Recommendations

NCMO Recommendation No. R/4/2019
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 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 2018,

Whereas:

  • the capital buffer for other systemically important institutions (O-SII buffer) is a capital reserve that shall be set to mitigate 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 level, as applicable, to maintain a buffer of up to 2 percent of the total risk exposure amount,
  • the requirements on the O-SII buffer, effective 1 January 2016, are subject to yearly re-assessment,
  • 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) let. b), c), e) and i) and of Art. 4 para. (1) let. a) in Law No. 12/2017 on 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 impose, starting 1 January 2020, 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 2018, as follows: (i) 2 percent for Banca Comercială Română S.A. (consolidated level), Raiffeisen Bank S.A. (consolidated level), OTP Bank România 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 Garanti Bank S.A. (individual level).

List of systemically important banks and the other systemically important institutions buffer (O-SII buffer) applicable in 2020

NCMO Recommendation No. R/3/2019
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 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 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 the total risk exposure amount may be set.

Whereas:

    Regarding the countercyclical capital buffer, it should be noted that:

  • the analysis on excessive growth in credit and indebtedness of the private sector pointed out that total indebtedness (non-financial corporations and households) remained further in positive territory (0.94 percentage points in June 2019), yet below the alert threshold that signals excessive credit growth;
  • at a sectoral level, there are still signals indicating the build-up of vulnerabilities related to both household and corporate lending;
  • the growth rate of residential property prices has embarked on a downward path in 2019, having stood at 5.35 percent in December 2018 and 3.28 percent in March 2019, i.e. below the 6 percent alert threshold recommended by the European Commission and below the 10 percent signalling threshold.

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 alert threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 (zero) percent and to closely monitor developments in structural imbalances and indebtedness at aggregate and sectoral levels.

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

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,

Whereas:

  • it is necessary to limit the opportunities for arbitraging macroprudential measures via NBFIs,
  • the analysis made by the MPF-NBR interinstitutional working group in what concerns the IMF recommendation pointed out that the only applicable solution is the full implementation of IFRS by the NBFIs entered in the General Register, as a basis of accounting and for preparing individual financial statements,

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 issue, in compliance with the related legal provisions,  the regulations 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, starting 2019, as follows:

  • from 2019 to 2021, 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 2022, 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 2022, individual financial statements shall no longer be prepared consistent with the national regulations according to European directives; and
  • to put in place a transitory regime by using off-balance sheet accounting to affect the own funds calculated by the NBFIs entered in the Special Register, from 2019 to 2021, i.e. decreasing them by the additional allowances for expected credit loss following the shift to IFRS 9.

NCMO Recommendation No. R/1/2019
on the countercyclical capital buffer in Romania

Having regard to:

  1. 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 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 (CCB) to improve the banking sector’s resilience to potential losses generated by excessive credit growth. The CCB 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 CCB rate higher than 2.5 percent of total risk exposure amount may be set.

Whereas Regarding the countercyclical capital buffer, it should be noted that:

  • the analysis on excessive growth in credit and indebtedness of the private sector pointed out that total indebtedness (non-financial corporations and households) remained further in positive territory (0.53 percentage points in December 2018), yet below the alert threshold that signals excessive credit growth;
  • at sectoral level, there are still signals indicating the build-up of vulnerabilities related to both household and corporate lending;
  • residential property prices continued to increase, reporting an annual advance of 5.73 percent in nominal terms in September 2018 (0.66 percent in real terms over the same period), i.e. below the 6 percent alert threshold recommended by the European Commission and below the 10 percent signalling threshold.

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 adopted this recommendation:

Having regard to the fact that total indebtedness currently remains below the alert threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 percent and to closely monitor developments in structural imbalances and indebtedness at aggregate and sectoral levels.

NCMO Recommendation No. R/8/2018
on the countercyclical capital buffer in Romania

Having regard to:

  1. 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 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 (CCB) is to improve the banking sector’s resilience to potential losses generated by excessive credit growth. The CCB 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 CCB rate higher than 2.5 percent of total risk exposure amount may be set.

