NEW REGULATIONS IN THE FINANCIAL SECTOR

Modification of Government Ordinance on payment services and of Law on non-banking financial institutions (NFI)
(Government Emergency Ordinance No. 42/2011 amending and supplementing Government Emergency Ordinance No. 113/2009 on payment services and Law No. 93/2009 on non-banking financial institutions published in the Official Gazette No. 303/May 3, 2011)

Among the amendments of the Ordinance on payment services the following should be mentioned: (i) for authorising an entity to provide payment services the National Bank of Romania (NBR) may request information from the National Office for Prevention and Control of Money Laundering on persons and entities exposed to money laundering and terrorism financing risk; (ii) payment institutions have to carry out the credit activity according to prudent and sound practice rules ; (iii) shareholders and associates of a payment institutions can decide to give up the authorisation and dissolve the entity, as the case, communicating to the NBR the decision of the general shareholders/associates meeting together with a plan regarding the discharge of duties towards the users of the payment services; (iv) authorisation of a payment institution shall automatically come to an end following a merger/division by which the payment institution ceases to exist or following a decision to open the insolvency procedure; (v) payment institutions have to settle and use special credit risk provisions according to NBR regulations for payment services related credits; (vi) credit agreements related to payment services concluded by payment services providers, security interests and guarantees for securing the credit are enforceable titles; (vii) the securities set up in favour of payment service providers in order to secure credits linked to payment services which fulfil the advertising requirements grant priority against third parties (including the State) whose receivables and guarantees accomplished the advertising requirements at a later date.

Among the modifications of the Law on non-banking financial institutions the following should be mentioned: (i) the provision by which the financial institutions from other member states were excluded from the application of the provisions of this law according to Government Emergency Ordinance No. 99/2006 regarding credit institutions and capital adequacy, as amended and supplemented (Part I Title I Chapter IV Section 2) is repealed; (ii) the credit activity is carried out professionally through credit institutions and financial institutions from other member states, payment service providers that grant credits related to payment services and through non-banking financial institutions; (iii) the NFIs may provide issuance and administration of credit cards services for clients, other that those falling under the provisions of Government Emergency Ordinance No. 113/2009 on payment services, and carry out activities related to settling transactions with these cards; (iv) NFIs registered in the General Registry are able to provide payment services and grant credits related to the payment activity according to the provisions of Government Emergency Ordinance No. 113/2009; these credits do not fall under the provisions of Law No. 93/2009.

REGULATIONS ISSUED BY THE NATIONAL BANK OF ROMANIA (NBR)

Modification of Regulation regarding the limitation of credit risk for natural persons’ credits
(NBR Regulation No. 2/2011 amending Regulation No. 3/2007 on limitation of credit risk for consumers’ credit published in the Official Gazette No. 316/May 9, 2011)

According to this amendment the provisions of NBR Regulation No. 3/2007 are applicable also to payment institutions, Romanian legal persons, which register a significant level of credit activity based on the provisions of NBR Regulation No. 21/2009 regarding payment institutions, such as further amended and supplemented.

Modification of Regulation on credits and investments classification
(NBR Regulation No. 3/2011 amending and supplementing Regulation No. 3/2009 on credits and investments classification, as well as for establishing, regularisation and use of specific credit risk provisions published in the Official Gazette No. 316/May 9, 2011)

According to this amendment the provisions of NBR Regulation No. 3/2009 apply also to payment institutions, Romanian legal persons, that grant credit related to payment services. For payment institutions the following are taken into account: (i) clarification of credits related to payment services granted to creditors outside the credit institution domain; (ii) determining the necessary specific credit risk provisions for classified credits; (iii) establishing, regularisation and use of specific credit risk provisions.

The internal norms of the creditor in case of payment institutions should be appropriated by persons responsible for directing and managing the activities carried out by payment services. Also, the internal norms of payment institutions that register a significant level of credit activity according to Regulation No. 21/2009 on payment institutions have to be submitted to the NBR – Supervision Department.

The form and content of the reporting forms, the frequency and means of submitting these forms for payment institutions are identical to those established for non-banking financial institutions by NBR order.

Modification of Regulation on payment institutions
(NBR Regulation No. 4/2011 amending and supplementing NBR Regulation No. 21/2009 on payment institutions published in the Official Gazette No. 316/May 9, 2011)

Among the most important amendments the following should be mentioned: (i) for obtaining an authorisation for providing payment services the applicant has to submit together with the authorisation request also the last annual financial statement, as well as the most recent financial statement submitted with the competent authorities; (ii) a new chapter regarding the conditions for carrying out the credit activity was established; this chapter settles the applicability of NBR regulations with respect to credit risk limitations for natural persons’ credits and criteria that has to be fulfilled for establishing a “significant level of credit activity”; (iii) payment institutions can open up accounts in order to protect funds only with credit institutions authorised to carry out their activity in a member state; (iv) payment institutions that carry out credit activity have to report quarterly to the NBR – Supervision Department the situation of credit activity based on the form referred to as “Situation of credit activity”; (v) payment institutions have to report annually accountancy information from the balance elements and profit and loss accounts regarding payment services according to the time frame for submitting annual financial statements to the NBR.

