Financial Services Newsletter No. 5/2011

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NEW REGULATIONS IN THE FINANCIAL SECTOR

Regulation on the establishment, declaration and payment of annual and additional contributions to the Deposit Guarantee Fund in the banking system

(Regulation No. 3/2011 on the establishment, declaration and payment of annual and additional contributions to the Deposit Guarantee Fund in the banking system published in the Official Gazette No. 386/June 2, 2011)
According to this regulation the credit institutions, Romanian legal persons have a duty to participate in the establishment of financial resources of the special fund for indemnification by paying an annual contribution until June 30 at the latest each year and to report to the Fund the value of the passive not guaranteed.

In case the financial resources accumulated with the special fund for damages are not sufficient to pay the damages, each credit institution, Romanian legal person shall pay an additional contribution.

Law regarding the activity of issuing electronic money

(Law No. 127/2011 regarding the activity of issuing electronic money published in the Official Gazette No. 437/June 22, 2011)
This law establishes: (i) the conditions to have access to the activity of issuing electronic money and carry out this activity, (ii) the conditions to carry out the activity of providing payment services through institutions issuing electronic money, (iii) prudential supervision of institutions issuing electronic money and (iv) the conditions regarding the redemption of electronic money.

According to this regulation the activity of issuing electronic money can be carried out by: (i) credit institutions; (ii) institutions issuing electronic money; (iii) postal services providers that issue electronic money; (iv) the European Central Bank and central national banks, when they do not act in their capacity of monetary authorities or in any other quality involving the exercise of a public function; (v) member states and regional or local authorities, when these act in their capacity of public authorities.

Among the important provisions of this law the following should be mentioned: (i) institutions issuing electronic money are forbidden to receive deposits or other reimbursable funds from the public; (ii) these have to continuously dispose of own funds corresponding to the necessary amount determined according to the regulations issued by the NBR; (iii) the funds received in exchange of electronic money must be protected by being evidenced and kept separately from funds destined to activities carried out by the institutions issuing electronic money and deposited in a separate account with a credit/investment institution in very good quality assets when the electronic money were not redeemed on the day following their reception, or by an insurance policy or other comparable guarantee for an amount equivalent to the one that has to be evidenced and stored separately; (iv) total or partial outsourcing of the issuance of electronic money is forbidden; (v) the NBR shall organise and administer the registry of institutions issuing electronic money; (vi) the issuers of electronic money have to issue electronic money for a value equivalent to that of funds received; the electronic money can be issued before receiving the funds in case the payment of the equivalent value is carried out through a payment instrument; (vii) the issuers have a duty to redeem the electronic money at the holder’s request, at any moment, free of charge and at par value.

This law transposes certain provisions of Directive 2009/110/CE on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC.

REGULATIONS ISSUED BY THE NATIONAL BANK OF ROMANIA (NBR)

Regulation on the position of persons registered with the Central Credit Register of payment institutions

(NBR Regulation No. 5/2011 on the position of persons registered with the Central Credit Registry of payment institutions published in the Official Gazette No. 400/June 8, 2011)
According to this regulation payment institutions have a duty to report to the Central Credit Register within 6 months from the date the NBR established they register a significant level of credit activity. If after 3 reporting periods the NBR establishes that the payment institution does not register a significant level of credit activity, it shall lose its position of persons reporting with the Central Credit Registry.

Modification of Regulation on the use of advance valuation approach for operational risk

(NBR Regulation No. 6/2011 amending and supplementing NBR Regulation No. 25/2009 on the use of advance valuation approach and the approval for credit institutions to use this approach for operational risk published in the Official Gazette No. 438/June 22, 2011)
By this amendment tree more sub-sections are added to section “Insurance to operational risk and other mechanisms for transferring this risk”: 1) general requirements regarding operational risk transfer techniques, 2) specific requirements for the use of insurance contracts for operational risks and 3) specific requirements for the use of other operational risks transfer mechanisms.

Methodological norms on the drawing up of periodic reports regarding statistical financial and accountancy information

(NBR Order No. 2/2011 approving the Methodological norms on the drawing up of periodic reports regarding statistical financial and accountancy information, applicable to Romanian branches of credit institutions from other member states published in the Official Gazette No. 418/June 15, 2011)
According to these norms Romanian branches of credit institutions from other member states have to draw up periodical reports including statistical financial and accountancy information and to send them to the NBR in hard copy format and through the IT reporting system.