Whereas Regarding the countercyclical capital buffer, it should be noted that:

  • the analysis on the excessive growth of credit and private indebtedness showed that total indebtedness (non-financial corporations and households) further stayed below the alert threshold that signals excessive credit growth; however, the differential between the value of the alternative indicator and the signalling threshold narrowed since the previous analysis, reaching 0.88 percentage points in September 2018 versus 0.82 percentage points in June 2018;
  • at sectoral level, there are still signals indicating the build-up of vulnerabilities related to household lending;
  • residential property prices continued to increase, posting a slightly fast pace, their annual growth rate coming in at 4.72 percent in nominal terms in June 2018 (-0.65 percent in real terms over the same period), standing below the 6 percent alert threshold recommended by the European Commission and below the 10 percent signalling threshold;
  • with regard to household lending, measures have been taken to limit the indebtedness level (the DSTI ratio).

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 adopted this recommendation:

Having regard to the fact that total indebtedness currently remains below the alert threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 percent.

NCMO Recommendation No. R/7/2018
on the systemic risk buffer in Romania

Having regard to:

  • NCMO Recommendation No. 9 of 18 December 2017 on the systemic risk buffer in Romania,
  • the need to update the reference period for calculating the asset quality indicators set according to the methodology set forth by NCMO Recommendation No. 9 of 18 December 2017 on the systemic risk buffer in Romania with a view to calibrating the systemic risk buffer,

Pursuant to:

  • the provisions of Art. 3, para. (1) letters b), 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, while implementing NCMO Recommendation No. R/9/2017, to make the semi-annual re-assessment and set the 12-month reference interval for the average values of the indicators based on which the systemic risk buffer is determined, as well as the level at which credit institutions apply this buffer, namely on individual and/or consolidated level.

NCMO Recommendation No. R/6/2018
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 NCMO Regulation No.2/2017 on the methodology and procedures used for setting capital buffers and the scope of these instruments, i.e. Art. 21-24 concerning the buffer for other systemically important institutions
  • the credit institutions identified as having a systemic nature pursuant to the methodology 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 30 June 2018,

Whereas

  • the capital buffer for other systemically important institutions (O-SII buffer) is a capital reserve that shall be set to mitigate 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 level, as applicable, to maintain a buffer of up to 2 percent of the total risk exposure amount
  • the requirements on the O-SII buffer, effective 1 January 2016, are subject to yearly re-assessment
  • 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) let. b), c), e) and i) and of Art. 4 para. (1) let. a) in Law No. 12/2017 on macroprudential oversight of the national financial system,

The National Bank of Romania is recommended to impose, starting 1 January 2019, 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 30 June 2018, 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), and CEC Bank S.A. (individual level), (ii) 1.5 percent for OTP Bank Romania S.A. (consolidated level) and (iii) 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 Garanti Bank S.A. (individual level).


List of systemically important banks and the other systemically important institutions buffer (O-SII buffer) applicable in 2019

NCMO Recommendation No. R/5/2018
on the countercyclical capital buffer in Romania

Having regard to: (1) 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 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 (CCB) to improve the banking sector’s resilience to potential losses generated by excessive credit growth. The CCB 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 CCB rate higher than 2.5 percent of total risk exposure amount may be set. Whereas: Regarding the countercyclical capital buffer, it should be noted that: – the analysis on the excessive growth of credit and private indebtedness showed that total indebtedness (non-financial corporations and households) further stayed below the alert threshold that signals excessive credit growth; however, the differential between the value of the alternative indicator and the signalling threshold narrowed since the previous analysis, reaching -0.03 percentage points in March 2018 and 0.93 percentage points in June 2018 respectively versus -0.45 percentage points in December 2017; – at sectoral level, there are still signals indicating the build-up of vulnerabilities related to household lending; – residential property prices continued to increase at a fast pace, their annual growth rate coming in at 6.43 percent in nominal terms in March 2018 (1.41 percent in real terms over the same period), standing above the 6 percent alert threshold recommended by the European Commission, yet further below the 10 percent signalling threshold. At the same time, the deviation of residential property prices from their long-term trend remains above the alert threshold. 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 adopted this recommendation: Having regard to the fact that total indebtedness currently remains below the alert threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 percent and to monitor developments in household indebtedness.

