracting new customers to bank online still a 3 speed transfer systems. Increasing the number and volume of remittances and increasing the number of systems and points of granting services received / sent the Bank a condition significantly increasing the volume of shipments: in EUR - 34 million in Russian rubles - 0.5 billion U.S. dollars - about 90 million. In 2008 the Bank made 220 trades in securities of statdin own and their means in the amount exceeds 2120 mil. lei, including about 200 primary market operations. To end the total amount of the investment portfolio indicated cifrade 150 million. Weighted average profitability growth (around 3 percentage points), the revenue growth condition of this activity compared to 2007 with 4 million or 12%.

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2009 At the end of 2009 servicemen Bank numbered 86 000 , including legal - 11 thousand individuals - 75 000. Open and maintain bank accounts over 200,000 customers' personal Clergy. Average daily number of transactions performed by one experienced worker over 500 operations. Advanced means of communication used by the Bank, provides payments to a high quality level within one working day. More and more followers attracted remote maintenance system "Bank-Client". Number of clients receiving services that system is about400. Convenience, comfort and service remotely view are obvious. Thanks to "Va-Bank", all payments, both cash inflows as and transfers through correspondent accounts can be pursued under the Real 4timp. In the reporting year the Bank has further optimized its network corresponding to the maximum in order to satisfy the requirements of its customers. the situation of 31.12.2009 correspondent bank network consisted of 47 accounts19 correspondent correspondent banks and 4 banks of 5 LORO account corresponding through which settlements were made in foreign currency. In 2009 while working were 30 and 10 guarantee letters International also have received 11 incasouri documentation. In 2009 the Bank implemented 2 new products systemsLeader and international transfers. T hus, at the end of 2009 in Bank already operated 13 international transfer systems faster. He continued work to implement card as a financial instrument settlement for individuals and businesses. During the year 7000 were issued Handy card number of active cards reached 37 000, were also signed 15 new contracts for service projects payroll, number which by the end reached 265. Completed the implementation of VISA cards.

