Recommendations

Recommendation NCMO No. R/8/2020
on the capital buffer for other systemically important institutions in Romania

Having regard to:

  • the provisions of Art. 3 para. (2) let. b) and para. (3) of Law No. 12/2017 on macroprudential oversight of the national financial system and those of Art. 21-24 of NCMO Regulation No. 2/2017 on the methodology and procedures used for setting capital buffers and the scope of these instruments,
  • the credit institutions identified as having a systemic nature pursuant to the methodology applied at national level and harmonised with the EBA Guidelines on the criteria to determine the conditions of application of Article 131(3) of Directive 2013/36/EU (CRD) in relation to the assessment of other systemically important institutions (O-SIIs), based on the data reported as at 31 December 2019,

Whereas:

  • the capital buffer for other systemically important institutions is a capital reserve that shall be set to mitigate the systemic risk posed by the size of credit institutions. By recommendation of the macroprudential authority, the competent authority may require each O-SII, on a consolidated, sub-consolidated or individual basis, as applicable, to maintain a buffer of up to 2 percent of the total risk exposure amount,
  • the requirements on the O-SII buffer are reassessed on an annual basis, being applicable as of 1 January 2016,
  • for the subsidiaries in Romania of EU institutions, upon setting the capital buffer for other systemically important institutions, the level of the global systemically important institutions buffer (G-SII buffer) or the level of the other systemically important institutions buffer applicable to parent undertakings was taken into consideration, in accordance with the provisions of Art. 23 para (3) of NCMO Regulation No. 2/2017 on the methodology and procedures used for setting capital buffers and the scope of these instruments,

Based on:

  • the provisions of Art. 3, para. (1) letters b), c), e) and i) and the provisions of Art. 4, para. (1) letter a) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The General Board of the National Committee for Macroprudential Oversight has issued this recommendation:

The National Bank of Romania is recommended to impose, starting 1 January 2021, a capital buffer for other systemically important institutions (O-SII buffer), on an individual or consolidated basis, as applicable, calculated based on the total risk exposure amount for all the credit institutions identified as having a systemic nature, based on the data reported as at 31 December 2019, as follows: (i) 2 percent for Banca Comercială Română S.A. (consolidated level), Raiffeisen Bank S.A. (consolidated level), Banca Transilvania S.A. (consolidated level), CEC Bank S.A. (individual level) and (ii) 1 percent for UniCredit Bank S.A. (consolidated level), BRD – Groupe Société Générale S.A. (consolidated level), Alpha Bank România S.A. (individual level) and OTP Bank România S.A. (consolidated level).

List of systemically important banks and the other systemically important institutions buffer (O-SII buffer) applicable in 2021

NCMO Recommendation No. R/7/2020
on the countercyclical capital buffer in Romania

Having regard to:

  • the provisions of Art. 3, para. (2), letter b) and para. (3) of Law No. 12/2017 on the macroprudential oversight of the national financial system and the provisions of NCMO Regulation No. 2/2017 on the methodology and procedure used for setting capital buffers and the scope of these instruments, namely Art. 4-9 on the countercyclical capital buffer, as well as Art. 1 on the applicability of capital buffers,
  • the objective of the countercyclical capital buffer (CCyB) to improve the banking sector’s resilience to potential losses generated by excess credit growth. The CCyB is built up in periods of excess credit growth as an add-on to the capital conservation buffer and may be released during credit crunches in order to absorb losses. The countercyclical capital buffer rate, expressed as a percentage of total risk exposure amount of credit institutions with credit exposures in Romania, shall range between 0 percent and 2.5 percent and shall be calibrated in steps of 0.25 percentage points or multiples of 0.25 percentage points. Where justified, a CCyB rate higher than 2.5 percent of total risk exposure amount may be set.

Whereas:

  • The economic effects of the COVID-19 pandemic were felt more strongly in 2020 Q2 and had repercussions on the evolution of private sector credit, which saw decelerations for both components, i.e. non-financial corporations and households.
  • European authorities recommend to avoid as much as possible ending at the same time several fiscal, monetary and micro- and macroprudential supervisory measures, implemented to support the national economy.