With the entrance into force of this order the NBR Order No. 14/2008 approving the Models of the periodical reports including statistical financial and accountancy information and the methodological norms regarding the drawing up and use of this models, applicable to Romanian branches of credit institutions from other member states is repealed, as well as any other contrary provisions.

Methodological norms regarding the drawing up of FINREP financial statements at individual level

(NBR Order No. 3/2011 approving the Methodological norms regarding the drawing up of FINREP financial statements at individual level, according to International Financial Reporting Standards, applicable to credit institutions for prudential supervisory reasons published in the Official Gazette No. 418/June 15, 2011)
According to these norms credit institutions, Romanian legal persons, and Romanian branches of credit institutions with headquarters in a third country have the duty to draw up FINREP financial statements at individual level beginning with the 2012 fiscal year. These must be sent to the NBR through the IT reporting system and in hard copy form to the Supervisory Department of the NBR.

With the entrance into force of this order NBR Order No. 13/2007 regarding FINREP financial statements at individual level, applicable to credit institutions is repealed.

Order on the functioning of TARGET2 payment system

(NBR Order No. 4/2011 on the functioning of the TARGET2-Romania payment system published in the Official Gazette No. 443/June 24, 2011)

This order establishes: (i) the functioning rules for TARGET2-Romania payment system, part of the Trans-European real-time gross settlement express transfer system; (ii) provisions regarding the granting of intraday credit; and (iii) the settlement procedures for auxiliary systems.

The functioning rules are applicable to participants in the TARGET2-Romania payment systems that concluded a participation agreement to the NBR system.

Beginning with the moment Romania becomes a member of the Eurosystem, the NBR will be able to grant TARGET2-Romania participants intraday credit and offer liquidity aggregation models according to the TARGET2-Romania functioning rules.

Order designating the systems that fall under the provisions of the Law on final effect of settlement

(NBR Governor Order No. 637/2011 designating the systems that fall under the provisions of Law No. 253/2004 on the final effect of settlement within payment systems and financial instruments operations clearing systems published in the Official Gazette No. 443/June 24, 2011)
According to this order the following fall under the provisions of the Law No. 253/2004 on the final effect of settlement within payment systems and financial instruments operations clearing systems: (i)NBR’s ReGIS system, (ii) NBR’s TARGET2-Romania system, (iii) TRANSFOND’s SENT system assuring the funds settlement, (iv)NBR’s SaFIR system assuring the clearing of operations with financial instruments, (v) Central Depository’s RoClear system, clearing and settlement system for financial instruments, (vi) the clearing and settlement system for transactions with derivative financial instruments of Sibiu Romanian Compensation House, (vii) the clearing and settlement system for transactions with derivative financial instruments of Bucharest Compensation House and (viii) Sibex Depository’s DSClear system, clearing and settlement system for operations with financial instruments.

With the entrance into force of this order (July 4, 2011) the NBR Governor Order No. 34/2008 designating the system that fall under the provisions of Law No. 263/2004 on the final effect of settlement within payment systems and financial instruments operations clearing systems is repealed.

REGULATIONS ISSUED BY THE NATIONAL SECURITIES COMMISSION (NSC)

Instruction on the registration and crossing off of securities from the NSC evidences

(Instruction No. 4/2011 on the registration and crossing off of securities form the NSC evidences to be published in the Official Gazette)
This instruction establishes the legal framework applicable to registration and de-registration of securities from the NSC records.

The instruction mentions the categories of securities and financial instruments mandatory to be registered with NSC.

According to this instruction, the entities whose securities were subject of a public offer to sell prospectus, approved by the NSC, but which are not traded on capital markets shall: (i) be registered and maintained in the NSC evidences for a period of 2 years; (ii) have to make available to public and communicate to the NSC within a 5 months period from the end of the financial year, an annual report according to Article 1121 of NSC Regulation No. 1/2006 on issuers and operations with securities; (iii) the financial instruments will be mandatorily deposited with the authorised central depository; (iv) pay an annual fee for maintaining the securities with the NSC according to NSC Regulation No. 7/2006 on the NSC revenues.

