Risk management and internal control system of the Moldovan banks

Ion Cara
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Ion Cara: PhD student,Academy of Economic Studies of Moldova,Chisinau,Republic of Moldova

Romanian Journal of Economics, 2023, vol. 57, issue 2(66), 85-98

Abstract: The main purpose of this research is to examine the interdependencies between the internal control system and risk management in the Moldovan banking industry. This subject matter is crucial and relevant to the Republic of Moldova because the continuous development of the banking internal control system is imperative. Method: The research investigates a range of indicators that are considered representative for the internal control system and representative indicators for risk management to evaluate how well risk is managed. The study employs mainly quantitative methodology, with a focus on deductive statistical analysis to identify causal connections and consider the significance level. Results: The results determined that a well-structured internal control system has a direct relationship with risk management in the Moldovan banking sector that was represented in current study by the four systemically important banks. Specifically, the results demonstrate an inverse correlation between both credit risk and market risks and internal control, while a direct correlation is observed between both liquidity and operational risk and internal control. Therefore, the research suggests that banks should adopt appropriate measures to evaluate potential risks and establish effective control mechanisms to govern their operations. Originality: It is noteworthy to mention that no investigations have been discovered on how the internal control mechanism influences the risk management of the banking industry in Moldova. Hence, the scientific novelty of this study lies in the development of an econometric model aimed at enhancing the examination of the interplay between risk management and internal control in Moldovan banks. Nevertheless, what truly distinguishes this articleb s innovation is its expansion of the analysis to assess the distinct risks faced by banks, with a comprehensive exploration of possible dependencies between credit risk, market risk, liquidity risk and operational risk and internal control systems in Moldovan banks.

Keywords: credit risk; liquidity risk; market risk; operational risk; internal control (search for similar items in EconPapers)
JEL-codes: G21 G32 M42 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ine:journl:v:57:y:2023:i:66:p:85-98

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