Financial Services Newsletter No. 7/2011

New Financial Regulations

Government Ordinance Regarding Legal Simple Interest and the Legal Interest for Late Payment for Money Obligations

(G.O. no. 13/2011 regarding the legal simple interest and the legal interest for late payment for money obligations, and for the regulation of financial and fiscal measures in the banking field, published in the Official Gazette no. 607/August 29, 2011)

Among the significant amendments we note:
(i) The definition of interest, 0f the simple interest and of the interest for late payment for money obligations;
(ii) In the commercial transactions, the establishment of legal interest at the level of the reference interest rate of the National Bank of Romania (NBR) and of the legal interest for late payment at the level of the reference rate of NBR to which are added four percentage points;
(iii) In the civil transactions (in the relations that are not arising from the operation of an enterprise for profit), the establishment of legal simple interest and of the late payment interest is at the same level mentioned above decreased with a 20% and the limit to which can be established the conventional interest is an amount of up to 50% per year above the legal interest; violating the limits laid down for conventional interest is sanctioned with the de jure nullity and the creditor is forfeited from his rights of claiming legal interest;
(iv) In the legal relationships with foreign elements when the Romanian legislation is applicable and the payment was stated in a foreign currency, the legal interest is of 6% per year.
Note that for the ongoing contracts in which the interest rate is established following the entry into force of the ordinance the validity of the conventional interest is determined with reference to the legal interest at the date of its stipulation.
(v) Concerning the anatocism, it is established that interests can capitalize and can produce interest under a special agreement concluded in order to achieve this effect after their maturity, but only for interest owed for at least one year and provides as a novelty the possibility of capitalizing the simple interest (apparently, without restrictions), and also the inapplicability of the anatocism at the current account contract.

The amendments shall enter into force starting with September 1, 2011, date from which the Government Ordinance no. 9/2000 is repealed, except the articles relating to the capitalization of the simple interest and certain provisions referring to the New Civil Code, which shall enter into force as of October 1, 2011.

The Ordinance transposes the following provisions of Directive 2011/7/UE of the European Parliament and of the Council of February 16, 2011 on combating late payment in commercial transactions: the definition of legal interest for late payment.

Amending the Law on Settlement Finality in Payment and Securities Settlement Systems

(G.O. no. 13/2011 regarding legal simple interest and legal interest for late payment for money obligations, and for the regulation of financial and fiscal measures in the banking field, published in the Official Gazette no. 607/August 29, 2011)

Is hereby amended the meaning of certain terms used by the law in question (such as the definition of the system, of the participant, of the indirect participant, of the guarantee, the correlation of the definition on the financial instruments with the one provided by Government Emergency Ordinance no. 99/2006) and certain new concepts are included (for example, defines the interoperable system), certain amendments are brought to the regulations concerning setoff and irrevocability of transfer orders, but also those relating to the effects of insolvency procedure opened against a participant.

The amendments aim at reducing the systemic risk and at the full implementation of the provisions of Directive 2009/44/CE of the European Parliament and of the Council from May 6, 2009 amending Directive 98/26/CE on settlement finality in payment and securities settlement systems and of Directive 2002/47/CE on financial collateral arrangements.

The provisions enter into force starting with September 1, 2011.

Amendments Regarding Financial Collateral Arrangements

Among the most significant amendments:
(i) Clarifying the meaning of certain terms (such as multilateral development bank, the beneficiaries and providers of financial collaterals);
(ii) Including the concept of private debt and correlative amendment to the definition of financial collateral;
(iii) Clarifying the fact that neither prioritization nor opposability of the financial collateral contract are subject to the fulfillment of any formality.

The amendments aim at the implementation of the provisions of the Directive 2009/44/CE of the European Parliament and of the Council from May 6, 2009 amending Directive 98/26/CE on settlement finality in payment and securities settlement systems and of Directive 2002/47/CE on financial collateral arrangements as regards linked systems and private debts.

The provisions enter into force as of September 1, 2011.

