April 2010 Financial Services Industry monthly bulletin


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The Financial Services Industry Monthly Bulletin is a banking and finance law publication by Reff & Associates (correspondent law firm of Deloitte Romania) and Deloitte Tax.

Each month, our specialist team of finance lawyers and tax advisors will keep you updated with the latest legal, regulatory and tax developments in the financial services industry in Romania as well as with the recent changes and trends in the international financial regulations.

The areas covered by our bulletin include:

Banking and non-banking financial institutions
Capital markets
Insurance companies
Private pension funds

Published in: Economy & Finance
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April 2010 Financial Services Industry monthly bulletin

  1. 1. April 2010
  2. 2. Please find below a brief description of such amendments as follows: Credit institutions framework: the issuance of electronic currency is no longer an activity Amendments to the Romanian Banking Law specific to credit institutions but has been included within the scope of main activities of As of 1 April 2010, Romanian Government has financial institutions. amended the current regulatory framework applicable to credit institutions by enacting Notion of significant branch: The notion of Government’s Emergency Ordinance no. significant branch of a foreign legal entity in 26/2010, published in the Official Gazette no. Romania or of a Romanian entity acting abroad 208 as of 1 April 2010 (“GEO 26/2010”). The is newly introduced through GEO 26/2010; amendment of Government’s Emergency under the provisions of GEO 26/2010, a branch Ordinance no. 99/2006 (“Banking Law”) had a shall be considered as such mainly on the two- fold necessity: the one imposed by the following reasons: Stand – By Agreement concluded between Romanian State and the International Monetary  the market share of the branch, as regards Fund in 2009 and the necessity for a full its deposits is higher than 2 % implementation of European Directive 2007/64/CE (for which the implementation  the potential impact over the market dead-line was 1 November 2009). liquidity and over the payment, clearing and settlement systems of the suspension or Amongst the amendments brought by GEO closing the branch’s activity. 26/2010 we underline those regarding (i) the separation of the entities issuing electronic  the size and importance of the branch from currency and credit institutions; (ii) introduction the perspective of the number of its of the notion of significant branch and awarding customers and the financial – banking greater supervision powers over the said sector. branches to the relevant regulator; (iii) introduction of the Supervisory Boards within the The importance of introducing this new Romanian domestic law; (iv) extension of the qualification resides on the potential impact a competencies of the national regulator (i.e. branch might have on the banking system of National Bank of Romania – “NBR”) with respect another Member State. From the same to the special administration of Romanian credit perspective, the possibilities of cooperation institutions and (v) decrease of certain between Member States regulators in case of procedural terms. significant branches have been enhanced.
  3. 3. Supervisory Boards: In light of the provisions of (b) Special administration EC Directive 2007/64/CE, GEO 26/2010 implements the mechanism of Supervisory Special administration cases: The cases for which Boards, a body composed of representatives of NBR may impose the special administration of a supervisory authorities from various Member Romanian credit institution have been increased States with the purpose of coordinating their as follows: actions for the consolidated supervision of each of the financial groups identified within the  it is ascertained or it is predictable a Europe Union. The activities of the said significant depreciation of the prudential Supervisory Boards shall unfold, among others, and financial performance indicators, being in accordance with the guidelines issued by the able to endanger in the short termthe Committee of European Banking Supervisors and ability of the credit institution to observe are meant to ensure: the prudential requirements and the shareholders did not take the necessary  the exchange of information between measures to remedy this situation; supervisory authorities;  was ascertained gross deficiencies in the  determining the supervisory programs administration/management of the credit based on the evaluation of the group risk institution or gross and repeated breaches performed by the proper supervisory of the legal provisions which seriously authorities; endanger the interests of those having deposits with the said institution;  increase of the efficiency by eliminating the unnecessary overlapping in supervisory  the credit institution did not fully implement requirements; within the terms set by NBR one or several of the measures imposed to it and this may  uniform application of the prudential endanger the liquidity and/or the adequate requirements set at community level for all level of its own funds; the entities within a banking group.  the operations performed by the credit Enlarged supervision powers institution endanger the stability or the level of its own funds or the stability of the a. Remedy plan banking system or the credit institution undergoes a liquidity crisis which endanger Among the measures which NBR can take in the interests of the persons having deposits case a credit institution does not comply with with it or other creditors; the banking law requirements, GEO 26/2010 introduces a new measure namely that of  the credit institution did not draft within demanding to the credit institution to draft a the term set by NBR a remedy plan or NBR remedy plan. The said plan shall detail the ascertains that the presented plan is not measures to be taken by the credit institution for feasible or that the credit institution did not the proper management of the risks to which fulfill in the set deadlines the commitments the said credit institution is exposed and/or to undertaken through the said plan or the eliminate the drawbacks identified by NBR. ascertained deficiencies regarding the liquidity or the own funds cannot be remedied trough a remedy plan;
