mugur isarescu : strengthening supervision, corporate governance and risk management in the financial sector of the republic of moldova speech by mr mugur isarescu, governor of the national bank of romania, at the event for the launching of the twinning project “ strengthening supervision, corporate governance and risk management in the financial sector of the republic of moldova ”, bucharest, 18 january 2022. * * * esteemed president of the parliament of the republic of moldova, dear governor armasu, your excellency, ambassador of the european union to the republic of moldova, dear president of the central bank of the kingdom of the netherlands, mr. klaas knot, dear president of the board of the central bank of lithuania, mr. gediminas simkus, mr. vice - president of the administrative board of the national commission for financial markets of the republic of moldova, ladies and gentlemen, i am honoured to address the audience today, not only as governor of the nbr, but also as a long - trusted and close partner of the national bank of moldova. looking back, i am pleased to see the progress made in the last decades by the republic of moldova, on its path towards a banking and financial system at international and european standards. the modernisation of the banking and financial system of the republic of moldova is, ultimately, to the benefit of the society and citizens. ever since 1991, romania and the nbr have supported the republic of moldova and the national bank of moldova. supporting moldova ’ s first currency issues via technical support, expertise and professional training was the first area of institutional cooperation. this was followed by a more focused collaboration in almost all areas of professional training. i would like to mention, for example, the 2001 project in the field of banking supervision, then the provision of technical assistance in the field of inflation targeting in 2010, but also the 2015 – 2017 twinning project on banking regulation and supervision. also noteworthy is the multilateral cooperation, within the joint constituency at the international monetary fund, or during the meetings of the central banks governors ’ club of the central asia, black sea region and balkan countries. given the time span of more than 30 years of close bilateral institutional cooperation between the national bank of romania and the national bank of moldova, highlighted by the strategic partnerships for developing and broadening cooperation in areas of mutual interest, i would like to emphasize the positive synergies created over time. i express my firm belief that these synergies are a

, the discipline it imposes on the mpc is symmetric. the inflation target has been instrumental in ensuring that monetary policy has responded boldly and decisively to the events that have unfolded since the autumn. and, when the time comes, the clarity and transparency of the inflation targeting framework will ensure that the committee takes the right decisions on the way back up, however courageous or unpopular those decisions might appear. the public commitment that the committee will do whatever it takes to hit the inflation target is central to the conduct of monetary policy. it underpins the credibility of the inflation target. this commitment is more important than ever in the current environment of unprecedented shocks and unconventional policy measures. recent events have raised the question of whether the committee could provide even more information about its policy strategy by committing to keep interest rates low for a particular period of time or until the economic outlook evolves in some specified way. the difficulty is in designing such a commitment that would be both useful and that the committee would be willing to adhere to. a commitment to keep interest rates low for a certain period of time runs the risk of being overtaken by events. the past eighteen months has demonstrated only too well how rapidly the state of the economy can change. i truly have little idea as to how long bank rate will need to be maintained at its current low level in order to meet the inflation target. as such, it would make little sense to commit to a rule that suggested i did! the potential benefit of a state contingent commitment – in which the mpc commits to maintaining bank rate at its current level until the economic outlook has evolved in a particular way – is that it may aid the public ’ s understanding of how the committee is likely to react to economic developments. it may convey information about our reaction function. but such a commitment is not easy to design. if too general, it will not add anything to our existing – and over - riding – commitment to do whatever it takes to hit the inflation target. if too precise, it will not capture the myriad of factors that affect the outlook for inflation. the array of judgements underlying the committee ’ s policy decisions are not easily summarised by reference to one or two economic variables. the committee ’ s preferred approach is to describe its assessment of the outlook for output and inflation, and allow the public and markets to make their own assessment of the likely future path of interest rates. in the most recent inflation report published in may, the committee judged it was more likely than