Financial Services

Acts Issued by the Romanian Parliament

Banking enforcement officers become judicial enforcement officers

(Law nr. 287/2011 regarding certain measures related to the organization of the enforcement of receivables belonging to credit or institutions or non-banking financial institutions, published in the Official Gazette, part I, no. 894/16.12.2011)

The new law repeals the legal provisions according to which credit institutions and non-banking financial institutions were able to organize their own body of enforcement officers competent with regards to enforcement orders belonging to those institutions or to other members of their group. Therefore, enforcement officers belonging to these institutions will be appointed judicial enforcement officers, upon request, in the terms and conditions outlined by Law no. 188/2000, but without having to pass a competence test or to pay admission fees.

Forced enforcement procedures with regards to enforcement orders of credit institutions which were ongoing at the date of the entry into force of the provisions of the new law may be continued by the enforcement officer that began the forced enforcement procedure, but the creditor will be able to request that the enforcement of such titles be passed on the competent enforcement officer according to the applicable law.

As of the date of entry into force of the new law and until the appointment as judicial enforcement officer, the officers that have been exercising their profession within the credit institution or the non-banking financial institution, upon the creditors’ request, may commence new forced enforcement procedures on the basis of the enforcement orders belonging to these institutions.

The law entered into force on 19.12.2011.

Regulation Issued by the National Bank of Romania (NBR)

Regulation concerning the liquidity of credit institutions

(NBR Regulation no. 25 of 8.11.2011 regarding the liquidity of credit institutions published in the Official Gazette, part I, no. 820/21.11.2011)

The new regulation regarding the liquidity of credit institutions concerns the minimum level of liquidity acceptable and applied to credit institutions registered in Romania and to Romanian branches of foreign credit institutions and includes provisions with regards to:

(a) surveying the liquidity risk by the NBR and by credit institutions

(b) determining the liquidity indicator (as a ratio between the actual liquidity and the necessary liquidity)

(c) the limits within which the credit institutions have to maintain the liquidity indicator, depending on the maturity bands; and

(d) the reporting obligations credit institutions have towards the NBR concerning the situations regarding the liquidity indicator;

(e) starting its entry into force and until 31.03.2012, credit institutions must not conclude transactions which may lead, on any of the maturity bands (less than 3 months, 3-6 months or 6-12 months), to deteriorating the liquidity level indicator for all the transactions in lei, as recorded in the first month of reporting which, as a result of the enforcement of this regulation, does not meet the limit provided in the new regulation (level 1 liquidity).

The new regulation repeals NBR Regulation no. 24/2009 and has entered into force on 01.01.2012. The credit institutions must finalize the process of conforming by 31.03.2012.

Conditions for temporary stock holdings during assistance or financial restructuring operations

(NBR Regulation no. 26 of 18.11.2011 regarding temporary stock/social parts holdings as part of assistance or financial restructuring operations, published in the Official Gazette, part I, no. 855/05.11.2011)

The regulation outlines the conditions that need to be observed during a debt to equity swap operation where the receivables held by credit institutions are converted into shares of entities outside the financial sector, during assistance or financial restructuring operation. These rules aim to implement article 145 of Emergency Government Ordinance no. 99/2006 concerning credit institutions and capital adequacy. These holdings will not be considered qualified participations in the meaning provided in the ordinance.

The Regulation includes the conditions that are necessary in order for the stock holdings to be eligible for the treatment under the new regulation. Among these are the following:

(a) establishing a general policy and strategy related to this type of operations, at an individual or consolidated level;

(b) formulating a concrete assistance or financial restructuring plan for the entity concerned that will provide, among others, the motivation for choosing the debt-to-equity swap solution on the basis of a cost-benefit analysis;

(c) Elaborating a share evaluation methodology at their smallest attributable value according to the applicable accounting setting.

Credit institutions will have the obligation of notifying the Surveillance division on the NBR of the intention to acquire shares/social parts and the NBR will have to communicate results of the analysis within 60 days from receiving the documentation. If it is the view of the Surveillance division of the NBR is that the regulatory requirements are not fulfilled, it will still be permitted to acquire the shares/social parts but they will not benefit from the derogatory regime established by the new regulation.

The shares or social parts cannot be held for more than 36 months, time limit which can be extended but only in a way as to not exceed 48 months from their acquisition. Upon the expiration of this time period these holdings will be immediately deemed as qualified participations and the holder will have the obligation to totally or partially transfer them to third parties (excluding entities that are part of their prudential consolidation area).

The Regulation has entered into force on 05.12.2011

Provisions implementing banking prudential rules in the context of IFRS standards

(NBR Order no. 26 of 09.12.2011 regarding certain provisions implementing the banking prudential rules in the context of legal changes in implementing International financial reporting standards which will enter into force on 1 January 2012, published in the Official Gazette, part I, no. 903/20.12.2011)

The order establishes that all credit institutions registered in Romania and Romanian branches of foreign credit institutions must provide the National Romanian Bank – Surveillance division, before 1 Mars 2012, with electronic and paper versions of all the forms for banking prudential indicators required by the order, elaborated at individual level on the bases of the data registered in the opening accounts of the 2012 financial year.

The Romanian branches of credit institutions established in EU member states must provide the NBR – Surveillance division, with electronic and paper versions of all the forms related to the banking prudential indicators regarding liquidity and high liquidity risk.

Furthermore, the order outlines the procedure to be followed in case a credit institution falls outside of banking prudential indicators calculated at individual level on the basis of data from the opening accounts of the 2012 financial year.