  4. 4.  the measure of special administration is Furthermore, under the provisions of GEO requested by the board of 26/2010, the special administrator may, under administration/supervision board/general NBR instructions, to carry out the following meeting of shareholders for grounded activities with respect to the activity of the credit reasons; institution under special administration such as:  NBR declared as being unavailable the  the increase/decrease of the share capital – deposits made by the credit institution with from this perspective it is worth mentioning the Fund for guarantying the deposits that the shareholders’ preemption right has within the banking system; been decreased from one month to only 14 days; Apart from the cases above mentioned, NBR is obliged to impose special administration of a  sale of the credit institution’s assets, credit institution if the level of its own funds transfer of deposits; does not exceed 75 % of the minimum threshold imposed by law, and if NBR does not  transfer of assets (along with the liabilities decide to withdraw the license of that credit accompanying such assets); institution.  merger/spin – off. After the special administration has been imposed, NBR may, on a case-by-case Treatment of the special administration assessment, impose the following: measures in case of bankruptcy: Another element of novelty brought by GEO 26/2010 is  withdrawal of the authorizations granted to that the measures taken under the special the persons having managing attributions in administration procedures cannot be suspended the said credit institution; or cancelled in court, including in the course of the bankruptcy procedure.  withdrawal of the authorizations granted to the auditor; If the measures taken during the special administration procedure shall be declared  suspension of the voting rights of the through a court decision as unlawful, then the shareholders having qualified participations. person in whose favor the said ruling has been issued may enter a legal action for damages. Powers of the special administrator: the special Furthermore, during the said analysis of the administrator entrusted with the administration measures taken during the special administration of the credit institution as per the above procedure, the court of law shall analyze only mentioned provisions has now enlarged powers. the legality of the said measures; NBR is the sole Amongst the measures which the special authority empowered to rule upon the grounds administrator may take during its mandate we based on which the said measures were taken. underline: Duration of the special administration: The  suspension of the activity of attracting duration of the special administration is deposits and/or granting credits; decreased from currently one year to only four months (this term can be however extended if  reduction or restructuring of unprofitable necessary for the implementation of the activities (including the possibility to close restructuring measures imposed by NBR). 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.
  5. 5. Foreign currency exchange institutions: For the Among the amendments set forth under the said purposes of Law no. 656/2002 for the Emergency Ordinance we outline the following: prevention and sanctioning of anti-money laundering and for certain measures for  the appeal to be filed against the decision prevention and fighting the financing of whereby was decided the opening of the terrorism, GEO 26/2010 expressly qualifies the proceedings should be filed within 5 days as entities specialized in foreign currency exchange of the communication of the opening as financial institutions. decision; Entry into force: Although GEO 26/2010 entered  in fulfilling of their duties, the syndic judge into force on 1 April 2010, most of the and the liquidator may require the point of amendments above shall enter into force view of NBR as banking supervisory gradually, as of 31 October 2010 and then as of authority in any banking matters. Also, NBR 30 April 2011. may transmit to syndic judge or to the liquidator during the bankruptcy Amendments to the implementation of “First proceedings, its point of view or House” program information it consider relevant, whenever deemed necessary; The Romanian Government adopted Emergency Ordinance no. 30/2010 for the amendment of  the petition to open bankruptcy Government’s Emergency Ordinance no. proceedings (irrespective if it is filed by the 60/2009 regarding some measures in view of debtor itself or by its creditors) will be implementing the “First House” program. The accompanied by prior approval of NBR. In above mentioned Emergency Ordinance was this respect, the debtor is obliged to submit published in the Official Gazette no. with NBR the request to initiate the 243/16.04.2010. proceedings within 10 days as of the date on which the insolvency state appeared. Amendments with respect to the bankruptcy of NBR will decide on the request of debtor or credit institutions its creditors within 10 days as of the receipt. Also, NBR could not give the approval if it Romanian Government issued Emergency appreciates that the debtor is not insolvent, Ordinance no. 37/2010 for amending and in which event may establish the special supplementing Government Ordinance no. administration if the conditions of such 10/2004 on bankruptcy of credit institutions. 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).
  6. 6. NBR issued Circular no. 11/2010 regarding the penalty interest rate for the deficits of minimum mandatory reserves in the national currency for NBR amends the rates of interests paid to the the period April 24th – May 23rd mandatory minimum reserves established in lei and US dollars starting with the application In accordance with the said circular, the penalty period March 24 – April 23, 2010 interest rate for the deficits of minimum mandatory reserves in the national currency is NBR issued Circular no. 13/2010 regarding the set to 15.75%/year. The above mentioned rates of interests paid to the mandatory Circular was published in the Official Gazette no. minimum reserves established in lei and US 231/13.04.2010 and can be accessed here. dollars starting with the application period March 24 – April 23, 2010. According to the NBR enacts the regulatory framework regarding Circular, the rate of interest paid to the the unitary model of reporting the blocked mandatory minimum reserves established in lei is economic funds and resources of 2.52% per year and for the ones established in USA dollars is of 0.89% per year. The above- NBR adopted Order no. 340/2010 regarding the mentioned Circular was published in the Official unitary model of reporting the blocked economic Gazette no. 252/20.04.2010 and can be funds and resources. The above mentioned accessed here. Order was published in the Official Gazette no. 260/21.04.2010 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.