REGULATIONS ISSUED BY THE NATIONAL SECURITIES COMMISSION (NSC)

Ruling regarding public offers to sell
(NSC Ruling No. 6/19.05.2011 published in the NSC Bulletin No. 20/2011)

According to this ruling, as part of a public offer to sell, the intermediary that is a participant to the relevant trading and clearing and settlement system is able to introduce, in the clients’ name, an order to subscribe in the trading system through which the offer is carried out provided certain conditions regarding the subscription are fulfilled, such as: (i) the existence of proof that the client deposited corresponding funds in the collective account opened by the intermediary for this purpose; (ii) the existence of a written declaration of the custodian agent regarding the undertaking to settle the value of the financial instruments subscribed by the client; (iii) holding a bank letter of guarantee issued by a credit institution in the EU covering the settlement of the risk undertaken by the intermediary.

Alert regarding operations carried out on Forex type trading platforms
(NSC Alert from 20.05.2011)

By this alert the NSC draws attention on the fact that the operations carried out on Forex type trading platforms are not regulated and supervised by the NSC.
Also, transactions with foreign currency and other financial instruments, such as defined by Government Emergency Ordinance No. 99/2006 regarding credit institutions and capital adequacy, exceed the object of activity of an investment firm and are not subject to compensation by the Investors Compensation Fund.

INSURANCE

Norms for the application of the Law on compulsory insurance for homes against earthquakes, land slides and floods
(ISC Order No. 6/2011 approving the Norms for the application of Law No. 260/2008 on compulsory insurance for homes against earthquakes, land slides and floods published in the Official Gazette No. 315/May 6, 2011)

These norms apply to: (i) natural and legal persons holding the ownership of residential buildings; (ii) persons or authorities that administer houses owned by the state or the administrative and territorial units, (iii) the lessor, in case of a house subject to a financial leasing agreement.

The compulsory insurance shall be paid by the National Agency for Social Performances in case the natural person benefits from social security and holds the ownership of a building for housing purposes.

Norm regarding the technical reserves for life insurances
(ISC Order No. 8/2011 for the application of Norms regarding the technical reserves for life insurances, assets admitted to cover them and the dispersion of assets admitted to cover the gross technical reserves published in the Official Gazette No. 325/May 11, 2011)

These norms that will be in force beginning with July 1, 2011 establish for insurers that carry out life insurance activities the basic principles for determining the value of the technical reserves. It also brings clarifications with respect to: (i) the ways in which assets covering technical reserves may be invested; (ii) the categories of assets admitted to cover the gross technical reserves; (iii) the rules regarding the dispersion of assets admitted to cover the gross technical reserves; (iv) the annuities related to investment funds in case insurance agreements are linked to the value of units of an undertaking in collective investment or an internal fund or the shares index; (v) establishing the gross subscription premiums; (vi) the liquidity factor and assets considered to be liquid; (vii) rules that have to be observed with respect to currency in which the insurer’s engagements are to be paid.

These provisions transpose articles 20, 22, 23, 24, 25 and 26 of Directive 2002/83/EC on life assurance.

At the entrance into force of these norms the Order of the ISC President No. 113.131/2006 for the implementation of Norms regarding the technical reserves for life insurance, assets admitted to cover them and the dispersion of assets admitted to cover the gross technical reserves is repealed.

Modification of norms regarding the organisation of internal control system, risk management and internal audit activity
(ISC Order No. 7/2011 amending and supplementing Norms regarding the principles to set up an internal control system and risk management, as well as organising and carrying out the internal audit activity for insurers/reinsurers approved by ISC President Order No. 18/2009 published in the Official Gazette No. 325/May 11, 2011)

According to this amendment: (i) the outsourcing of certain activities must not affect the activities carried out by insurers/reinsurers, nor the prudential supervision of the Insurance Supervision Commission (ISC), (ii) the insurer’s/reinsurer’s management remains responsible for the outsourced activities and the risks associated to this outsourcing; (iii) the insurer/reinsurer may outsource certain activities only after a prior approval from the ISC which shall analyse the necessity to outsource and the draft agreements with providers; (iv) the internal audit activity, organisation and management of own accountancy, financial accountancy and administration of accountancy, IT services and the management activity and payment of damage files cannot be outsourced; (v) the insurers have the duty to draw up an annual report regarding the reinsurance program used for assigned risks based on which the ISC will evaluate the observance of prudential requirements, the adequacy of the insurance program with the insurer’s risk profile, avoidance of risks concentration and their transfer etc.