The Order entered into force on 01.01.2012

Amendments concerning own funds of credit institutions and investment firms

(NBR and NSC Regulation no. 28 of 09.12.2011 regarding the supplement of NSC and NBR Regulation No, 18/23/2006 regarding own funds of credit institutions and investment firms , published in the Official Gazette, part I, no. 909/21.12.2011)

The order establishes that tier 1 own funds of credit institutions will include 50% of the value of sums representing the positive balance of deferred taxes related to some of the elements that must be deducted in order to determine own funds levels.

Furthermore, as of 21.12.2011, the date of entry into force of this regulation, 50% of the sums representing the positive balance of deferred taxes related to these elements can be included in tier 2 own funds of a credit institution without the prior consent of the NBR.

The Regulation has entered into force on 01.01.2012

Approval of accounting regulation according to European directives

(NBR Order no. 27 of 27.12.201 on the approval of accounting regulation compliant with European directives , published in the Official Gazette, part I, no. 930/28.12.2011)

The order approves the accounting regulation in line with European directives and establishes that the annual financial accounts must be joined by a written declaration which commits the head of the institutions to elaborate the financial accounts in conformity with accounting Regulation compliant with European directives.

The Order is applicable to:

(a) Non-banking financial institutions registered in the General Registry;

(b) Payment institutions that award loans related to payment services and whose activity is limited to electronic currency and to supplying payment services;

(c) Electronic currency issuing institutions that award payment service related loans and whose activity is limited to issuing electronic currency and providing payment services.

(d) Romanian branches of foreign credit institutions mentioned in points a)-c);

(e) Foreign branches of credit institutions registered in Romania mentioned in points a)-c); and

(f) The deposit guarantee fund in the banking system.

The order has entered into force as of 01.01.2012.

Changes to accounting regulations applicable to credit institutions

(NBR Order no. 29 of 28.12.2011 regarding the modification and the completion of NBR Order no. 27/2010 regarding the approval of accounting regulation complying with International Financial Reporting Standards applicable to credit institutions, published in the Official Gazette, part I, no. 933/29.12.2011)

The Order outlines the procedure for submission of the report to be prepared by credit institutions with the implementation of accounting balances prepared for the trial balance accounts at 31 December 2011 in the opening accounts of the 2012 fiscal year.
The financial accounts shall be provided by the credit institutions registered in Romania, at the NBR – Surveillance division, together with the annual financial accounts for the 2011 financial year, as well as at territorial units of the Public Finance Ministry, within 150 days from the end of the 2011 financial year. The provision is applicable to Romanian branches of credit institutions from a EU member state and, in certain conditions, to those with their headquarters in a non EU member state.

The Order has entered into force on 01.01.2012.

Regulation Issued by the Romanian National Securities Commission (NSC)

NSC suspends the interdiction to maintain on ATS illiquid shares

(NSC Ruling no. 13 of 17.11.2011 regarding the suspension of the application of article 71 paragraph. (4) of the NSC Regulation no. 2/2006 regarding regulated markets and alternative trading systems, published in the NSC Bulletin no. 46/2011)

According to the Ruling nr. 13 of 17.11.2011, the application of article 71, paragraph (4) of the NSC Regulation no. 2/2006 regarding regulated markets and alternative trading systems is suspended until it will be modified. Therefore the provision that prevented the system operator from maintaining within the system financial instruments that have not been traded for the past consecutive 3 months is suspended. The suspension of the interdiction has entered into force on the day of the publication in the NSC Bulletin no. 46/2011 and on the NSC website (www.cnvmr.ro)

A new deadline extension for carrying out the internal audit for intermediaries of shares issued by Fondul Proprietatea

(NSC Decision no. 1180 of 15.11.2011 on extending the deadline established in article 1 of NSC Decision no. 546 of 9.06.2011, published in the NSC Bulletin no. 46/2011)

The NSC has decided for the third time to extend the deadline for carrying out the audit of its IT system required to provide investment services and activities related to shares issued by SC Fondul Proprietatea SA. According to the decision, the new deadline is 31.03.2012.

According to NSC Regulation no. 5/2010, in order to utilize the global accounts system and to undertake security loan operations and grant security interests, the IT systems used by intermediaries must be audited in order to certify at least that the IT systems provide the technical and operational conditions necessary to utilize the global accounts, to undertake security loan operations and grant the associated security interest.

The NSC sets the framework for the establishment and functioning of ETF’s

(NSC Ruling no. 14 of 09.12.2011 regarding the framework for the establishment and functioning of exchange traded funds, published in the NSC Bulletin no. 49/2011)

The NSC has set the framework for the establishment and the functioning of exchange traded funds (ETF’s) (ex., rules regarding issuing shares or the process of repurchasing them). According to the definition, an ETF is a collective securities investment fund admitted on a regulated market in Romania, whose investment policy established in the articles of incorporation of the fund aims to completely or partially replicate the performance of a certain share index, called a reference index, through total or partial investment in the components of the share index.

The ruling contains amongst others a set of rules regarding the issuing prospectus of an ETF. This will have to contain a warning to investors on a secondary market on the cover underlining that:

a) ETF tradable shares can only be directly repurchased from the investment management company by authorized participants;

b) the investors can purchase and sell ETF shares by concluding contracts with intermediaries.

The collective investment funds authorized before the entry into force of the ruling can convert into ETF’s only if their investment policy aims at reproducing the structure of a certain index per each share, according to the applicable regulation.