April 2010

Amendments to the Romanian Banking Law

As of 1 April 2010, Romanian Government has

amended the current regulatory framework

applicable to credit institutions by enacting

Government’s Emergency Ordinance no.

26/2010, published in the Official Gazette no.

208 as of 1 April 2010 (“GEO 26/2010”). The

amendment of Government’s Emergency

Ordinance no. 99/2006 (“Banking Law”) had a

two- fold necessity: the one imposed by the

Stand – By Agreement concluded between

Romanian State and the International Monetary

Fund in 2009 and the necessity for a full

implementation of European Directive

2007/64/CE (for which the implementation

dead-line was 1 November 2009).

Amongst the amendments brought by GEO

26/2010 we underline those regarding (i) the

separation of the entities issuing electronic

currency and credit institutions; (ii) introduction

of the notion of significant branch and awarding

greater supervision powers over the said

branches to the relevant regulator; (iii)

introduction of the Supervisory Boards within the

Romanian domestic law; (iv) extension of the

competencies of the national regulator (i.e.

National Bank of Romania – “NBR”) with respect

to the special administration of Romanian credit

institutions and (v) decrease of certain

procedural terms.

Please find below a brief description of such

amendments as follows:

Credit institutions framework: the issuance of

electronic currency is no longer an activity

specific to credit institutions but has been

included within the scope of main activities of

financial institutions.

Notion of significant branch: The notion of

significant branch of a foreign legal entity in

Romania or of a Romanian entity acting abroad

is newly introduced through GEO 26/2010;

under the provisions of GEO 26/2010, a branch

shall be considered as such mainly on the

following reasons:

the market share of the branch, as regards

its deposits is higher than 2 %

the potential impact over the market

liquidity and over the payment, clearing and

settlement systems of the suspension or

closing the branch’s activity.

the size and importance of the branch from

the perspective of the number of its

customers and the financial – banking

sector.

The importance of introducing this new

qualification resides on the potential impact a

branch might have on the banking system of

another Member State. From the same

perspective, the possibilities of cooperation

between Member States regulators in case of

significant branches have been enhanced.

Supervisory Boards: In light of the provisions of

EC Directive 2007/64/CE, GEO 26/2010

implements the mechanism of Supervisory

Boards, a body composed of representatives of

supervisory authorities from various Member

States with the purpose of coordinating their

actions for the consolidated supervision of each

of the financial groups identified within the

Europe Union. The activities of the said

Supervisory Boards shall unfold, among others,

in accordance with the guidelines issued by the

Committee of European Banking Supervisors and

are meant to ensure:

the exchange of information between

supervisory authorities;

determining the supervisory programs

based on the evaluation of the group risk

performed by the proper supervisory

authorities;

increase of the efficiency by eliminating the

unnecessary overlapping in supervisory

requirements;

uniform application of the prudential

requirements set at community level for all

the entities within a banking group.

Enlarged supervision powers

a. Remedy plan

Among the measures which NBR can take in

case a credit institution does not comply with

the banking law requirements, GEO 26/2010

introduces a new measure namely that of

demanding to the credit institution to draft a

remedy plan. The said plan shall detail the

measures to be taken by the credit institution for

the proper management of the risks to which

the said credit institution is exposed and/or to

eliminate the drawbacks identified by NBR.

(b) Special administration

Special administration cases: The cases for which

NBR may impose the special administration of a

Romanian credit institution have been increased

as follows:

it is ascertained or it is predictable a

significant depreciation of the prudential

and financial performance indicators, being

able to endanger in the short termthe

ability of the credit institution to observe

the prudential requirements and the

shareholders did not take the necessary

measures to remedy this situation;

was ascertained gross deficiencies in the

administration/management of the credit

institution or gross and repeated breaches

of the legal provisions which seriously

endanger the interests of those having

deposits with the said institution;

the credit institution did not fully implement

within the terms set by NBR one or several

of the measures imposed to it and this may

endanger the liquidity and/or the adequate

level of its own funds;

the operations performed by the credit

institution endanger the stability or the level

of its own funds or the stability of the

banking system or the credit institution

undergoes a liquidity crisis which endanger

the interests of the persons having deposits

with it or other creditors;

the credit institution did not draft within

the term set by NBR a remedy plan or NBR

ascertains that the presented plan is not

feasible or that the credit institution did not

fulfill in the set deadlines the commitments

undertaken through the said plan or the

ascertained deficiencies regarding the

liquidity or the own funds cannot be

remedied trough a remedy plan;

the measure of special administration is

requested by the board of

administration/supervision board/general

meeting of shareholders for grounded

reasons;

NBR declared as being unavailable the

deposits made by the credit institution with

the Fund for guarantying the deposits

within the banking system;

Apart from the cases above mentioned, NBR is

obliged to impose special administration of a

credit institution if the level of its own funds

does not exceed 75 % of the minimum

threshold imposed by law, and if NBR does not

decide to withdraw the license of that credit

institution.

