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 inbank concentration and competition and the role of the state in competition policies and regulations (policies and laws that affect themarket structure and degree of competition). It is important to not only make sure that the banking sector is competitive, transparentand efficient but also stable.The purpose of the study was to investigate and analyze the degree of concentration at the Moldovan banking market and itsimpact on competition and market structure of financial markets over the period of 2013-2017. Both structural and non-structuralmeasurement approaches of concentration and competition along with the desk research, a case study and interviews with thefinancial 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 levelsand relationship between concentration and stability seems to be negative, meaning that high concentration results lower stability ofthis banking market. Banks in Moldova have the ability of extracting monopolistic profits from big interest rate spreads by setting lessfavorable prices to customers based on collusive and non-competitive behavior in a highly concentrated market. The competitionlevel and market structure of this country results in high prices of financial product and low access to finance. Moldovan financialmarkets are bank dominated, characterized with a monopolistic banking structure, with leading roles of a few universal profile bankinginstitutions, dominating not only the banking sector but also whole financial market.Keywords: banking, competition, concentration, financial market, stabilityJEL: G1, G2, G21, D4, G14