Financial Services Newsletter No. 6/2011

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New Regulations in the Financial Sector

Statute of the Deposit Guarantee Fund in the banking system
(Order No. 1/2011 approving the Statute of the Deposit Guarantee Fund in the banking system published in the Official Gazette No. 499/July 13, 2011)

According to this Statute, the Fund has the purpose of guaranteeing deposits and carries out compensation payments to guarantee depositors. Also, the Fund can carry out other prerogatives for assuring the financial stability such as: financing of operations that imply transfer of guaranteed deposits, carrying out the activity of special administrator, interim administrator or liquidator of credit institutions, management of special compensation fund etc.

The Fund’s activity is harmonised with the provisions of Directive 94/19/EC on deposit-guarantee schemes and Directive 2009/14/EC amending Directive 94/19/EC on deposit-guarantee schemes as regards the coverage level and the payout delay. Also, the Fund aims at assuring conformity with the fundamental principle on good governance and international practice established by the International Association of Deposit Insurers together with the Basel Committee on Banking Supervision.

This order repeals the Order of the president of the Board of Directors of the Deposit Guarantee Fund in the banking system No. 1/2004 regarding the Statute of the Deposit Guarantee Fund in the banking system.

Regulation Issued by the National Bank of Romania (NBR)

Regulation regarding the institutions issuing electronic money
(NBR Regulation No. 8/2011 regarding the institutions issuing electronic money published in the Official Gazette No. 508/July 18, 2011)

This regulation applicable to institutions issuing electronic money, Romanian legal persons establishes the rules on the setting up of these institutions, carrying out their activity and their prudential supervision.

Among the provisions of this regulations the following should be mentioned: (i) requirements and documentation that has to be submitted to the NBR for the authorisation of institutions issuing electronic money; (ii) establishing the necessary own funds and their structure; (iii) the conditions for carrying out crediting activity; (iv) measures for protecting the funds received in exchange of electronic money; (v) the procedures for notifying the NBR on the modifications that might appear in the status of institutions issuing electronic money (i.e.: supplementing the scope of business, replacing the persons responsible for the management and administration of activity of issuing electronic money, opening of branches in third countries, outsourcing material operational functions etc.); (vi) reports that have to be carried out by institutions issuing electronic money.

This regulation transposes the provisions of Article 2 point 4, Article 3 paragraphs (1) – (3), Article 4, Article 5 paragraphs (1), (3), (4), Article 7 paragraph (2) of Directive 2009/110/EC 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.

Regulation amending and supplementing certain legislation regarding institutions issuing electronic money
(NBR Regulation No. 7/2011 amending, supplementing and repealing certain legislation published in the Official Gazette No. 510/July 19, 2011)

According to this amendment the following provisions apply also to institutions Romanian legal persons issuing electronic money: (i) NBR Regulation No. 3/2007 on the limitation of credit risk for natural persons’ credits, as further amended and supplemented; (ii) NBR Regulation No. 9/2008 on know your customer in order to prevent money laundering and terrorism financing, as further amended; (iii) NBR Regulation No. 28/2009 on the supervision of the application of international sanctions regarding funds blocking; (iv) NBR Regulation No. 3/2009 regarding credit and placements classification, as well as establishing, settling and use of specific credit risk provisions, as further amended and supplemented.

With respect to NBR Regulation No. 11/2007 on the authorisation of credit institutions, Romanian legal persons, and of branches in Romanian of third countries credit institutions: (i) it introduces a new provision regarding minimum information that have to be mentioned by banks when describing the activities they are to accomplish during the first 3 years of activity in case they carry out certain electronic money issue; (ii) it repeals Chapter V on the “Authorisation of institutions issuing electronic money, Romanian legal persons” and the provision regarding the limitation of the scope of business of branches of third country institutions issuing electronic money.

It also repeals: (1) NBR Norm No. 14/2003 regarding the investments carried out by institutions issuing electronic money; (2) references to institutions issuing electronic money of Article 1 paragraph (1) of NBR Regulation No. 6/2008 on the inception of activity and amendment of the status of credit institutions, Romanian legal persons, and branches in Romania of third country credit institutions.

Regulation Issued by the Romanian National Securities Commission (NSC)

Modification of Instruction on semi-annual accountancy reporting system
(Instruction No. 5/2011 amending Instruction No. 5/2006 regarding the semi-annual accountancy reporting system of entities authorised, regulated and supervised by the National Securities Commission published in the Official Gazette No. 536/July 29, 2011)

According to this amendment, the semi-annual accountancy reports of entities authorised, regulated and supervised by the NSC will have to be drawn up by the entities observing the provisions of Regulation No. 4/2011 on Accountancy Regulations according to ECC Directive No. IV applicable to entities authorised, regulated and supervised by the NSC.