Amendments to the Banking Law

Most significant changes concern:
(i) determining the NBR’s obligation of cooperation and information with the European Commission and with the European Banking Authority newly established as of January 1, 2011 (for example, setting NBR’s obligation for notify the European Banking Authority of any authorization granted, withdrawn or whose validity has ceased and inform it about the conditions under which it may grant an authorization and the required documentation);
(ii) Regulating NBR role as consolidated supervisor;
(iii) Regulating the procedure for the settlement of disputes before the European Banking Authority;
(iv) Regulating non-discriminatory access to payment system of payment system providers;
(v) The procedure for notification by NBR as a consolidated supervisor of specialized institutions of the European Union (EU), when there are emergencies or adverse developments in financial markets that could endanger the liquidity of the market and financial system stability;
(vi) Regarding the special management of credit institutions (for example, regulating the conditions under which assets can be sold, deposits can be transferred, assets can be sold by assuming liabilities and merger-division of a credit institution under special management).

The amendments aim at implementing the provisions of the Directive 2010/78/EU of the European Parliament and of the Council of November 24, 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority).

The provisions regulating NBR’s cooperation with EU institutions enter into force starting with December 31, 2011, and the provisions referring to the special management of credit institutions enter into force as of September 1, 2011.

Amendments to the Regulation on the Deposit Guarantee Fund

(G.O. no. 13/2011 regarding legal simple interest and the legal interest for late payment for money obligations, and for the regulation of financial and fiscal measures in the banking field, published in the Official Gazette no. 607/August 29, 2011)

Among the amendments on G.O. no. 39/1996 on the establishment and functioning of the deposit guarantee fund in the banking system we note:
(i) Settling a mechanism whereby the Guarantee Fund ensures the financing to facilitate the implementation of restructuring measures in the special management procedure;
(ii) Regulating the special situations in which the Fund resources could be insufficient to pay compensations, in which case the Government may grant a loan within 15 working days of its request by the Fund.

The provisions enter into force starting with September 1, 2011.

Ordinance Amending the Credit Institutions’ Bankruptcy

The main amendments on Government Ordinance no. 10/2004 regarding credit institutions bankruptcy aim at:
(i) Correlating the meaning of certain terms with the provisions on Government Emergency Ordinance no. 99/2006 regarding credit institutions and capital adequacy;
(ii) Correlating certain provisions with the legislation regarding bankruptcy procedure (in the field of court organization, of the activity of insolvency practitioners).

The provisions of the ordinance enter into force starting with September 1, 2011.

Regulation Issued by the National Bank of Romania (NBR)
Order on the Reporting Exposures Related to Entities Having Special Relationship with the Credit Institution

(BNR Order No. 6/2001 on the reporting exposures related to entities having special relationship with the credit institution, published in the Official Gazette No. 551/August 3, 2011)

The NBR Order no. 7/2001 on the reporting exposures related to entities having special relationship with the credit institution is repealed.

Amendments include:
(i) The method of submission to NBR of reporting forms regarding the exposures related to entities having a special relationship with the credit institution. The reporting forms can be submitted in electronic format (EXCEL format is no longer required) using the IT reporting system of the NBR (SIRNBR).
(ii) If the reporting is done within three months from the communication of the system rules by NBR, it can also be used the submission in EXCEL format using the interbank communication network (RCI).

The provisions enter into force starting with August 3, 2011.

Regulation Concerning the Status as Reporting Entities of the Electronic Money Institutions at the Central Credit Register

(NBR Regulation no. 9/2011 concerning the status as reporting entities of the Electronic Money Institutions at the Central Credit Register published in the Official Gazette no. 549/August 3, 2011)

The provisions of the NBR Regulation refer to the non-banking financial institutions which at the date of authorization by NBR as electronic money institution had the status of reporting entities at the Central Credit Register; this non-banking financial institutions keep their acquired status.

If after the expiration of three reporting periods, NBR notes that the electronic money institutions doesn’t record a significant level of lending activity, they shall cease to be reporting entities at the Central Credit Register.

Also, credit institutions issuing electronic money, other than the non-banking financial institutions, have the obligation to report to the Central Credit Register within at maximum 6 months following the date on which the NBR found that that credit institution registered a significant level of lending activity.

The provisions enter into force starting with August 3, 2011.

