June 2010 Financial Services Industry Monthly


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June edition of Financial Services Industry Monthly Bulletin – 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 prepares for you a summary of the latest legal, tax and regulatory developments relevant for banks, non-banking financial institutions, private pensions and capital markets in Romania. In addition, our bulletin updates you on the most recent changes and trends in the international financial services industry regulatory framework.

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June 2010 Financial Services Industry Monthly

  1. 1. June 2010
  2. 2.  Provisions with respect to commissions With respect to the commissions to be charged by credit institutions in relation to the consumer credits, GEO 520/2010 establishes the following: Romanian Government amends the current regulatory framework regarding the credit  the increase of the commissions, taxes, facilities for consumers costs, bank charges or other costs related to the credit agreement is prohibited, except The Romanian Government enacted the for those imposed by legislation (i.e. file Emergency Ordinance no. 520/2010 regarding analysis fee, administration credit fee or the credit facilities for consumers („GEO current account administration fee, early 520/2010”). Further to entry into force of the repayment fee, insurance costs, penalties, GEO 520/2010, provisions of Law no. 289/2004 or single commission for services provided regarding the legal regime of the credit facilities upon the consumer demand); for consumers - natural persons, shall be repealed.  in relation to the amounts drawn down, it is prohibited to charge a commission for the It is worth mentioning that the protection disbursement of the respective amounts; granted to the consumers through the provisions of GEO 520/2010 shall be also maintained in  in case that the facility is not granted, it is case that the law applicable to the agreement is forbidden to charge a file analysis fee. the law of a non-member state, if the credit facility is closely related to the territory of a  Early repayment fee member state. According to the provisions of GEO 520/2010, The most significant amendments brought the early repayment fee in relation to credit through the provisions of GEO 520/2010 are facilities having a variable interest rate is presented below: prohibited. In case of credit facilities having a fixed interest rate, the early repayment fee may  The withdrawal right of the consumer not exceed 1 %, if the period of time between the early repayment date and the maturity date In accordance with the provisions of GEO of the credit agreement exceeds one year, and it 520/2010, the consumer may withdraw from the may not exceed 0,5 % in case the mentioned credit facility, without giving any reason, within period of time does not exceed one year. 14 calendar days either as of the conclusion date of the credit agreement, or as of the day when The regulations regarding the early repayment the consumer is notified with respect to the shall be applicable to the leasing agreements amendments that the creditor envisages to bring which are subject to the provisions of GEO to the existing credit agreement. If the consumer 520/2010, further to the expiry of a12 months exercises his/her right of withdrawal, he/she will period as of their conclusion. pay to the creditor the principal or the amounts drawn down and the related accrued interest.
  3. 3.  Limitation of default interest rate amount  Assignment of the creditor's rights under the credit agreement In accordance with the provisions of GEO 520/2010, the default interest rate in case of late In the event that the creditor assigns its right payments cannot be 2 percentage points higher under the credit agreement or the credit than the interest rate to be paid in lack of such agreement itself, the assignor is obliged to notify delay, in case the consumer or his/her spouse is the assignment to the consumer within 10 days in one of the following situations: unemployed, as of the execution of the assignment agreement extended sick leave, divorced, death, decreased by registered mail with confirmation receipt. of the salary by at least 15% of its value. The assignee is requested to have a contact  Provisions concerning the amendment of person in Romania for the purpose of solving the credit facilities potential disputes and to be kept liable in front of the public authorities. In accordance with GEO 520/2010, there are prohibited the contractual clauses giving to the  Linked credit agreements creditor the right to unilaterally amend the contractual terms without the execution of an The GEO 520/2010 prohibits the execution of additional act agreed by the consumer. credit agreements having for object the acquisition of goods / services in the trading  In case of amendments requested by the spaces of such goods and / or services, even in applicable legislation, the lack of execution case such credit agreements would be executed of the additional acts by the consumer shall through the dealers of the goods and / or be deemed an implicit approval. In this services. case, the inclusion in the additional acts of provisions different to those requested by However, linked credit agreements are excluded the legislation are null by law; from the application of this interdiction. The linked credit agreement means a credit  In case of amendment of contractual terms agreement where the credit serves exclusively to regarding the costs, the creditor should finance an agreement for the supply of specific send to the consumers a notification with at goods or the provision of a specific service, and least 30 days prior to their application. The it is characterized by the fact that the two consumer has to notify its option within 15 agreements, facility and sale-purchase days as of receipt of the notification. The agreements, form a commercial unit from an lack of any answer from the consumer objective point of view. cannot be considered implicit acceptance of the new conditions and the agreement will GEO 520/2010 mentions that, where the goods remain unchanged. In case that the or services covered by a linked credit agreement consumer does not accept the new are not supplied, or are supplied only in part, or conditions, the creditor does not have the are not in conformity with the contract for the right to sanction the consumer or to supply thereof, the consumer shall have the right accelerate the credit; to pursue remedies against the creditor if the consumer has pursued his remedies against the  In case of the consumer's impossibility to supplier but has failed to obtain the satisfaction accept the amendment of the contractual to which he/she is entitled. In this case, the terms regarding the increase of interest, the creditor is jointly liable with the supplier with creditor does not have the right to respect to any remedies the consumer may unilaterally terminate the credit facility pursue against the supplier. without firstly proposing to the consumer a rescheduling or a refinancing of the facility, taking into account the consumer’s income, if such rescheduling / refinancing is possible according to internal regulations of the creditor.