After the special administration has been

imposed, NBR may, on a case-by-case

assessment, impose the following:

withdrawal of the authorizations granted to

the persons having managing attributions in

the said credit institution;

withdrawal of the authorizations granted to

the auditor;

suspension of the voting rights of the

shareholders having qualified participations.

Powers of the special administrator: the special

administrator entrusted with the administration

of the credit institution as per the above

mentioned provisions has now enlarged powers.

Amongst the measures which the special

administrator may take during its mandate we

underline:

suspension of the activity of attracting

deposits and/or granting credits;

reduction or restructuring of unprofitable

activities (including the possibility to close

down branches);

reduction of the expenses (including the

downsize of employees);

filling legal actions for the annulment of the

fraudulent acts concluded previously by the

credit institution.

Furthermore, under the provisions of GEO

26/2010, the special administrator may, under

NBR instructions, to carry out the following

activities with respect to the activity of the credit

institution under special administration such as:

the increase/decrease of the share capital –

from this perspective it is worth mentioning

that the shareholders’ preemption right has

been decreased from one month to only 14

days;

sale of the credit institution’s assets,

transfer of deposits;

transfer of assets (along with the liabilities

accompanying such assets);

merger/spin – off.

Treatment of the special administration

measures in case of bankruptcy: Another

element of novelty brought by GEO 26/2010 is

that the measures taken under the special

administration procedures cannot be suspended

or cancelled in court, including in the course of

the bankruptcy procedure.

If the measures taken during the special

administration procedure shall be declared

through a court decision as unlawful, then the

person in whose favor the said ruling has been

issued may enter a legal action for damages.

Furthermore, during the said analysis of the

measures taken during the special administration

procedure, the court of law shall analyze only

the legality of the said measures; NBR is the sole

authority empowered to rule upon the grounds

based on which the said measures were taken.

Duration of the special administration: The

duration of the special administration is

decreased from currently one year to only four

months (this term can be however extended if

necessary for the implementation of the

restructuring measures imposed by NBR).

Foreign currency exchange institutions: For the

purposes of Law no. 656/2002 for the

prevention and sanctioning of anti-money

laundering and for certain measures for

prevention and fighting the financing of

terrorism, GEO 26/2010 expressly qualifies the

entities specialized in foreign currency exchange

as financial institutions.

Entry into force: Although GEO 26/2010 entered

into force on 1 April 2010, most of the

amendments above shall enter into force

gradually, as of 31 October 2010 and then as of

30 April 2011.

Amendments to the implementation of “First

House” program

The Romanian Government adopted Emergency

Ordinance no. 30/2010 for the amendment of

Government’s Emergency Ordinance no.

60/2009 regarding some measures in view of

implementing the “First House” program. The

above mentioned Emergency Ordinance was

published in the Official Gazette no.

243/16.04.2010.

Amendments with respect to the bankruptcy of

credit institutions

Romanian Government issued Emergency

Ordinance no. 37/2010 for amending and

supplementing Government Ordinance no.

10/2004 on bankruptcy of credit institutions.

Among the amendments set forth under the said

Emergency Ordinance we outline the following:

the appeal to be filed against the decision

whereby was decided the opening of the

proceedings should be filed within 5 days as

of the communication of the opening

decision;

in fulfilling of their duties, the syndic judge

and the liquidator may require the point of

view of NBR as banking supervisory

authority in any banking matters. Also, NBR

may transmit to syndic judge or to the

liquidator during the bankruptcy

proceedings, its point of view or

information it consider relevant, whenever

deemed necessary;

the petition to open bankruptcy

proceedings (irrespective if it is filed by the

debtor itself or by its creditors) will be

accompanied by prior approval of NBR. In

this respect, the debtor is obliged to submit

with NBR the request to initiate the

proceedings within 10 days as of the date

on which the insolvency state appeared.

NBR will decide on the request of debtor or

its creditors within 10 days as of the receipt.

Also, NBR could not give the approval if it

appreciates that the debtor is not insolvent,

in which event may establish the special

administration if the conditions of such

proceedings are met;

The said Emergency Ordinance was published in

the Official Gazette no. 278 as of 28.04.2010

(date upon it also entered into force).

NBR issued Circular no. 11/2010 regarding the

penalty interest rate for the deficits of minimum

mandatory reserves in the national currency for

the period April 24th – May 23rd

In accordance with the said circular, the penalty

interest rate for the deficits of minimum

mandatory reserves in the national currency is

set to 15.75%/year. The above mentioned

Circular was published in the Official Gazette no.

231/13.04.2010 and can be accessed here.

NBR enacts the regulatory framework regarding

the unitary model of reporting the blocked

economic funds and resources

NBR adopted Order no. 340/2010 regarding the

unitary model of reporting the blocked economic

funds and resources. The above mentioned

Order was published in the Official Gazette no.

260/21.04.2010 and can be accessed here.

