Oct 2009 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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Oct 2009 Financial Services Industry monthly bulletin

  1. 1. October 2009
  2. 2. Domestic regulatory updates 3 Legal 4 1. Banking 4 2. Insurance 7 3. Private pensions 8 4. Capital Markets 9 Tax 10 International regulatory updates 11 Domestic regulatory proposals 13 1. Banking 14 2. Insurance 15 3. Private pensions 16 International regulatory proposals/measures 17
  3. 3. Financial Services Industry Monthly Bulletin 8
  4. 4.  its initial capital to be between EUR 20.000 and EUR 125.000, depending on the Issuer: Romanian Government rendered payment services; Romanian Government regulates the payment  its headquarter to be located in Romania; services in view of implementing into national legislation Directive 2007/64/EC of the European  in view of maintaining a healthy and Parliament and of the Council as of 13 prudent management, NBR must ascertain November 2007 regarding payment services in the internal market that the persons responsible for leading and managing its activity have a good Romanian Government adopted Emergency reputation and an adequate knowledge Ordinance no. 113/2009 regarding the payment related to the nature, extension and services published in the Official Gazette no. complexity of its activity. 685/12.10.2009 (“GEO 113/2009”). The main provisions of GEO 113/2009 refer to: Payment services Scope The payment services can be performed under GEO 113/2009 covers the following categories single payment transactions, framework of payment services providers: contracts and related payment operations, if the user acts as a consumer.  credit institutions; Through a payment service it is to be understood  electronic currency issuers; any of the following activities:  postal services providers that provide  services that allow to deposit/withdraw cash payment services under the applicable into/from a payment account, as well as all national legal framework; of the operations necessary to operate that payment account;  payment institutions as per GEO 113/2009;  European Central Bank and national central  performance of the following payment banks when they are not acting as operations irrespective whether the funds monetary authorities or in any other quality are covered or not by a credit line: direct implying the exercise of public authority; debit, including single direct debit, payment operations through a payment card or  Member States or their regional or local similar device, transfer of credit operations, authorities when they are not acting in their including operations with scheduled capacity of public authorities. payment orders; Conditions related to the payment services providers  issuance and/or acceptance for payment of payment instruments;  A payment institution is defined as the legal entity authorized under GEO 113/2009 to  delivery of money; provide payment services within the European Union and European Economic  performance of payment operations in Area. The conditions which must be which the payer's consent to carry out a observed by an entity in order to provide payment transaction is given through any payment services in Romania are: telecommunication system, digital or informatics, and the payment is made by  to obtain an authorization before starting the operator of the system or of the its activity from the National Bank of telecommunications or computer network Romania (“NBR”); that acts exclusively as an intermediary between the user of the payment services  to be established in accordance with the and the supplier of goods and services. provisions of Companies’ Law no. 31/1990; 4
  5. 5. The entities providing payment services upon the Regulations repealed date when GEO 113/2009 entered into force must apply for an authorization with NBR until Regulation 20/2009 repeals a series of Norms December 31st, 2010. If these entities shall not issued by NBR regulating: NBFI minimal share be authorized under GEO 113/2009 until April capital; General, Special and Evidence Registries; 30th, 2011, then they shall not be allowed to notification and registration procedures within provide payment services any longer. the said registries; criteria for the registration with the Special Registry; changes within NBFI With respect to the ongoing contracts, the status; NBFI own funds; supervision of NBFI payment services providers have the obligation exposures; organization and internal control, the to ensure the compliance of the contract with administration of significant risks, as well as the the provisions of GEO 113/2009 within 45 days performance of internal audit. as of its entering into force. GEO 113/2009 entered into force on November 1st, 2009. NBR amends the regulatory framework regarding payment institutions Issuer: National Bank of Romania (“NBR”) NBR issued Regulation no. 21/2009 regarding NBR amends the current legal framework payment institutions (“Regulation 21/2009”) regarding non banking financial institutions which was published in the Official Gazette no. 735/ 29.10.2009, being able to be accessed NBR issued Regulation no. 20/2009 regarding here. non-banking financial institutions (“Regulation 20/2009”) which was published in the Official Further to the recent entry into force of the GEO Gazette no. 707/21.10.2009 and may be 113/2009 which sets forth that the payment accessed here. The main provisions of Regulation