  4. 4.  The competent authority for the application NBR amended the interest rates payable on of provisions of GEO 520/2010 minimum mandatory reserves For the application of the provisions of the GEO NBR issued Circular no. 19/2010 regarding the 520/2010, the consumers may refer to National interest rates payable on minimum mandatory Authority for Consumer Protection. In exercising reserves. The above mentioned Circular sets its attributions, National Authority for Consumer forth the interest rates payable on minimum Protection is entitled to apply fines in amount mandatory reserves during May 24 - June 23, between 10,000 lei to 100,000 Lei. In addition, 2010 as follows: the National Authority for Consumer Protection may also order: (i) immediately compliance of  2.02% per year for minimum mandatory the infringed contractual terms, (ii) reserves set up in RON; reimbursement of the amounts disbursed without legal basis, (iii) bringing the contract in  1.07% per year for minimum mandatory accordance with legal provisions and (iv) reserves set up in Euro; reparation of the deficiencies ascertained under the protocol.  0.99% per year for minimum mandatory reserves set up in U.S. dollars. GEO 520/2010 was published in the Official Gazette no. 389/11.06.2010 and will entry into The said Circular was published in the Official force within 10 days as of the publication date, Gazette no. 389/11.06.2010 and may be respectively on June 21, 2010. Within 90 days as accessed here. of its entry into force all the credit agreements in place should be amended in order to comply with the provisions of GEO 520/2010. MPF amended the regulatory framework regarding the implementation of “First house” programme NBR established the level of the reference interest rate for June 2010 MPF issued Order no. 1.814/2010 for the amendment of MPF’s Order no. 2.225/2009. The NBR issued Circular no. 18/2010 regarding the said order amends among others the template level of the reference interest rate valid for June convention for the guarantee of housing 2010. According to the above mentioned construction and was published in the Official Circular, the interest reference rate of NBR valid Gazette no. 407/18.06.2010. for June 2010 was 6.25% per year. The above mentioned Circular was published in the Official Gazette no. 360/01.06.2010 and may be accessed here.
  5. 5. ISC amended the regulatory framework PPSSC set the regulatory framework regarding regarding the activity of entities organizing the profitability rates of the privately managed unitary professional trainings for insurance pension funds personnel PPSSC adopted Decision no. 9/2010 for ISC enacted Order no. 6/2010 for the approving Norm no. 7/2010 regarding the implementation of the Norms regarding the profitability rates of the privately managed activity of entities organizing unitary professional pension funds. The above mentioned Decision was published in the Official Gazette no. training courses for insurance personnel. The 369/04.06.2010 and may be accessed here. above mentioned Order was published in the Official Gazette no. 417/22.06.2010 and may be accessed here. ISC amended the regulatory framework regarding the professional qualification and continuous training of the persons active in the distribution of insurance products NSC amended the regulatory framework regarding the certification of the professional ISC enacted Order no. 7/2010 for the training institutions, operators and specialists implementation of the Norms regarding the within capital markets professional qualification and continuous training of the persons active in the distribution NSC issued Order no. 36/2010 for the approval of insurance products. The above mentioned of Regulation no. 12/2010 regarding the Order was published in the Official Gazette no. certification of the professional training 417/22.06.2010 and may be accessed here. institutions, operators and specialists within capital markets. The above mentioned Order was published in the Official Gazette no. 404/17.06.2010 and may be accessed here. NSC amended the regulatory framework regarding the performance of public offers through the trading system of a market/system operator NSC issued Order no. 37/2010 regarding the approval of Instruction no. 2/2010 for the amendment of Instruction no. 3/2007 regarding the performance of public offers through the trading system of a market/system operator. The above mentioned Order was published in the Official Gazette no. 401/16.06.2010 and may be accessed here.