NCMO Recommendation No. R/4/2018 on implementing macroprudential instruments for achieving the intermediate objectives included in the Overall Macroprudential Strategy Framework of the National Committee for Macroprudential Oversight

Having regard to:

Recommendation of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1), Art. 3 para. (1) let. d), h), i) and Art. 13 of Law No. 12/2017 on the macroprudential oversight of the national financial system, Whereas:

In its meeting of 21 May 2018, the NCMO General Board approved the Overall Macroprudential Strategy Framework of the National Committee for Macroprudential Oversight.

Pursuant to:

the provisions of Art. 3, para. (2), let. a), as well as of Art. 4, para. (1), let. a) and b) 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 and the Financial Supervisory Authority are recommended to implement, where applicable, the macroprudential instruments for achieving the intermediate objectives included in the Overall Macroprudential Strategy Framework of the National Committee for Macroprudential Oversight, according to the Annex to this Recommendation. The Government is recommended to support the NCMO’s macroprudential policy for the purpose of safeguarding financial stability.

Annex to NCMO Recommendation No. R/4/2018 on implementing macroprudential instruments for achieving the intermediate objectives included in the Overall Macroprudential Strategy Framework of the National Committee for Macroprudential Oversight

NCMO Recommendation No. R/3/2018 on the countercyclical capital buffer in Romania

Having regard to:

Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, namely Art. 130 and Art. 136 concerning the countercyclical capital buffer, Art. 160 regarding the gradual or accelerated steps of adjustment of the countercyclical capital buffer, and Article 162 para. (2) on the applicability of capital buffers, The objective of the countercyclical capital buffer (CCB) to improve the banking sector’s resilience to potential losses generated by excessive credit growth. The CCB 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 CCB rate higher than 2.5 percent of total risk exposure amount may be set. Whereas:

Regarding the countercyclical capital buffer, it should be noted that:

the analysis on the excessive growth of credit and private indebtedness showed that total indebtedness (non-financial corporations and households) further stayed below the alert threshold that signals excessive credit growth; in addition, the differential between the value of the alternative indicator and the signalling threshold widened markedly since the previous analysis, reaching -0.37 percentage points in December 2017 versus -0.26 percentage points in September 2017; at sectoral level, there are still signals indicating the build-up of vulnerabilities related to household lending; residential property prices continued to increase at a fast pace, their annual growth rate coming in at 8.68 percent in nominal terms in September 2017 (6.79 percent in real terms over the same period), standing above the 6 percent alert threshold recommended by the European Commission, yet further below the 10 percent signalling threshold. However, this information should be interpreted with caution, given the change in the calculation methodology of property prices by the National Institute of Statistics (NIS). Pursuant to:

Art. 3, para. (1) and para. (2), as well as 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: Having regard to the fact that total indebtedness currently remains below the alert threshold and setting a countercyclical buffer rate above 0 (zero) percent is, thus, not necessary, the National Bank of Romania is recommended to maintain the countercyclical buffer rate at 0 percent and to monitor developments in household indebtedness.

NCMO Recommendation No. R/2/2018 on implementing some measures related to firms’ financial soundness

Having regard to:

the provisions of Art. 1, para. (2) and Art. 2, para. (1) of Law No. 12/2017 on the macroprudential oversight of the national financial system, the persistence of structural imbalances regarding the soundness of non-financial corporations in Romania, which entail notable negative consequences on the stability of the Romanian financial system, NCMO Recommendation No. R/6/2017 to the Government, via the Ministry of Public Finance, and the National Bank of Romania to make an in-depth analysis of these challenges. Pursuant to: the provisions of Art.3, para. (1), let. e), together with those of Art. 4, para. (1), let. b) 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 Government is recommended to assess the opportunities to improve the regulatory framework governing non-financial corporations, after having consulted with businesspersons and social partners.

NCMO Recommendation No. R/1/2018 on recalibrating the “First Home” programme

Having regard to:

the provisions of Art. 1, para. (2) and Art. 2, para. (1) of Law No. 12/2017 on the macroprudential oversight of the national financial system, NCMO Recommendation No. R/7/2017 to the Government, via the Ministry of Public Finance, and the National Bank of Romania, identifying the increase in household indebtedness as a challenge to financial stability,Pursuant to: the provisions of Art.3, para. (1), let. e), together with those of Art. 4, para. (1), let. b) 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 Government is recommended to assess the opportunity of recalibrating the “First Home” programme from a social perspective by revising the requirements to access this programme while preserving a sustainable level of indebtedness.

Recommendations 2017