Amendments to the Regulation Concerning the Business Management of Credit Institutions, Internal Process Assessment of the Capital Adequacy and the Conditions for Outsourcing Their Activity

(NBR Regulation no. 10/2001 amending and supplementing NBR Regulation no. 18/2009 on the business management of credit institutions, internal process assessment of the capital adequacy and the conditions for outsourcing their activity, published in the Official Gazette no. 549/August 3, 2011)

The main amendments include:
(i) Preventing entering into business relationship with people involved in criminal activities, and in this respect, credit institutions, in their lending activity must have strict policies on customer knowledge;
(ii) Extending the concept of “entities having special relationship with the credit institution”;
(iii) Introducing an alternative system for determination of the maximum exposure value of a credit institution before a group of people with whom it has a special relationship; group that can be constituted by one or more institutions. Thus, the exposure value can be either 25% of the credit institution’s own funds, or the equivalent of 150 million Euros, depending on whichever is higher.

The provisions enter into force starting with August 3, 2011.

Regulation Issued by the Romanian National Securities Commission (NSC)

NSC Ruling Concerning Issuers of Shares Registred in a Third Country, for Which Romania Is Home Member State

(NSC Ruling no. 30/August 10, 2011 published in the CNVM Gazette no. 32/2011)

The NSC ruling aims at clarifying the applicable regime for the issuers of shares registered in a third country for which Romania is home member state and whose shares are admitted to trading on a regulated market in Romania, previously being admitted to trading on other markets outside Romania (“Issuer”).
Therefore, NSC ruling lays down among others:
(i) Application of passporting procedure of the prospectus when offering shares of the Issuer in another member state or admitting to trading its shares on a regulated market in another member state;
(ii) In the case of shares offering in another member state whose legislation exempts the offer from the obligation of publishing a prospectus, the Issuer is not subject to the requirement of approval by NSC of a simplified prospectus.
(iii) In case of carrying out an offering of shares on the territory of a third country, the Issuer is not subject to the obligation of approval by NSC of a prospectus/simplified prospectus;
(iv) In case of carrying out an admission to trading following sale offering of shares performed exclusively on the territory of a third country, the Issuer is not subject to the requirement of approval by the NSC of a simplified prospectus;
(v) If a share offering is performed on the Romanian territory, regardless of whether such offering is performed on the territory of a third country, the Issuer is subject to the requirement of preparing a simplified prospectus and of its approval by the NSC;
(vi) An Issuer from a third country whose shares are admitted to trading on a regulated market from Romania is not subject to certain provisions of the Law no. 297/2004 on capital market (for example, provisions concerning the election of board members by cumulative vote, the obligation to approve within a extraordinary general assembly certain acts of acquisition, disposal, exchange or creation of a security interest, whose value exceeds 20% of the total of fixed assets);
(vii) In case of a share capital increase of the Issuer, the Issuer is subject to the reporting obligations provided by Law no. 297/2004 on capital market and by the application regulations and when the share capital increase is made by issuing new shares, the Issuer is obliged to register at the NSC the newly-issued shares;
(viii) That the Issuer is subject to the reporting obligations concerning major holdings provided by article 116 from NSC Regulation no. 1/2006 on the issuers and securities transactions and to the notification obligation of the insiders regarding transactions carried out on their own account with the Issuer’s shares.

The Ruling enters into force starting with August 10, 2011.

REGULATIONS ISSUED BY THE SUPERVISORY COMMISSION OF THE PRIVATE PENSION SYSTEM (SCPPS)

Amendments Concerning the Half Year Accounting Reporting System of the Entities Authorized, Regulated and Supervised by SCPPS

(SCPPS Decision no. 12/2011 on the approval of Norm no. 9/2011 concerning the half year accounting reporting system of the entities authorized, regulated and supervised by the Supervisory Commission of the Private Pension System, published in the Official Gazette no. 575/ August 12, 2011)

The norm approved by the SCPPS decision regulates the drawing-up and the submission of the half year accounting reports for the entities authorized, regulated and supervised by the SCPPS (i.e.: pensions companies, voluntary pension funds, private managed pension funds, the managers of the voluntary pension funds that are insurance companies or management companies or private pensions brokers).

Within the approved norm are described the required documents, the method of drawing-up and the delivery requirements for each entity subject to its provisions and also the penalties applicable in case of breach of certain obligations related to the half year accounting reporting.

The provisions enter into force starting with August 12, 2011 and they apply to the accounting reports for the first semester of 2011.

Financial Services