The provisions of the annual report regarding the reinsurance program used for assigned risks apply also to reinsurance for the retrocession program.

The provisions regarding the outsourcing of insurers/reinsurers activities will enter into force on January 1, 2012.

Norms regarding the assets issued to cover the gross technical reserves for direct insurance activity
(ISC Order No. 9/2011 for the application of Norms regarding the assets admitted to cover the gross technical reserves for insurers carrying out direct insurance activities, the dispersion of assets admitted to cover gross technical reserves, as well as the liquidity factor published in the Official Gazette No. 325/May 11, 2011)

These norms which enter into force on July 1, 2011 establish the assets admitted to cover the gross technical reserves according to the type of activity carried out by the insurer for assuring the return, security and tradability of investments and dispersion of risks. According to this regulation for activities carried out in member states, the assets admitted to cover gross technical reserves have to be established on their territory.

The categories of assets admitted to cover the reserves are divided between investments, receivables and other assets (i.e. available cash). Also, the norms bring clarifications with respect to the dispersion of assets admitted to cover the gross technical reserves and the maximum volume that may be invested in a certain asset, the computation of the liquidity factor and the currency in which the commitments have to be paid.

These provisions transpose Articles 20, 21, 22 and 26 of Directive 92/49/EEC on the coordination of laws, regulations and administrative provisions relating to direct insurance and amending Directives 73/239/EEC and 88/357/EEC and annex 1 of Directive 88/357/EEC on the coordination of laws, regulations and administrative provisions relating to direct insurance and laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 73/239/EEC.

At the date of entrance into force of this order the provisions of ISC President Order No. 113.130/2006 for the application of Norms regarding the assets admitted to cover the gross technical reserves for the insurer carrying out direct insurance, dispersion of assets admitted to cover gross technical reserves, as well as the liquidity factor are repealed.

Modification of norms regarding the activity of entities which organise professional training courses
(ISC Order No. 10/2011 amending and supplementing Norms regarding the activity of entities that organise unitary professional training courses for insurance personnel implemented by ICS President Order No. 6/2010 published in the Official Gazette No. 333/May 13, 2011)

According to this modification norm the entities which intend to become providers of e-learning training programs in insurance activity have to fulfil also the software requirements for the approval of the e-learning platform, such as provided for in the annex to this norm.

Provisions regarding: (i) the duty to mention the content of the analytical schedule, the subjects of the graduation exam and the form of the final evaluation of the graduates; (ii) the way in which the graduation exam is organised and the structure of the exam commission, are repealed.

Modification of the norms regarding the professional qualification and continuous training
(ISC Order No. 11/2011 amending and supplementing Norms regarding the professional qualification and continuous training of persons working in the distribution of insurance products, implemented by ISC President Order No. 7/2010 published in the Official Gazette No. 333/May 13, 2011)

In addition to the professional qualification of the persons that intend to carry out an activity within the distribution of insurance products and continuous training requirements, these norms establish also requirements regarding continuous specialization.

The detailed thematic, the analytical schedule and the course support for professional qualification and continuous professional training programs will be drawn up by the Monitoring Commission for the quality of the professional training and is subject to the ISC approval. The schedule framework shall be structured in life insurance and direct insurance.

The graduation exam shall be organised by the Insurance Management Institute (IMI). The students will register for the exam organised by IMI based on a certificate issued by the provider of the educational program which certifies that the entire professional qualification program was covered by the student. Following the passing of the exam, the IMI shall issue the graduation certificates.

After creating the support-platform the ISC shall organise also online exams.

The detailed thematic, the analytical schedule and the course support for the professional specialization programs will be drawn up by the provider of educational programs in insurance. Also, the graduation exam shall be organised by the provider, and the persons that pass the exam will receive a graduation certificate issued by the provider of educational programs in insurance.

PRIVATE PENSIONS

Modification of the norm regarding the computation of the net asset and of the value of the fund units for private managed pension funds
(Norm No. 6/2011 amending and supplementing Norm No. 5/2009 on the computation of the net asset and of the value of the fund units for private managed pension funds published in the Official Gazette No. 357/May 23, 2011)

This amendment regards the way in which shares of companies in insolvency, reorganisation or judicial liquidation, temporary or total cessation of activity, or which are suspended or withdrawn from trading are computed in the assets of the private managed pension fund.

Modification of the norm regarding the computation of the net asset and value of the fund units for voluntary pension funds
(Norm No. 7/2011 amending and supplementing Norm No. 5/2009 on the computation of the net asset and of the value of the fund units for voluntary pension funds published in the Official Gazette No. 357/May 23, 2011)

This amendment regards the way in which shares of companies in insolvency, reorganisation or judicial liquidation, temporary or total cessation of activity, or which are suspended or withdrawn from trading are computed in the assets of the voluntary pension fund.