2010 Despite the financial situation created by international and domestic market, 2010 was noted by an increase in the volume of foreign payments of customers. The volume of payments for Bank clients increased on average by one third compared to 2009 (33%), and payments on behalf of clients - approximately in half (48%). Also substantially increased the volume of trade operations, both through internal auction and CSV Bank through the network. Exchange for serving customers within the Bank operates 61 CSV, through which in 2010 was purchased U.S. $ 50 million, over 30 million euros and 360 million Russian rubles, were also sold 4 million . dollars, by 7 million euros and Russian rubles. To internal auction from businesses of the Bank was purchased / sold foreign currency in cash in an amount equivalent to 300 million U.S. dollars (93.5 million U.S. dollars / 194.9 million), from individuals - U.S. $ 150 million (128.8 million USD / U.S. $ 16.6 million), exceeding by about one third the volume of 2009.
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Bank efforts to develop retail business, especially international transfers, trade in nominal checks and travel exchange operations of individuals occupying a substantial part of the market in bank. BC quota "BS" JSC systems among local operators of international transfers of individuals recorded 12.3% in 2010, which shows a good result in that sphere. Bank acted in 14 operating systems, including 2 systems were opened in 2010 - "PrivatMoney" and "Coinstar". Total transfers to individuals shown in U.S. dollars equivalent approximately U.S. $ 150 million during the year, exceeding 1.3 times the level of 2009. The highest demand is enjoying the "Unistrut", " ", "Contact". Segment remains a priority international shipments and territorial subdivisions, which is a positive factor in the development of retail business in all branches of the Bank. In 2010 the Bank began offering its customers a new service - Issuance nominal Canadian dollars and continue providing services buy / sell American Express traveler's checks. 1. Paying attention to the business in 2010 with cards, the Bank continued to actively work to implement the settlement cards that contemporary financial tool for businesses and individuals. During the year there are over 4000 cards. The total number of active cards reached 40 000. Were concluded over 40 contracts for service salary and total salary projects reached 300. There is a dynamic business operations cashless settlement growth, turnover which increased on average by 50%. The biggest increase was recorded in Euro - 70%, average purchase amount is 370 Euro. While increasing turnover, the third increase in the number of cashless transactions in national and foreign currency, surpassing the figure of over 5 million operations. Taking into account the changes introduced by MasterCard since April 15, 2010, namely authorization to conduct transactions over the Internet with Maestro, is expected to increase the number of cards and transactions, especially overseas. This innovation will obviously expand the circle of users taking electronic payments via the Internet, which is contemporary and very convenient. 2. Despite the increase in non-cash settlements through card transactions, , cash settlements and still occupy high. In 2010 the turnover of cash income reached about 5 billion and expenditure - 4 billion. However, average daily revenue inflows from trade totaled 11 million and releases of funds - 15 million. Along with the above directions with cash activity in 2010 was carried extra cash in Bank amounting to 150 million and achieved commercial banks amounted to 526 million. Cash was received from BNM amounted to 30 million, of commercial banks amounted to 112 million lei. Timely and safe transportation and collection of cash from subsidiaries, economic subjects, CSV, power bank cash machines and other customer service related obligations were secured by the Bank's collection service has advanced means of protection.
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3.For an application before special banking products enjoy communal services accepting payments and other payments from the population. This is a very lengthy processing arrangement in brochures and sending bills to pay. During the year the Bank operators have processed about a million tickets. Currently, it takes measures to develop and implement an advanced software package for accepting payments using payment method communal internet and ATMs. 4. In accordance with the licenses National Bank and National Commission of Financial Market, along with traditional financial activities, the Bank pays its customers and operations and specific services - operations with government securities and brokerage operations with corporate securities. 5. Network subsidiary of BC "BS" SA includes 20 branches and 46 representative offices and Central Bank - the largest subdivision that offers the full spectrum of banking services. Bank subdivisions served through the end of 2010 about 84 000 customers, including businesses - 11 thousand individuals - 73 000. In 2010 they opened new accounts approximately 12 000 customers. Clergy banking customers conducted by more than 207,000 actual analytical accounts opened with banks. 6. With one of the best remote maintenance systems, the Bank actively promotes this service among customers. During the year the Bank-Client system the number of participants increased by 161 customers and on 31.12.2010 reached 557 clients. The advantage of this system is that the main operations can be performed on accounts without visiting branches through complex software "client-bank", which is one of the most advanced and affordable versions of remote banking.

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Conclusion In 2011 the Bank has achieved positive results that allow us to look confidently into the future. Bank assets increased by 13% (365.4 million lei) and at the end they exceeded 3.2 billion USD. Deposits increased by 21% (378 million) recorded approximately 2.2 billion. The loan portfolio increased by 17% (320 million), amounting to over 2 billion end. Total regulatory capital increased net income of 10% (43 million), exceeding the amount of 472 million. And prudent management of banking risks, effective internal control system and continuous monitoring of asset quality permit compliance with all prudential requirements set by the National Bank, as well as maintaining account profitability of assets additional reserves involvement, raising quality, expanding range of services provided, branch network development and strengthening customer base. As proof of the relationship can be brought confidence expressed by international credit institutions in attracting investment to the real sector of the economy, private enterprises small and medium business. To increase customer benefit underserved seek new solutions and working methods, implement new technologies and ensure a high level of service in all sectors, enabling us to reach and exceed the performance of competitors. Bank's work was and is geared towards sustainable development, to achieve new standards of corporate governance and providing a broader spectrum as servivii and modern banking products. To this end in 2011 the Bank partially renovated and modernized technical and program the machine for server, network and communications, ATMs and machines park collection, current and capital repairs performed in branches and agencies of the Bank, has purchased property new subdivisions bank location. All these measures have allowed the Bank improve the quality and expand the volume and range of banking services rendered, strengthening and enforcing its presence in the financial market of Moldova, maintaining existing customer base and attract new customers to the service.

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