  6. 6. Romanian Government amended law no. 571/2003 regarding the Fiscal Code and other financial-fiscal measures. The Romanian government has enacted an Emergency Ordinance for the amendment of law no. 571/2003 regarding the Fiscal Code and other financial fiscal measures. We point out that starting 1 July 2010 income derived from deposits, current accounts and savings accounts received by individual residents in Romania and non-residents is taxable income. This income would be subject to a tax of 16%. New criteria were introduced for requalification of the independent activities as dependent, which it is possible to have as consequences the increase of the social securities contributions for certain persons. This requalification may have a very significant impact on the capacity of individuals for reimbursement of the credits obtained, especially when the tax authorities set up additional liabilities further to tax controls. The above mentioned law was published in the Official Gazette no. 431/28 June 2010 and can be accessed here.
  7. 7. The main provisions of the draft order  starting with financial year 2012, credit institutions will keep the accounts and will prepare the annual individual financial statements in accordance with IFRSs as NBR published a proposal of Regulation on adopted following the procedure set out in temporary holding of shares during an assistance Article 6(2) of the Regulation (EC) No. operation or financial restructuring of an entity 1606/2002 of the European Parliament and outside the financial sector. of the Council of 19 July 2002 on the application of international accounting For more information please access here. standards; Proposal of Order regarding the implementation  starting with January 1, 2012, credit of the International Financial Reporting institutions will organize and run the Standards by credit institutions as a basis for accounting in accordance with the IFRS accounting and preparation of individual annual provisions, the Accounting Law’s provisions financial statements as of the financial year 2012 and other applicable legal provisions, as well as with the regulations issued by the General objective and reasons for elaboration of National Bank of Romania for the the normative act implementation of this order. Implementation of International Financial The full text of the proposal may be accessed Reporting Standards in the banking sector is an here. objective set out both in the Report on the Observance of Standards and Codes– Proposal of Order amending NBR’s Order no. Accounting and Auditing – ROSC issued by the 13/2008 for the approval of Accounting World Bank in December 2008 and in the FSAP Regulations in accordance with European program (Financial Sector Assessment Program) directives applicable to credit institutions, non- issued by the International Monetary Fund and banking financial institutions and to the Fund for the World Bank in May 2009, as well as in the deposit guarantee in the banking system Letter of Intent signed in Bucharest on the 5th of February 2010 and approved by the Decision of General objective and reasons for elaboration of the International Monetary Fund’s Executive the normative act Board on the 19th of February 2010, whereby the National Bank of Romania and the Ministry The draft order is issued following the of Public Finance commit themselves to adopt recommendation of the Superior Council of towards the end of the program’s period the Accounting and Financial Reporting Council to necessary legal framework so as to achieve the adopt a unified framework in terms of comprehensive implementation of IFRSs starting accounting rules and treatments applied by with the beginning of 2012. entities covered by the regulation and supervision of the NBR for similar operations with those performed by the other economic operators. The draft order aims at implementing and tailoring of changes and additions made by the Ministry of Public Finance Order no. 3055/2009 for approval of accounting regulations according with European directives, to the extent they are applicable to institutions regulated and supervised by the National Bank of Romania.
