Financial Services Newsletter No. 8/2011

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Regulations Issued by the National Authority for Consumers’ Protection (NACP)

Mandatory information to be provided to consumers by the financial banking and non-banking companies

(The National Authority for Consumers’ Protection Order no. 164/August 30, 2011, published in the Official Gazette no. 620/ September 1, 2011).

The National Authority for Consumers’ Protection (NACP) issued an order according to which the financial banking and non-banking companies have the following obligations towards consumers:

• To display information regarding consumer rights and obligations, financial terminology and other information provided by the NACP, inside the units, in a visible place and on a video format.

• To provide a continuous scrolling display that will run information concerning pricing of financial products such as: current account administration fee, at the counter or at the ATM withdrawal fee, deposit fee or deposit interest.

These provisions shall not apply to credit unions and pawn shops.

This piece of legislation will enter into force as of January 1st, 2012.

Regulation Issued by the Romanian National Securities Commission (NSC)

Intermediaries may grant their clients direct electronic access to a regulated market or an alternative trading system

(NSC Ruling no. 19/29.11.2010, published in the NSC Gazette no. 47/2010).

In accordance with this Ruling an intermediary can grant a client direct electronic access to a regulated market or to an alternative trading system through an automatic order control system, if certain conditions are met.

It should be noted that granting direct electronic access to a client would only be possible if the rules of the regulated market or of the alternative trading system allow it and if their trading systems are compatible with those of the intermediary.

The provisions entered into force as of September 30th, 2011, but they are suspended until March 31st, 2012.

The application of certain rules issued by NSC was suspended

(Ruling no. 12/2011, published in the NSC Gazette no. 39/2011.)

Under the amendments, the application of the provisions on auditing systems used by entities authorized, regulated and supervised by NSC (NSC Instruction no. 2/2011) is suspended until March 31, 2012 as well as granting intermediaries’ clients direct electronic access to a regulated market or an alternative trading system

Ruling no 19/29.11.2010 will also be suspended until March 31, 2012.

The audit reports submitted to the RNSC under the now suspended provisions remain valid.

These provisions have entered into force as of September 27, 2011.

Regulation Issued by the National Bank of Romania (NBR)

Repealing NBR regulations on the supervision of foreign exchange positions of banks 

(NBR Norm no. 1 / 2011 to repeal NBR Norm no. 4 / 2001 on the supervision of foreign exchange positions, published in Official Gazette no. 677/23 September 2011).

According to the rule issued by the NBR, NBR norm no. 4/2001 on the supervision of foreign exchange positions of banks shall be repealed as of 1 January 2012.

Regulation on the classification of loans and placements, and for determining and applying prudential value adjustments

(NBR Regulation no. 11/2011 regarding the classification of loans and placements, and for determining and applying prudential value adjustments, published in Official Gazette no. 684/September 27, 2011.

The regulation issued by the NBR applies at individual level, to credit institutions, Romanian legal persons and branches in Romania of credit institutions from third countries and which for the exposure of credit/placements determines minimum capital requirements for credit risk, at individual level.

General provisions mainly includes: (a) Classification of exposures in loans/placements; (b) Determination of prudential value adjustments on the classified loans/ placements.

In order to become applicable, internal rules established following this regulation must be validated by NBR – Surveillance Directorate.

The provisions regarding the methodology for the classification of loans and investments and for the determination and use of prudential value adjustments will enter intro force as of January 1, 2012. Until the enforcement date, borrowers will need to seek validation from the NBR Supervision Department in order to enforce the regulation under the internal rules.

Lenders shall report periodically to the NBR, on the situation regarding the implementation of the regulation and any other case concerning the application of regulation if it is requested by the NBR.

Form and content of the reports as well as the frequency and the means of transmission of the reports to NBR will be established by NBR order.

The provisions of this regulation are in force as of October 1st, 2011and have repealed the provisions of the following acts applicable to credit institutions, Romanian legal persons and branches in Romania of credit institutions from third countries: NBR Regulation no. 3 / 2009 on classification of loans and investments and the establishment, adjustment and use of specific provisions for credit risk and also the NBR Order no. 5 / 2009 on the reporting of statements relating to the classification of credit or investments exposures and the need for specific provisions for their credit risk.

Amendments to the NBR and the NSC regulation on the treatment of credit risk by credit institutions and investment firms, according to the standard approach.

(NBR Order no. 8/2011 and NSC Order no. 60/2011 regarding the approval of the NBR and NSC Regulation no. 07/12/2011 amending and supplementing NBR and NSC Regulation no. 14/19/2006 on credit risk treatment for credit institutions and investment firms, according to standard approach, published in Official Gazette no. 685/September, 27 2011).

Amendments concern: (a) The introduction of the definition of “value adjustment”.; (b) The method for calculating the adjustment of assets value for certain credit institutions; (c) The value at risk of an asset is represented by its value corrected with value adjustments; (d) The value at risk for off-balance sheet items will be certain percentage of its value depending on the degree of risk of the respective item.

Legal provisions will take effect as of January 1st, 2012.

Amendments to the regulation concerning equity ratios of credit institutions and investment firms

(NBR Order no. 9 / 2011 and NSC Order no. 61/2011 amending and supplementing NBR and NSC Regulation no. 18/23/2006 regarding own funds of credit institutions and investment firms)

The new regulation narrows the applicability of the regulation by excluding from the initial list the electronic currency issuing institutions.

As a consequence of this exclusion the provisions of the regulation on minimum capital required and the provisions relating to the minimum level of equity of electronic currency issuing institutions are also repealed.

These provisions shall are in force as of September 27th, 2011.

Other legislative amendments refer to: (a)Application of the requirements of NBR and RNSC on determining equity ratios with regards to all assets assessed at fair value and on deduction of level 1 equity of any additional value adjustments considered necessary; (b)Amendments regarding value of exposure from securitization positions that receive a risk weight of 1250%.

These regulations transpose the provisions of art. 1 points 5-7 of Directive 2010/76/EU of the European Parliament and the Council of 24 November 2010 amending Directive 2006/48/EC and Directive 2006/49/EC as regards capital requirements for trading and securitization portfolio, and the supervisory review of remuneration policies and will take effect as of December 31, 2011.

The provisions will enter into force as of January 1, 2012.

Amendments to the regulation on the capital adequacy of credit institutions and investment firms

(NBR Order no. 10/2011 and NSC Order no. 62/2011 regarding the approval of the NBR and NSC Regulation no. 09/14/2011 to complete the NBR and NSC Regulation no. 22/27/2006 on the capital adequacy of credit institutions and investment firms, published in Official Gazette no. 685/September 27, 2011).

Among the legislative amendments is the requirement that credit institutions report periodically to the NBR individual statements enabling supervision of the classification to certain limits imposed by the NBR in its regulations. The form and content of the report form, frequency and reporting procedures are established by the order issued by the NBR.

At the same time, new rules are introduced for establishing credit institutions’ positions on foreign exchange registered at individual level at the end of each bank working day as follows: maximum 10% of equity for net open positions in each currency and gold and maximum 20% of equity for total net foreign currency positions.

These provisions shall enter into force as of January 1st, 2012.

The Romanian National Bank defines safe investments

(NBR Order no. 11/2011 and RNSC Order no. 71/2011 regarding the approval of the NBR and NSC. 15/10/2011 on investments under Article 831 of the Civil Code)

The new regulation lists the types of investments to which the safe investment regime in new Civil Code is applicable. These are only investments in government bonds issued by the Romanian state and placements under the form of guaranteed deposits with credit institutions authorized to operate in Romania.

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