The registration with the NSC shall be maintained for shares that were withdrawn from trading on the capital market following a decision of an extraordinary meeting of shareholders, but with respect to which there are pending litigations in courts.

At the entrance into force of this instruction and until the modification of NSC regulations, the applicability of provisions of Article 100 paragraph (3), Article 104 and Article 106 of NSC Regulation No. 1/2006 is suspended. Also, any contrary provision is repealed.

Ruling regarding the initiation of a public offer to sell

(NSC Ruling No. 7/01.06.2011 published in the NSC Bulletin No. 22/2011)
According to this ruling the public offer to sell can be initiated after at least 2 business days from the date the offering notice was published, following the approval by the NSC of the prospectus/offer document.

Until the modification of NSC Regulation No. 1/2006 on issuers and operations with securities the applicability of the provisions of Article 30 regarding the timeframe in which the offer may be initiated is suspended.

Ruling regarding the applicability of the provisions of the Regulation on the NSC revenues

(NSC Ruling No. 8/09.06.2011 published in the NSC Bulletin No. 23/2011)
According to this ruling the provisions of the NSC Regulation No. 6/2007 on NSC revenues, as republished, regarding the minimum level of the quota perceived by the NSC, calculated from the total value of the offer to sell provided for in the prospectus, and its payment to the NSC account prior to submitting the offer documents (Article 6 paragraph (2)) is not applicable in case of public offers to sell shares held by a public institution, on behalf of the Romanian State.

Ruling on the applicability of International Financial Reporting Standards

(NSC Ruling No. 9/15.06.2011 published in the NSC Bulletin No. 24/2011)
According to this ruling until December 31, 2011 the applicability of Instruction No. 3/2011 regarding the applicability of International Financial Reporting Standards by entities authorised, regulated and supervised by the NSC is suspended.

Decision regarding the modification of Book I of Bucharest Stock Exchange Code

(NSC Decision No. 516/01.06.2011 published in the NSC Bulletin No. 22/2011)
Among these amendments the following should be mentioned: (i) negotiation of conditions according to which the Deal Transaction is carried out through Participants and the use of functions of the trading system of the BVB or other means; (ii) in case the negotiation was carried out through the BVB trading system, the Counterparty stock agents have the right to refuse the deal order received, and the Initiators have the possibility to retract the deal order received; (iii) if the negotiation was carried out outside the BVB trading system, the Initiator has to signal out this in a clear manner prior to send the deal order; (iv) the provision regarding the details with respect to deals management is modified; (v) a cross transaction results following the conclusion of a Deal Transaction through the same stock agent or of different stock agents trading on behalf of the same participant.

Decision on the modification of Procedure No. 1 regarding the members of the Investors Compensation Fund, establishment, declaration and payment of contributions

(NSC Decision No. 544/08.06.2011 published in the NSC Bulletin No. 23/2011)

Procedure No. 1 is applicable to the Fund’s members, respectively to intermediaries (investment firms, credit institutions, other entities providing financial services) and contains provisions regarding: (i) acquiring and putting an end to membership; (ii) contributions that members have to pay (i.e.: initially, annually, for administrative costs, special); (iii) transparency duties, respectively the publication of data for identifying the intermediaries on their own website, informing the investors/potential investors with respect to qualification in the investors category whose investments are compensated by the Fund, advertising materials, providing the Fund with information and documents regarding the investment services provided on behalf of the clients or with respect to the activity of individual clients’ portfolio management.

Decision to extend the time frame for carrying out the IT system audit for providing investment services and activities related to shares issued by Fondul Proprietatea

(NSC Decision No. 546/09.06.2011 published in the NSC Bulletin No. 23/2011)
According to this decision the time frame on which the intermediaries have a duty to carry out an audit of their IT system in order to provide investment services and activities regarding shares issued by S.C. Fondul Proprietatea S.A., in complying with the provisions of NSC Regulation No. 5/2010 on the observance of technical and operational conditions corresponding to the use of global accounts, is extended until November 16, 2011, for intermediaries to remedy the issues signalled out by the IT auditors.

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