Pursuant to:

  • the provisions of Art. 3, para. (1) letters b), e) and i) and the provisions of Art. 4, para. (1) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has issued this recommendation:

Considering that total indebtedness currently remains below the signalling threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, as well as the uncertainties surrounding the economic and financial developments at national and international level generated by the spread of COVID-19 infections, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 (zero) percent. Moreover, the National Bank of Romania is recommended to further monitor developments in the economy and lending at aggregate and sectoral levels, with a focus on the impact of COVID-19 pandemic on household and corporate financing by credit institutions.

NCMO Recommendation No. R/6/2020
on addressing vulnerabilities from the widening of the agri-food trade deficit

Having regard to:

  • the provisions of Art. 3 para. (1) let. b) of Law No. 12/2017 on the macroprudential oversight of the national financial system,
  • NCMO Decision No. D/4/16.12.2019 that approved the set-up of a Working Group tasked with the identification of possible solutions for reducing risks from the widening of the trade deficit generated by agri-food industry,
  • the important part in credit institutions’ balance sheet of credit to firms in agriculture and food industry,
  • the conclusions of the NCMO Working Group analysis on addressing vulnerabilities from the widening of the agri-food trade deficit,

Whereas:

  • The agri-food trade balance has become a vulnerability that may pose a potential systemic risk for at least two reasons: (i) the strong relationship between the worsening of the current account deficit and the outbreak of a financial or a balance-of-payments crisis and (ii) the need to ensure food security (which is in fact one of the lessons of the COVID-19 pandemic crisis);

Based on

  • the provisions of Art. 3 para. (1) let. e) and Art. 4 para. (1) let. a) and let. b) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has issued this recommendation:

    I. The government is recommended to adopt measures to:

    1. Develop, through close dialogue with representatives of relevant associations, as well as to budget primarily programmes worth at least EUR 9.4 billion, under the 2021-2027 Multiannual Financial Framework, aimed at implementing the European Union’s Farm to Fork Strategy, also in line with specific climate risk objectives in the future Common Agricultural Policy. The said programmes should be developed so as to also facilitate green bond issues by the authorities, credit institutions, other investors. Implementation period: 1-3 years
    2. Develop, through close dialogue with representatives of relevant associations, as well as to budget primarily programmes worth at least EUR 0.5 billion, under the 2021-2027 Multiannual Financial Framework, that can use the potential of digital technologies, in compliance with the Declaration of cooperation on a “A smart and sustainable digital future for European agriculture and rural areas” to which Romania is a signatory party. Implementation period: 1-3 years
    3. Enhance the role of credit guarantee funds (the National Credit Guarantee Fund for SMEs, the Rural Credit Guarantee Fund) and of the Romanian Counter-Guarantee Fund in supporting firms in agriculture (the increase in the flow of guarantees by at least lei 3 billion by 2023) and food industry (the rise in the flow of guarantees by at least lei 2 billion by 2023). Implementation period: 1-3 years
    4. Revise the certificates-of-deposit mechanism through close dialogue with credit institutions and relevant associations. Implementation period: 1-3 years
    5. Improve the legislation on certifying and promoting agri-food products through close dialogue with representatives of relevant associations and ensure adequate budgeting for these programmes. Implementation period: 1-3 years
    6. Design and implement, through close dialogue with representatives of relevant associations, a strategy for promoting high-quality food items, also via an increased role of quality schemes. Where the products of the local sector satisfy the quality requirements, the authorities should promote primarily the said goods. Implementation period: 1-3 years
    7. Assign markedly higher scores, in any support scheme provided by the authorities (grant-in-aids, guarantees from credit guarantee funds, EU funds, promotion of investments, exports, etc.), to firms that: (i) create food chains, (ii) generate local clusters, (iii) produce bio goods, (iv) produce goods listed in Top-10 food imports, (v) are listed among potential national champions, (vi) play an active part in the programmes designed for achieving the objectives in the Declaration on “A smart and sustainable digital future for European agriculture and rural areas” or those adopting digital technologies on a large scale, or that (vii) play an active part in the programmes designed for achieving the objectives in the European Union’s Farm to Fork Strategy or which help fulfil the climate change agenda in the agricultural sector. Implementation period: 1-3 years
    8. Implement an industrial policy for the food sector that should lead also to improved fulfilment of the government’s role in underpinning the agri-food sector (reducing the hidden economy that involves agri-food products, enhancing the role played by the National Sanitary Veterinary and Food Safety Authority (ANSVSA) in controlling food safety, cutting back beaurocracy, removing duplication of work in controlling tasks by drafting transparent procedures, supporting education and training of the persons involved in the agri-food sector, etc.). Implementation period: 3-5 years