services shall only be provided by payment 20/2009 refer to: institutions authorized by NBR, the said authority issues the Regulation 21/2009 setting forth the Registration of Non Banking Financial Institutions conditions which must be met by an undertaking (“NBFI”) in order to be authorized as a payment institution along with changes in the activity of Regulation 20/2009 details the legal such institution that requires NBR prior approval. requirements and the documentation necessary for the registration of NBFI with the General, The most important new elements brought by Special or Evidence Registries. Regulation 21/2009 are described below as follows: Prudential requirements Authorization process Regulation 20/2009 provides a set of prudential requirements applicable to NBFI in relation to: Among the conditions to be observed by the the computation of own funds and their entity requesting to be authorized as a payment minimum level; the maximum limits of institution we underline: exposures; the general framework regarding the organization, internal control and audit as well  to have an initial share capital between EUR as administration of significant risks. 20.000 and EUR 125.000, depending on the rendered payment services; Financial Services Industry Monthly Bulletin 5
  6. 6.  to have as business scope of activity only  Opening of branches within third party payment services that shall effectively be countries; performed;  Outsourcing important operational services  shareholders and the persons responsible in connection with the payment services. for leading and managing the activity to have a good reputation and an adequate NBR repeals the norms for the application of Law knowledge related to the nature, extension no. 289/2004 regarding the legal regime for and complexity of its activity. consumer credits for individual consumers NBR issued Order no. 8/2009 repealing NBR’s Furthermore, Regulation 21/2009 obliges the Order and of the president of the National undertakings which provide payment services Authority for Consumers Protection no. upon the date when Payment Ordinance entered 2/231/2005 on the approval of Norms for into force to apply for an authorization with NBR implementing Law no. 289/2004 regarding the until December 31st, 2010. legal regime of consumer credit contracts for Changes within the activity of a payment individual consumers. The above mentioned institution Order was published in the Official Gazette no. 675/08.10.2009. Regulation 21/2009 provides also some changes in the activity of a payment institution which are NBR’s Circular no. 36/2009 regarding the level of subject to the prior approval of NBR such as: the reference interest rate applicable in October 2009, namely 8.5 % per year  Amendment of the business scope of The above mentioned Circular was published in activity; the Official Gazette no. 648/1.10.2009 and may be accessed here.  Change of the persons responsible for leading and managing the payment services activity; 6
  7. 7. Issuer: Insurance Supervision Commission (“ISC”) ISC amends the current regulatory framework regarding the Insurance Pool against Natural Disasters ISC issued Order no. 20/2009 for the amendment of the Norms regarding the Insurance Pool against Natural Disasters as approved through ISC’s Order no. 17/2009. The above mentioned Order was published in the Official Gazette no. 691/14.10.2009 and may be accessed here Financial Services Industry Monthly Bulletin 7
  8. 8. PPSSC amends the current regulatory framework regarding the threshold applicable to the investments made by voluntary pension funds in Issuer: Private Pension System Supervision treasury bills Commission (“PPSSC”) PPSSC issued Decision no. 25/2009 for the PPSSC amends the current regulatory framework approval of Norm no. 17/2009 for the regarding the threshold applicable to the amendment of Norm no. 23/2008 for the investments made by privately administered temporary amendment of the threshold pension funds in treasury bills applicable to the investments made by voluntary pension funds in treasury bills and approved PPSSC issued Decision no. 24/2009 for the through PPSSC’s decision no. 39/2008. approval of Norm no. 16/2009 for the amendment of Norm no. 22/2008 for the The above mentioned decision was published in temporary amendment of the threshold Official Gazette no. 693/15.10.2009 and may be applicable to the investments made by privately accessed here. administered pension funds in treasury bills and approved through PPSSC’s decision no. 38/2008. The above mentioned decision was published in Official Gazette no. 693/15.10.2009 and may be accessed here. 8