NBR amends the rates of interests paid to the

mandatory minimum reserves established in lei

and US dollars starting with the application

period March 24 – April 23, 2010

NBR issued Circular no. 13/2010 regarding the

rates of interests paid to the mandatory

minimum reserves established in lei and US

dollars starting with the application period

March 24 – April 23, 2010. According to the

Circular, the rate of interest paid to the

mandatory minimum reserves established in lei is

of 2.52% per year and for the ones established

in USA dollars is of 0.89% per year. The above-

mentioned Circular was published in the Official

Gazette no. 252/20.04.2010 and can be

accessed here.

NBR establishes the level of the reference

interest rate valid for the month of April 2010

NBR issued Circular no. 10/2010 regarding the

level of the rate of reference interest of NBR

valid in April 2010. According to the Circular, for

the month of April, 2010, the level of the rate of

reference interest of NBR is of 7% per year. The

above mentioned Circular was published in the

Official Gazette no. 205/01.04.2010 and can be

accessed here.

NBR amended the current regulatory framework

on non-banking financial institutions

NBR issued Regulation no. 5/2010 amending

NBR’s regulation no. 20/2009 on non-banking

financial institutions. Among the amendments

set forth under the Regulation there should be

mentioned that if, in exceptional and duly

justified circumstances exposures of non-banking

financial institutions exceeds the limits set by the

law, the respective institution must report this

situation without delay to NBR which may

specify a dead line in which the respective non-

banking financial institution to comply to the

requested limits.The said Regulation was

published in the Official Gazette no. 281 dated

04.29.2010 and may be accessed here.

ISC amends the current regulatory framework

regarding the procedure for resolving complaints

regarding the activity of insurers, reinsurers and

insurance/reinsurance intermediaries

ISC issued Order no. 3¬/2010 for the approval of

the prudential Norms on resolving complaints

regarding the activity of insurers, reinsurers and

insurance/reinsurance intermediaries. The said

Norms were published in the Official Gazette no.

226/09.04.2010 and may be accessed here.

ISC enacted the regulatory framework regarding

the organizing of archive activity within insurers,

reinsurers and insurance/reinsurance

intermediaries

ISC enacted Order no. 4/2010 for the approval

of the Norms regarding the organizing of archive

activity with insurers, reinsurers and

insurance/reinsurance intermediaries. The above

mentioned Order was published in the Official

Gazette no. 264/22.04.2010 and can be

accessed here.

PPSSC has amended the current regulatory

framework on the procedure for monitoring the

implementation of international sanctions within

the private pension system

PPSSC issued Norm no. 4/2010 for the

amendment of PPSSC’s Norm no. 11/2009 on

the procedure for monitoring the

implementation of international sanctions within

the private pension system. The above

mentioned Norm was published in the Official

Gazette no. 217/07.04.2010 and may be

accessed here.

NSC decides suspending the application of

Articles 154 and 155 of NSC’s Regulation no.

1/2006 regarding the issuers and operations of

securities until its amendment

NSC adopted Decision of Measures no.

11/21.04.2010 through which it was decided

the suspension of the application of the

provisions described under Articles 154 and 155

of NSC’s Regulation no. 1/2006 regarding the

issuers and operations of securities until its

amendment. The said Articles refer to the

transfer of the issuer whose shares do not

observe the rules under Article 153 of Regulation

1/2006 on the alternative system of trading

administrated by the Bucharest Stock Exchange.

As such, the shares which upon the entry into

force of the said decision of measures are traded

on the market of unquoted securities shall be

traded according to the rules governing this type

of market. Moreover, the shares which upon the

entry into force of the said decision are listed on

RASDAQ market shall be traded according to the

rules currently applicable. The above mentioned

decision may be accessed here.

Proposal of Norm regarding the transparency

and reporting obligations in voluntary pensions

system

The full text of the proposal can be accessed

here.

Proposal of Norm on management rules for

taking voluntary pension funds.

The project is under public consultations until

28.05.2010 and can be accessed here.

Proposal of Instruction regarding the

transmission on electronic means of internal

procedures drafted according to relevant

regulations issued by NSC by the intermediaries

registered in NSC Register.

The full text of the proposal can be accessed

here.

European Central Bank has published on April 6,

2010 its opinion on extending government

guaranties to banks and other institutions.

For more details please access here.

CEBS initiated on April 7, 2010 the public

consultations regarding its proposed Guidelines

regarding the evaluation process on the capital

adequacy of cross border groups.

The deadline for submitting any comments on

the said Guidelines is July 9, 2010. For more

details please access here.

CEBS published on 26 April 2010 its Principles

for disclosures in times of stress.

For further information please access here.

Date

4 – 5 June 2010

Venue

Yaki Hotel

Mamaia, Constanta

At first glance, the Romanian VAT system seems

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VAT rules are frequently encountered.

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For additional information, please visit the web

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Sectorul Serviciilor Financiare Buletin lunar 11

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