    II. The National Bank of Romania is recommended to:

    1. Revise, at least once every two years, the methodology for identifying the firms that could be viewed as potential agri-food national champions and to publish the updated version on the NCMO’s website. Implementation period: on a regular basis
    2. Disseminate additional statistical data for agri-food firms’ improved access to finance. Implementation period: on a regular basis, starting in December 2020

NCMO Recommendation No. R/5/2020
concerning the implementation of Recommendation ESRB/2020/7 on restriction of distributions during the COVID-19 pandemic

Having regard to:

  1. Art. 3 para. (2) let. a) of Law No. 12/2017 on the macroprudential oversight of the national financial system,
  2. Recommendation ESRB/2020/7 on restriction of distributions during the COVID-19 pandemic (ESRB/2020/7),
  3. the key role played by the financial system in exiting the COVID-19 pandemic crisis,

Pursuant to:

  • Art. 3 para. (1) let. f) and Art. 4 para. (1) let. a) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has issued this recommendation:

The National Bank of Romania and the Financial Supervisory Authority are recommended to request financial institutions under their supervisory remit to refrain, at least until 1 January 2021, from undertaking any of the following actions, which has the effect of reducing the quantity or quality of their own funds at the consolidated and/or individual level:

  1. make a dividend distribution or give an irrevocable commitment to make a dividend distribution;
  2. buy-back ordinary shares;
  3. create an obligation to pay variable remuneration to a member of a category of staff whose professional activities have a material impact on the financial institution’s risk profile.

NCMO Recommendation No. R/4/2020
on the implementation of Recommendation ESRB/2020/8 on monitoring the financial stability implications of debt moratoria, and public guarantee schemes and other measures of a fiscal nature taken to protect the real economy in response to the COVID-19 pandemic

Having regard to:

  1. Art. 3 para. (2) let. a) of Law No. 12/2017 on the macroprudential oversight of the national financial system,
  2. Recommendation ESRB/2020/8 on monitoring the financial stability implications of debt moratoria, and public guarantee schemes and other measures of a fiscal nature taken to protect the real economy in response to the COVID-19 pandemic,

Pursuant to:

  • Art. 3 para. (1) let. f) and Art. 4 para. (1) let. a) and b) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has adopted this recommendation:

    A) The National Bank of Romania (NBR), the Government (represented by the Ministry of Public Finance) and the Financial Supervisory Authority (FSA) are recommended to monitor, assess and inform the National Committee for Macroprudential Oversight about the implications of the measures taken to protect the real economy in response to the COVID-19 pandemic, e.g. debt moratoria, public guarantee schemes and other measures of a fiscal nature. For this purpose, it is recommended that national authorities monitor the design features and uptake of these measures, as well as the possible implications for financial stability using key indicators, such as the following:

    1. Design features and uptake of measures: the volume; types of financial support (debt moratoria, loan guarantees, subsidised loans, or equity participations); beneficiaries and eligibility conditions; duration; and information on the use of the measure (e.g. volume and number of applications received and accepted);
    2. Implications for financial stability: the flow of credit to the real economy; the liquidity, solvency and indebtedness of the non-financial sector; and the financial soundness of the financial institutions, including observed and expected trends in non-performing loans and the ability to meet liquidity and capital requirements.

    B) The National Bank of Romania, the Government (represented by the Ministry of Public Finance) and the Financial Supervisory Authority are recommended to submit to the National Committee for Macroprudential Oversight information about the impact of the measures taken in response to the COVID-19 pandemic. The information will be centralised by the NCMO Secretariat and submitted to the European Systemic Risk Board. The authorities will report the information to the NCMO by filling in the templates published by the ESRB, as follows:

    1. The template “Features of the Measures”1 will be filled in by the Ministry of Public Finance once and submitted to the NCMO, which will send it to the ESRB by 31 July 2020. Subsequently, this template will be resent whenever the information is modified.
    2. The template “Uptake of the Measures”2 will be filled in on a quarterly basis, with the first reporting deadline on 31 July 2020 , as follows: (i) the NBR will fill in section 1, (ii) section 2 will be filled in by the MPF for the first time by 31 July 20203 and subsequently by the MPF in cooperation with the NBR, based on data availability, (iii) the remaining sections will be filled in, where appropriate, by the MPF and the FSA.
    3. The template “Qualitative questions”4 concerning the assessment of previously mentioned templates will be filled in the NBR, the MPF and the FSA, as follows: the first reporting will be submitted by 31 July 2020 for questionnaire A, by 31 October 2020 for questionnaire B and subsequently on a quarterly basis.

