Banking Concentration Impact on Market Structure of Post-Soviet Country – Moldova

Abstract

The new wave of mergers and acquisitions after the global financial crisis intensified the interest of policy makers and academics in
bank concentration and competition and the role of the state in competition policies and regulations (policies and laws that affect the
market structure and degree of competition). It is important to not only make sure that the banking sector is competitive, transparent
and efficient but also stable.
The purpose of the study was to investigate and analyze the degree of concentration at the Moldovan banking market and its
impact on competition and market structure of financial markets over the period of 2013-2017. Both structural and non-structural
measurement approaches of concentration and competition along with the desk research, a case study and interviews with the
financial sector professionals and independent expert were employed to address the research purpose.
The findings of the study indicate that in the developing country such as Moldova high concentration implies low competition levels
and relationship between concentration and stability seems to be negative, meaning that high concentration results lower stability of
this banking market. Banks in Moldova have the ability of extracting monopolistic profits from big interest rate spreads by setting less
favorable prices to customers based on collusive and non-competitive behavior in a highly concentrated market. The competition
level and market structure of this country results in high prices of financial product and low access to finance. Moldovan financial
markets are bank dominated, characterized with a monopolistic banking structure, with leading roles of a few universal profile banking
institutions, dominating not only the banking sector but also whole financial market.
Keywords: banking, competition, concentration, financial market, stability
JEL: G1, G2, G21, D4, G14