  9. 9. NSC confirmed the possibility of executing transactions outside a regulated market or an alternate transaction system Issuer: National Securities Commission (“NSC”) NSC issued the decision nr. 203/28.10.2009 NSC amends the current legal framework regarding the registration of groups confirming the possibility to execute transactions outside a regulated market or an alternate NSC enacted Order no. nr. 55/2009 for the transaction system for financial instruments not approval of Instruction no. 5/2009 for the admitted to be transacted on a regulated market amendment of Instruction no. 11/2005 and/or sold in an alternate transaction system regarding the registration of groups with NSC. within Romania or on RASDAQ market. The above mentioned Order was published in Official Gazette no. 737/ 29.10. 2009. The text Moreover, it is expressly provided that the of the above mentioned Instruction may be mechanisms based on which the above accessed here mentioned transactions are carried out do not fall under the provisions of Law no. 297/2004 NSC amends the current legal framework regarding capital markets. regarding the income of the institution The text of the above mentioned decision can be NSC enacted Order no. 54/2009 for the approval accessed here of Regulation no. 7/2009 for the amendment of Regulation no. 7/2006 regarding the incomes of NSC. The above mentioned Order was published NSC decided through decision no. in Official Gazette no. 736/29.10.2009 and may 1501/20.10.2009 that the evaluation report be accessed here based on which the price within a mandatory takeover offers is determined shall be made NSC suspends the application of certain available to the shareholders in the same provisions of Regulation 1/2006 regarding conditions as the offer itself issuers and operations with securities The above mentioned decision can be accessed NSC decided through Decision no. 16/2009 that here the application of Article 69 (1), (2) and (4) of Regulation no. 1/2006 regarding issuers and Other individual acts issued by NSC which may operations with securities, referring to the present interest to the participants to the capital professional and independency conditions market evaluators must met, is suspended until the entering into force of the amendments of NSC’s  Ordinance no. 587/22.10.2009 regarding regulations regarding independent evaluators. the evaluators’ obligation to act impartially The text of the above mentioned decision can be  Decision no. 1511/22.10.2009 regarding accessed here the computation of the value of the stocks NSC decided to forbid the execution of based on income approach contractual relationships between authorized entities and the persons sanctioned with a  Decision no. 1512/22.10.2009 regarding misdemeanor and to whom the complementary the computation of the value of the stocks measure of forbidding to carry out their activities based on income approach was applied NSC decided through Decision no. 1522/26.10.2009 that authorized entities, regulated and supervised by NSC cannot enter into contractual relationships regarding specific activities related to capital market which implies performance from persons being under the provisions of Article 273 (1) letter (c) point 3 of Law nr. 297/2004 regarding capital markets, namely which have been sanctioned with a misdemeanor and to whom the complementary measure of forbidding to carry out their activities was applied. The text of the above mentioned decision can be Financial Services Industry Monthly Bulletin 9 accessed here
  10. 10. Issuer: Romanian Government From a VAT perspective, the Fiscal Code implements the new rules adopted by the EU Romanian Government issued Ordinance no. with regard to the place of taxation of services. 109/2009 for amending and completing the The main rule for services rendered to taxable Fiscal Code. Those amendments will enter into force starting 1 January 2010. persons is that the place of taxation shall be the place where the beneficiary has established its The above mentioned Ordinance was published business or has a fixed establishment to which in the Official Gazette no. 689/13 October 2009. the services are rendered. For companies operating in the financial sector, The financial-banking institutions and insurance the deadline for submitting the corporate companies will have new reporting requirements income tax returns is modified, as follows: for services acquired from suppliers established in EU, which are taxable in Romania through a - Taxpayers (except for the banks) that reverse-charge mechanism. finalize until 25 February the closing of the previous financial year shall submit the annual Also, as a consequence of the new rules, the corporate income tax return by 25 February. financial institutions not registered for VAT purposes (e.g. insurance companies) will have to - The deadline for submitting the annual register in this respect for acquisitions of services corporate income tax return is set to 25 April from EU companies. (banks included). Recently, the European Court of Justice decided The deadline for paying the withholding tax on that the transfer of life reinsurance portfolio is dividends which were not paid until the end of subject to VAT (case C-242/08). An aspect that the year has been extended until 25 January of deserves a closer consideration is whether this the following year. decision may be extended to the financial transactions (e.g. transfer of loan portfolio). The deadline for submitting of the annual However, an automatic extension of this decision withholding declaration concerning the to other transactions is not likely, as each computation and withholding of tax was transaction has different characteristics and even extended to 30 June of the following year. the scope of the VAT exemption is different. In case of companies operating in the financial sector that have as shareholders pension funds, as defined in the legislation of the European Union member states, interest and / or dividends paid to such funds are exempt from withholding tax in Romania. 10
  11. 11. Financial Services Industry Monthly Bulletin 9
