On 18 December 2017, the fourth meeting of the General Board of the National Committee for Macroprudential Oversight (NCMO) took place. Discussions touched upon the findings of the latest analyses conducted with a view to adopting macroprudential measures for preserving financial stability. They included: (i) the regular analysis on the recalibration of the countercyclical capital buffer; (ii) the analysis on implementing a systemic risk buffer; and (iii) the analysis on the impact of credit institutions’ funding plans on the flow of credit to the real economy.

1. With regard to the regular assessment on the recalibration of the countercyclical capital buffer (CCB) – one of the macroprudential instruments –, conducted in compliance with the Recommendation of the European Systemic Risk Board on guidance for setting countercyclical buffer rates (ESRB/2014/1), the deviation of total indebtedness from its long-term trend continued to be in negative territory at the end of 2017 Q3. However, at sectoral level, signals on the existence of vulnerabilities related to household lending remain, whereas residential property prices continued to follow an upward trend.
   
   Consequently, the NCMO adopted Recommendation No. R/8/2017 whereby the National Bank of Romania (NBR), in its capacity as competent authority, is recommended to maintain the countercyclical capital buffer for credit institutions at 0 (zero) percent and to concurrently monitor developments in household indebtedness. This level was implemented as of 1 January 2016.
2. The National Committee for Macroprudential Oversight assessed the vulnerabilities identified across the banking sector which may have a negative impact on its resilience: (i) the need to solve the problem of non-performing loans; an issue of concern on the agenda of the decision-making bodies in the EU and worldwide; (ii) the tensions surrounding domestic macroeconomic equilibria; and (iii) the uncertainties about the regional and international context. In approaching these vulnerabilities, the appropriateness of implementing a systemic risk buffer was analysed, with focus on two objectives: (a) to encourage banks in their efforts to clean up their balance sheets, without affecting other prudential indicators, in the context of non-performing loans possibly resuming an uptrend and (b) to safeguard financial stability, assuming the persistence of tensions surrounding macroeconomic equilibria and regional and global uncertainties.
   
   Consequently, the NCMO adopted Recommendation No. R/9/2017 whereby the NBR, in its capacity as competent authority, is recommended to implement a systemic risk buffer applicable to all exposures, starting 30 June 2018, with the aim of supporting the adequate management of credit risk and enhancing banking sector resilience to unanticipated shocks, amid unfavourable structural circumstances. The measure will be implemented after completing the process of prior notification of European authorities, in line with the provisions of applicable EU regulations.
   
   Moreover, it is recommended that the buffer level be calibrated at 0 percent, 1 percent or 2 percent, depending on the average values over the past 12 months (September 2016 – August 2017) of the indicators on the non-performing loan ratio and coverage ratio corresponding to each individual credit institution. Finally, the NCMO recommends the NBR to reassess the indicators and thresholds used in the calibration of the systemic risk buffer with a half-yearly frequency, so as to monitor in real time the progress in resolving non-performing loans.
3. Based on the data provided by credit institutions’ funding plans, forward-looking information can be extracted on the developments in lending or the identification of vulnerabilities at an early stage or the build-up of potential risks to financial stability. As these analyses could allow preparation and early activation/deactivation of the macroprudential instruments, thereby increasing their efficiency and effectiveness, the NCMO recommended the NBR to assess on a regular basis the impact of credit institutions’ funding plans on the flow of credit to the real economy.

At the same time, during the NCMO meeting, discussions were held, according to the legal tasks, regarding the general framework for the macroprudential policy strategy of the National Committee for Macroprudential Oversight, the composition of the technical committees, the persons appointed to replace the de jure members in the NCMO General Board when they are temporarily unable to exercise their duties, and the structure of the first NCMO Annual Report that will be forwarded to Parliament in June 2018.

The next meeting is scheduled for 29 January 2018.

The National Committee for Macroprudential Oversight was established by virtue of Law No. 12/2017 on the macroprudential oversight of the national financial system, thus ensuring that Recommendation of the European Systemic Risk Board (ESRB) No. 3/2011 on the macro-prudential mandate of national authorities has been implemented. The NCMO brings together representatives of the National Bank of Romania, the Financial Supervisory Authority and the Government of Romania. The NCMO’s mission is to ensure coordination in the field of macroprudential oversight of the national financial system by setting the macroprudential policy and the appropriate instruments for its implementation.