  7. 7. 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.
  8. 8. ISC amends the current regulatory framework PPSSC has amended the current regulatory regarding the procedure for resolving complaints framework on the procedure for monitoring the regarding the activity of insurers, reinsurers and implementation of international sanctions within insurance/reinsurance intermediaries the private pension system ISC issued Order no. 3¬/2010 for the approval of PPSSC issued Norm no. 4/2010 for the the prudential Norms on resolving complaints amendment of PPSSC’s Norm no. 11/2009 on regarding the activity of insurers, reinsurers and the procedure for monitoring the insurance/reinsurance intermediaries. The said implementation of international sanctions within Norms were published in the Official Gazette no. the private pension system. The above 226/09.04.2010 and may be accessed here. mentioned Norm was published in the Official Gazette no. 217/07.04.2010 and may be ISC enacted the regulatory framework regarding accessed here. 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 NSC decides suspending the application of mentioned Order was published in the Official Articles 154 and 155 of NSC’s Regulation no. Gazette no. 264/22.04.2010 and can be 1/2006 regarding the issuers and operations of accessed here. 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.
  9. 9. Proposal of Norm regarding the transparency Proposal of Instruction regarding the and reporting obligations in voluntary pensions transmission on electronic means of internal system procedures drafted according to relevant regulations issued by NSC by the intermediaries The full text of the proposal can be accessed registered in NSC Register. here. The full text of the proposal can be accessed Proposal of Norm on management rules for here. taking voluntary pension funds. The project is under public consultations until 28.05.2010 and can be accessed here.
  10. 10. 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.
  11. 11. Date 4 – 5 June 2010 Venue Yaki Hotel Mamaia, Constanta At first glance, the Romanian VAT system seems to be simple. It appears to involve collecting and deducting VAT, which works more or less neutral for taxpayers. In practice this is far from the truth as various issues pop up when least expected. Difficulties in correctly applying the VAT rules are frequently encountered. Our workshop will help participants to spot opportunities leading to an improvement of their company’s tax position. For additional information, please visit the web page VAT in Practice.
  12. 12. Reff & Associates is the correspondent law firm of Deloitte Romania, fully integrated with the Deloitte multi-disciplinary advisory practice and affiliated to a network of law firms and legal departments working with Deloitte all over the world. Deloitte’s correspondent legal practice provides assistance to clients in Romania on various matters pertaining to mergers and acquisitions, corporate and commercial law, finance, banking and capital markets, real estate, project finance, employment, competition, fiscal and commercial litigation, and intellectual property. In the financial services sector, Reff & Associates provides the full range of services to banks and financial institutions, including: - Finance deals: transaction support in bilateral and syndicated loans, loan workouts, securitisation, loan transfers and assists in drafting and negotiating the transaction documentation (loan agreements, security and other ancillary documentation). - M&A transactions in the financial services sector: advice on the structure of the transaction, the pre-contractual documentation, due diligence, drafting/negotiating the purchase agreements and assisting the implementation of the transaction. - Regulatory assistance: ongoing assistance with respect to the specific legal and regulatory requirements applicable to banks / non banking financial institutions operating in Romania, development of new financial products, representation in front of the regulators (National Bank of Romania, Insurance Supervisory Commission, Securities Commission etc.). Andrei Burz Pinzaru Partner + 40 21 207 52 05 aburzpinzaru@deloittece.com Simina Mut Manager + 40 21 207 52 69 smut@deloittece.com Leontin Trifa Manager + 40 21 207 53 13 ltrifa@deloittece.com Sectorul Serviciilor Financiare Buletin lunar 11
  13. 13. George Mucibabici Chairman tel: + 40 21 207 52 55 e-mail: gmucibabici@deloittece.com Audit Santiago Pardo Partner tel: + 40 21 207 54 92 e-mail: sapardo@deloittece.com Enterprise Risk Services Gary Bauer Director tel: + 40 21 207 52 19 e-mail: gbauer@deloittece.com Financial Advisory Antonis Ioannides Partner tel: + 40 21 207 56 26 e-mail: anioannides@deloittece.com Tax Rodica Segarceanu Partner tel: + 40 21 207 52 31 e-mail: rsegarceanu@deloittece.com Legal Andrei Burz-Pinzaru Partner, Reff&Associates correspondent law firm of Deloitte Romania tel: + 40 21 207 52 05 e-mail: aburzpinzaru@deloittece.com Consulting Razvan Horobeanu Manager tel: + 40 21 207 53 57 e-mail: rhorobeanu@deloittece.com Actuarial & Insurance Solutions Slawomir Latusek Consultant tel: + 48 (22) 511 04 54 e-mail: slatusek@deloittece.com
  14. 14. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/ro/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's more than 169 000 professionals are committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities. This publication contains general information only, and none of Deloitte Touche Tohmatsu, its member firms, or its and their affiliates are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. None of Deloitte Touche Tohmatsu, its member firms, or its and their respective affiliates shall be responsible for any loss whatsoever sustained by any person who relies on this publication. © 2010 Deloitte Romania