  12. 12. European Union amends the regulatory European Council amends the regulatory framework regarding cross border payments framework regarding the collection of statistical information by the European Central Bank European Parliament and the Council adopted Regulation (EC) No 924/2009 as of 16 European Council adopted Regulation (EC) no. September 2009 on cross-border payments in 951/2009 as of 9 October 2009 amending the Community and repealing Regulation (EC) Regulation (EC) no. 2533/98 concerning the No 2560/2001 collection of statistical information by the European Central Bank. The said Regulation was published in Official Journal of the European Union no. The above mentioned Regulation was published 266/9.10.2009 and may be accessed here in the Official Journal of the European Union no. 269/14.10.2009 and may be accessed here European Union amends the regulatory framework regarding electronic money Commission notice on current State aid recovery institutions interest rates and reference/discount rates for 27 Member States applicable as of October 1st European Parliament and the Council adopts 2009. Directive 2009/110/EC as of 16 September 2009 on the taking up, pursuit and prudential The said notice was published in the Official supervision of the business of electronic money Journal of the European Union no. institutions amending Directives 2005/60/EC and 236/1.10.2009 and may be accessed here 2006/48/EC and repealing Directive 2000/46/EC. The above mentioned Directive was published in the Official Journal of the European Union no. 267/10.10.2009 and may be accessed here 12
  13. 13. 12
  14. 14. Proposal for a Regulation regarding the use of advanced evaluation approach and the approval Proposal for a norm for the amendment of NBR’s of such approach by credit institutions for the Norm no. 26/2006 regarding statistical reporting operational risk of the data necessary for drafting the payment balances The above mentioned proposal is now available for public discussions, with any comments being The above mentioned proposal is now available able to be send until 20.11.2009 and may be for public discussions, with any comments being accessed here able to be send until 15.11.2009 and may be accessed here 14
  15. 15. Proposal for Norms regarding the professional qualification and continuous training of Proposal for an Order for the approval of the insurance brokers accounting regulations applicable to insurance, insurance – reinsurance and reinsurance The above mentioned proposal may be accessed companies here The above mentioned proposal may be accessed Proposal for Norms regarding an unitary here professional development of the persons engaged within insurance filed The above mentioned proposal may be accessed here Financial Services Industry Monthly Bulletin 15
  16. 16. Proposal for a Norm for the amendment of Norm no. 11/2008 regarding the collection of Proposal for a Norm regarding reporting and individual contributions of the participants to the transparency obligations in the private private administered pension funds administered pension system The text of the above mentioned proposal may The text of the above mentioned proposal may be accessed here be accessed here Proposal for a Norm regarding the minimum Proposal for a Norm regarding the adhering and rentability of all private administered pension evidence of the participants to the private funds administered pension funds The text of the above mentioned proposal may The text of the above mentioned proposal may be accessed here be accessed here 16
  17. 17. Financial Services Industry Monthly Bulletin 15
  18. 18. European Commission has adopted additional Opinion of the European Central Bank of 29 legislative proposals to strengthen financial September 2009 on a proposal for a Council supervision in Europe Regulation on the introduction of the euro The European Commission has adopted on For further details please access the following 26.10.2009 additional legislative proposals to link further strengthen financial supervision in Europe, aiming to create a European System of Compendium Paper on the supervisory Financial Supervisors by establishing three new implementation practices across EU Member European Supervisory Authorities: European States of the Third Money Laundering Directive Banking Authority, European Insurance and For further details please access the following Occupational Pensions Authority and European link Securities and Markets Authority. The Federal Reserve, along with the other For further details please click here financial regulators of the Federal Financial Institutions Examination Council has adopted a The Commission proposes future policy actions policy statement on Prudent Commercial Real to strengthen the safety of derivatives markets Estate Loan Workouts The European Commission has adopted on For more details please click here 20.10.2009 a Communication for ensuring efficient, safe and sound derivatives markets. The Communication sets out future policy actions to increase transparency of the derivatives market, reduce counterparty and operational risk in trading. For more details, please click here 18
  19. 19. 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 Financial Services Industry Monthly Bulletin 9
  20. 20. 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
  21. 21. 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 168 000 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. © 2009 Deloitte Romania

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