  1. Template 1 – „Features of the Measures”, www.esrb.europa.eu/pub/pdf/recommendations/Template_1_-_Reporting_templates_under_Recommendation_B_of_Recommendation_ESRB_2020_08~03d34f309a.en.pdf
  2. Template 2 – „Uptake of the Measures”, www.esrb.europa.eu/pub/pdf/recommendations/Template_1_-_Reporting_templates_under_Recommendation_B_of_Recommendation_ESRB_2020_08~03d34f309a.en.pdf
  3. Raportarea va avea loc la data de 31 iulie pentru data de referință 30 iunie 2020. Similar, raportările viitoare vor fi realizate la o lună după încheierea unui trimestru.
  4. Template 3 – „Qualitative questions” www.esrb.europa.eu/pub/pdf/recommendations/Template_3_-_Reporting_templates_under_Recommendation_B_of_Recommendation_ESRB_2020_08~8ef856a42c.en.pdf

NCMO Recommendation No. R/3/2020
on the countercyclical capital buffer in Romania

Having regard to:

  1. the provisions of Art. 3, para. (2), let. b) and para. (3) of Law No. 12/2017 on the macroprudential oversight of the national financial system and the provisions of NCMO Regulation No. 2/2017 on the methodology and procedure used for setting capital buffers and the scope of these instruments, namely Articles 4-9 on the countercyclical capital buffer, as well as Art. 1 on the applicability of capital buffers,
  2. the objective of the countercyclical capital buffer (CCyB) to improve the banking sector’s resilience to potential losses generated by excessive credit growth. The CCyB is built up in periods of excessive credit growth as an add-on to the capital conservation buffer and may be released during credit crunches in order to absorb losses. The countercyclical buffer rate is expressed as a percentage of total risk exposure amount of credit institutions with credit exposures in Romania, shall range between 0 percent and 2.5 percent and shall be calibrated in steps of 0.25 percentage points or multiples of 0.25 percentage points. Where justified, a CCyB rate higher than 2.5 percent of total risk exposure amount may be set.

Whereas:

  • internal and external uncertainties surrounding the economic impact of the COVID-19 pandemic remain significant, and the effects may translate into an increase in the probability of default across the real sector, as well as into a slowdown in lending;
  • easing capital buffer requirements is in line with micro and macroprudential measures of a fiscal, monetary and supervisory nature, adopted at international level so as to ensure capital and liquidity to support the real economy;

Pursuant to:

  • the provisions of Art. 3, para. (1) let. b), e) and i) and the provisions of Art. 4, para. (1) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has issued this recommendation:

Considering that total indebtedness currently remains below the signalling threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, as well as given the uncertainty about the economic and financial developments at local and international level triggered by the spread of COVID-19, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 (zero) percent. Moreover, the National Bank of Romania should further monitor developments in the economy and lending at aggregate and sectoral levels, with a focus on the impact of COVID-19 pandemic on household and corporate financing by credit institutions.

NCMO Recommendation No. R/2/2020
amending the strategy regarding the implementation of the International Financial Reporting Standards (IFRS) by non-bank financial institutions (NBFIs) as a basis of accounting and for preparing individual financial statements

Having regard to:

  • Art. 3 para. (1) let. b) of Law No. 12/2017 on the macroprudential oversight of the national financial system,
  • the recommendation in the International Monetary Fund’s document entitled “Romania: Financial Sector Assessment Program”, published on 8 June 2018, on ensuring tighter provisioning requirements for the non-bank financial institutions (NBFIs) sector, similar to those applicable to credit institutions, pursuant to IFRS 9 ‘Financial instruments’,
  • NCMO Decision No. D/9/24.09.2018, whereby the action plan to implement the FSAP recommendations targeting the macroprudential policy and systemic risk was approved,
  • NCMO Recommendation No. R/2/2019 on the strategy regarding the implementation of the International Financial Reporting Standards (IFRS) by non-bank financial institutions (NBFIs) as a basis of accounting and for preparing individual financial statements,

