To meet the requirements implied by Romania's recent accession to the EU, Romania has created a new legal framework to regulate banking activity, Emergency Order 99/2006.
The new set of rules includes regulations that apply to an extended group of credit institutions, including banks, savings and loan associations, building societies, investment funds, and administrators of payment systems, and consists of a general part that applies to all credit institutions and a special part that applies to particular types of these institutions.
Emergency Order 99/2006 restates in a more detailed and elaborate manner a number of provisions already outlined under the old set of rules (Banking Law 58/1998), which were set to enter into force when Romania joined the EU. The new provisions:
- grant permission for credit institutions to enter leasing operations directly (previously permitted only through especially established leasing companies);
- grant permission to credit institutions from other member states to be active on the Romanian market either through a local branch or directly, without having to request authorization from the National Bank of Romania (NBR); consequently, the local branches will be supervised by the competent authority in their own member state, not by NBR, except for matters concerning monetary policy, providing necessary data for statistics and the required liquidity conditions;
- remove the requirement imposed on local branches of credit institutions from member states to publish Romanian versions of the institution's audited financials;
- provide that the NBR with consult the relevant competent authority, when authorizing an independent subsidiary of a credit institution from another member state or when analyzing the opportunity of a significant participation of a legal entity from another member state to the share capital of a Romanian credit institution;
- impose conditions on Romanian credit institutions when active in another member state's market.
The new regime includes some provisions that were not previously scheduled for implementation alongside Romania's EU accession. The minimum level of own funds for a credit institution is €5 million and public subscription is no longer allowed, to ensure transparency of participation structure and to give NBR better control over the basic requirements to be met by the shareholders.
A new provision aimed at protecting minority shareholders states that the rule that every share entitles to a single vote is mandatory in respect of credit institutions – no exception can be agreed between the shareholders. An old provision according to which only deeds signed by administrators or employees are binding to a bank has been abolished.
Former conditions imposed on a bank's managers (conducatori) are no longer required (previously they could only be natural persons with a degree in law or economics, having at least seven years' experience in finance and/or banking, and had to be employees of the respective credit institution).
As mentioned above, Emergency Order 99/2006 also regulates other credit institutions (such as savings and loans associations, and building societies).
Changes have also been made to the capital requirements for covering credit risk and regarding specific credit institution-client issues (for example, credit institutions can ask for NBR' s approval for implementing internal rating models and clients can ask a credit institution to explain the reasons for assigning them a particular rating).
In an attempt to provide a complete legal framework to supervise credit institutions that belong to integrated financial groups, Emergency Order 99/2006 has also established an interesting framework for collaboration between NBR and the National Securities Commission, enabling them to benefit from each other's expertise when taking decisions regarding measures to be taken or sanctions to be applied, or when approving changes in the organizational, management or shareholder structure.
By Adina Cojoc
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