  8. 8. The main changes and additions to existing Proposal of Regulation amending Regulation no. accounting rules (Order NBR no. 13/2008) by the 6/2008 regarding the changes in the situation of draft order, refer to the following issues the credit institution, Romanian legal entities and the Romanian branches of the third-country  inserting of provisions relating to the annual credit institutions financial statements’ users categories and the qualitative characteristics of these According to the provisions of the Article 108 of reports; the Government Emergency Ordinance no. 99/2006 on Credit Institutions and Capital  examples and additions to provisions on Adequacy, subsequently amended and general accounting principles; supplemented, each of the persons appointed to perform the administration and/or management  supplementing the provisions on valuation duties in a credit institution, as well as any of assets, liabilities and equity when person appointed to ensure middle management inventoried and on presenting these functions relative to the activities of a significant elements in balance sheet; importance, should be approved by the National Bank of Romania before starting the fulfillment  supplementing the provisions on of their tasks, according to the regulations accounting errors correction; issued.  change in accounting treatment for The draft regulation is aiming to amend the government grants; relevant provisions of the Regulation no. 6/2008 in order to expressly cover all cases when, due to  expanding the current provisions of the the changes in the credit institution’s internal accounting treatment for given and organizational structure or lines of received trade discounts; responsibilities, new persons are appointed to fulfill the referring tasks, or the persons already  specifying the factors which indicate approved by the National Bank of Romania are impairment of tangible and intangible assuming new responsibilities. In all of these assets; cases, according to the law, the National Bank of Romania’s prior approval is required.  separate accounting for tangible assets and inventories purchased, in case of which the The full text of the proposal can be accessed risks and benefits were transferred, but that here. are not yet received. The full text of the proposal can be accessed here.
  9. 9. CEBS revised consultation papers on settlement of OTC derivatives LMA amended coordinating committee letters On 23 June 2010, CEBS published a revised consultation paper on its draft guidelines on the On 17 June 2010, LMA published amended management of operational risk in market- versions of its coordinating committee letters. related activities. CEBS originally published the The letters govern the appointment of a guidelines in December 2009 but, following coordinating lender and coordinating committee feedback, has now revised them and launched a of lenders in connection with the refinancing of second consultation. The consultation period a borrower's bank loans. The above mentioned ends on 23 July 2010. letters may be accessed by LMA members here. The above mentioned guidelines can be accessed LMA published new netting agreements, here. termination and transfer agreements CEBS published on June 14, 2010 the On 30 June 2010, LMA published the following Implementation Guidelines on capital new documents: Multilateral Netting instruments referred to in Article 57 (a) of Agreement; Bilateral Netting Agreement; Directive 2006/48/EC recast. Bilateral Termination and Transfer Agreement; Termination Agreement. The above mentioned Implementation Guidelines can be accessed here. LMA also published updated versions of the following documents: Multilateral Termination & CEBS published on June 15, 2010 its Annual Transfer Agreement (Novation); Secondary Report for 2009. Trading Documentation User Guide. More details may be accessed by LMA members here. The mentioned report may be accessed here. CEBS initiated on June 17, 2010 a public consultation on several amendments to the Guidelines on Common Reporting. The mentioned amendments may be accessed EPCEMA recommends legislation on cross- here. border insolvency or "crisis management" for banks CEBS published on June 11, 2010 its report on national implementation of CEBS’s high-level On 28 June 2010, EPCEMA passed a request to principles for remuneration policies. the European Commission to draft a legislative framework creating a common insolvency The said report may be accessed here. regime for financial institutions operating across borders within the European Union. The motion CEBS published on June 30, 2010 two follow-up follows a consultation process that began on 20 reports setting out the outcome of its efforts in October 2009 on crisis management in the assessing banks’ disclosures. banking sector. For more details, please access here. For more information please access here.
  10. 10. EC initiated on June 14, 2010 a consultation on the options to be be considered for a CEIOPS released on June 29, 2010 the half- forthcoming legislative proposal dealing with yearly report on the financial conditions and potential risks from short selling. stability of the insurance and occupational For further information please access here. pension fund sector in the EU/EEA covering developments in the insurance, reinsurance and EC initiated on June 14, 2010 a public occupational pension fund markets for recent consultation on derivatives and market years. infrastructures. For more information about the press release The mentioned consultation may be accessed please access here. here. EC has published on 25 June, 2010, a consultation paper on the review of the Market Abuse Directive. For more details please access here. On 17 June 2010, the European Parliament approved, with amendments, the Commission's proposal to amend the Prospectus Directive ( 2003/71/EC). The proposal still has to be passed by the rest of the EU legislature before the Prospectus Directive is amended. For more information please access here.
  11. 11. 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.). For more details on our services and credentials in the FSI sector, please click here 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
  12. 12. George Mucibabici Chairman tel: + 40 21 207 52 55 e-mail: gmucibabici@deloittece.com Audit Ahmed Hassan Partner tel: + 40 21 207 52 60 e-mail: ahhassan@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 Daniel Petre Manager tel: + 40 21 207 54 44 e-mail: dpetre@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
  13. 13. 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