Moral Hazard as Factor of Banking Crises

Financial crisis is a specific form of financial crisis, expressed by an important deadlock in banking system functioning. It can be provoked by growth of financial bankruptcies, mass withdrawal of deposits, effect of "dominoes" and other factors, between which is moral hazard. Moral hazard in the financial market can be characterized as an irresponsible attitude or behavior of entities which pose their interests above those of society, other market participants, as well as other parts of the contracts. Recently moral hazard problem was related only corporate contractual relationships, and the irresponsible behavior of insured persons. But at the moment it becomes obvious that moral hazard has a broader impact. It is the irresponsible behavior of the representatives' supervisors that go far liberal policies, abusive practices of banks which are considered too big to fail and can afford taking excessive risks in pursuit of profits and lack of prudence depositors of these banks the conditions in which legal guarantees of repayment of deposits. The impact of moral hazard on banking activity is multidimensional. On the one hand, he can come from the regulatory and supervisory system, the administration and staff of commercial banks, as well as their clients. On the other hand, moral hazard in banking sphere is manifested by deficiencies in regulation of banks' activity (especially in the innovation field), conduct of corporate governance, promotion of "too big to fail" doctrine and implementation of deposit guarantee programs. Also, moral hazard was an important factor of banking supervision substantial reducing efficiency, bankruptcy of four commercial banks and, as a consequence, beginning of banking crisis in Moldova in 2014-2015. This article aims to demonstrate moral hazard as banking crises premise.