Whereas:

  • Amid the COVID-19 pandemic crisis, it is necessary to adopt measures with a view to supporting non-bank financial institutions to use the existing resources to channel the efforts for conducting operational activities,

Pursuant to:

  • Art. 3 para. (1) let. e) and Art. 4 para. (1) let. a) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has issued this recommendation:

The National Bank of Romania is recommended to amend, in compliance with the applicable legal provisions, the regulatory framework necessary for the full implementation of IFRS by non-bank financial institutions (NBFIs) entered in the General Register, as a basis of accounting and for preparing individual financial statements, so that the plan to implement IFRS by NBFIs, as set forth in NCMO Recommendation No. R/2/2019, be extended by one year, and the intermediate steps be accordingly postponed, as follows:

  • from 2019 to 2022, the NBFIs entered in the General Register shall prepare, solely for information purposes, a set of IFRS-compliant individual annual financial statements, by restatement of items in the financial statements drawn up consistent with the national regulations according to European directives;
  • starting 1 January 2023, the NBFIs entered in the General Register shall implement the IFRS and use only these standards as a basis of accounting and for preparing individual annual financial statements; starting 2023, individual financial statements shall no longer be prepared consistent with the national regulations according to European directives;
  • the transitory regime by using off-balance sheet accounting to affect the own funds calculated by the NBFIs entered in the Special Register, i.e. decreasing them by the additional allowances for expected credit loss following the shift to IFRS 9, shall be put in place in the period from 1 January 2021 to 31 December 2022. Furthermore, the National Bank of Romania is recommended to take the measures deemed appropriate in order to avoid the enforcement of sanctions in case the reporting deadlines, set for the 2019 financial year according to the plan to implement IFRS by the NBFI, are exceeded.

Furthermore, the National Bank of Romania is recommended to take the measures deemed appropriate in order to avoid the enforcement of sanctions in case the reporting deadlines, set for the 2019 financial year according to the plan to implement IFRS by the NBFI, are exceeded.

NCMO Recommendation No. R/1/2020
on the countercyclical capital buffer in Romania

Having regard to:

  • the provisions of Art. 3, para. (2), let. b) and para. (3) of Law No. 12/2017 on the macroprudential oversight of the national financial system and the provisions of NCMO Regulation No. 2/2017 on the methodology and procedure used for setting capital buffers and the scope of these instruments, namely Articles 4-9 on the countercyclical capital buffer, as well as Art. 1 on the applicability of capital buffers,
  • the objective of the countercyclical capital buffer (CCyB) to improve the banking sector’s resilience to potential losses generated by excessive credit growth. The CCyB is built up in periods of excessive credit growth as an add-on to the capital conservation buffer and may be released during credit crunches in order to absorb losses. The countercyclical buffer rate, expressed as a percentage of total risk exposure amount of credit institutions with credit exposures in Romania, shall range between 0 percent and 2.5 percent and shall be calibrated in steps of 0.25 percentage points or multiples of 0.25 percentage points. Where justified, a CCyB rate higher than 2.5 percent of total risk exposure amount may be set.

Whereas:

  • the recent developments triggered by the spread of COVID-19 pose new challenges to the economy, entailing the need for measures to uphold the further loan supply to households and non-financial corporations by the banking sector in the period ahead.

Pursuant to:

  • the provisions of Art. 3, para. (1) let. b), e) and i) and the provisions of Art. 4, para. (1) of Law No. 12/2017 on the macroprudential oversight of the national financial system,

The National Committee for Macroprudential Oversight has adopted this recommendation:

Considering that total indebtedness currently remains below the signalling threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, as well as given the uncertainty about the economic and financial developments at local and international level triggered by the spread of COVID-19, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 (zero) percent. Furthermore, the National Bank of Romania should further monitor developments in the economy and lending at aggregate and sectoral levels, with a focus on the impact of COVID-19 epidemic on household and corporate financing by credit institutions.

2018 – 2019

 

2017