Also, the provision by which companies admitted to trading that had a duty to draw up and submit to the NSC, within at most 2 months from the end of the reporting period, semi-annual accountancy reports according to the order of Economy and Finance Ministry for the approval of the semi-annual accountancy reporting system for economic operations is repealed.

Ruling regarding public offers to sell certain shares owned on behalf of the State
(NSC Ruling No. 10/06.07.2011 published on the NSC Bulletin No. 27/2011)

According to this ruling, until December 31, 2011, in case of public offers to sell certain shares owned by a public institution on behalf of the Romanian State, the level of the regularisation quota from the value of the public offer to sell, as established at point 3 letter a) of the Annex to the NSC Regulation No. 7/2006 on the National Securities Commission revenues, is of 0.35%.

Ruling regarding the distribution in Romania of stock units issued by member states UCITS 
(NSC Ruling No. 11/26.07.2011 published in the NSC Bulletin No. 30/2011)

According to this ruling until the transposition into national legislation of the provisions of Directives 2009/65/EC, 2010/43/EU and 2010/44/EU the applicability of the provisions of Instruction No. 5/2007 regarding the notification procedures for member states collective investment undertakings in transferable securities (UCITS) is suspended.

During the suspension of the instruction an intermediary procedure is established regarding the documents that have to be transmitted to the NSC by the authority in the home member state of the UCITS.

The UCITS distributing stock units in Romania have a duty to provide investors in Romania with all the information and documents that they have the duty to provide to investors in the home member state. Relevant information on the distribution of stock units shall be published in English on the NSC website.

In case of amendments to the information regarding the means of distribution or of a category of shares/fund units that are distributed, the UCITS have to transmit the NSC a written notification before these become applicable.

Modification of the Bucharest Stock Exchange Code
(NSC Decision No. 710/26.07.2011 published in the NSC Bulletin No. 30/2011)

Among the important amendments of the Code set up by this decision the following should be mentioned: (i) introduction of rules regarding: (1) admittance, (2) maintaining (including the International category) and (3) trading of financial instruments (fond units or shares) issued by a collective investment undertaking that has as investment policy objective the replication of a recognised index on shares or credit instruments performance (called tradable UCITS or ETF – Exhange Traded Funds); (ii) introduction and/or amendment of certain definitions, such as: liquidity provider, reference price, unitary value of net asset, initial market, entity responsible for covering also the elements related to tradable UCITS).

Insurance

Modification of the Norms regarding the principles to set up an internal control and risk management system and organising and carrying out the internal audit activity
(ISC Order No. 12/2011 amending and supplementing the Norms on the principles to set up an internal control and risk management system, as well as organising and carrying out the internal audit activity with insurers/reinsurers, approved by Insurance Supervisory Commission President Order No. 18/2009 published in the Official Gazette No. 506/July 18, 2011)

Among the important amendments the following provisions should be mentioned: (i) the management of the insurer/reinsurer remains responsible for the outsourced activities and the risks associated to outsourcing; (ii) the duty to always have available an adequate alternative competence system which will allow the taking over of direct control over outsourced activities; (iii) the duty to present the Insurance Supervisory Commission (ISC) with the adequate documentation for analysis in order to approve the outsourcing; (iv) the duty to draw up an annual report regarding the reinsurance program used for the assigned risks.

The amended provisions regarding the outsourcing of certain activities carried out by insurers/reinsurers shall enter into force beginning with January 1, 2012.

This order repeals the Insurance Supervisory Commission President Order No. 7/2011 amending and supplementing the Norms on the principles to set up an internal control and risk management system, as well as organising and carrying out the internal audit activity with insurers/reinsurers.

Order for the application of the Accountancy Reporting System on June 30, 2011
(ISC Order No. 13/2011 for the application of the Accountancy Reporting System on June 30, 2011 of insurance, insurance – reinsurance and reinsurance companies, as well as insurance and/or reinsurance brokers published in the Official Gazette No. 539/July 29, 2011)

These provisions apply to: (i) insurance Romanian legal persons, (ii) branches or subsidiaries of a third country insurer, (iii) branches of an insurance company or a mutual company from a member state that received an authorisation from the competent authority in the home member state, (iv) reinsurers, legal persons authorised according to law by ISC or the competent authority in the home member state, (v) insurers and/or reinsurers brokers Romanian legal persons, (vi) intermediaries from a member state carrying out intermediation activity on Romanian territory and (vii) companies authorised according to Law No. 32/2000 on insurance and insurance supervision, as further amended and supplemented, that have a duty to draw up and submit accountancy reporting as of June 30, 2011.

Accountancy reports on June 30, 2011 had to be drawn up according to the provisions of the Accountancy Regulations according to specific insurance European Directives, approved by ISC President Order No. 3129/2005, as further amended and supplemented, applicable together with the provisions of Accountancy Law No. 82/1991, republished, as further amended and supplemented.

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