The NCMO meeting of 3 June 2021
The second meeting of this year of the General Board of the National Committee for Macroprudential Oversight (NCMO) was held on 3 June 2021 by written procedure.
During the meeting, Board members examined analyses and adopted measures concerning macroprudential policy and systemic risk, namely the regular analysis on the recalibration of the countercyclical capital buffer, the manner of implementation of Recommendation ESRB/2020/12 on identifying legal entities, as well as the analysis of the Working Group on supporting green finance.
In addition, the NCMO General Board was informed of: (i) the systemic risks identified across the domestic financial system, (ii) the results of the regular analysis on the systemic risk buffer, and (iii) 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.
The meeting ended with the unanimous approval of the following measures:
NCMO Recommendation No. R/4/2021 on the countercyclical capital buffer – Given the persistence of uncertainties about the evolution of the economy and considering that several EU Member States have taken macroprudential policy easing measures, 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/5/2021 on implementing Recommendation ESRB/2020/12 on identifying legal entities – Following the ESRB recommendation, the competent authorities, namely the National Bank of Romania and the Financial Supervisory Authority, are recommended to require, to the extent permitted by law, all legal entities involved in financial transactions under their supervisory remit to have a legal entity identifier (LEI). Moreover, competent authorities are recommended to include or continue to include the LEIs in financial reporting obligations and public disclosure. The LEI is a 20-character reference code to uniquely identify legally distinct entities that engage in financial transactions and associated reference data and which is based on the ISO standard 17442 developed by the International Organization for Standardization.
NCMO Recommendation No. R/6/2021 on the analysis of the Working Group on supporting green finance – The stakes of climate change for the economy and financial system in Romania are high in terms of opportunities, but also of costs if this transition is delayed. However, the transition to a green economy needs to be orderly so as to avoid the risk of considerable disruptive effects, given the share and the importance of carbon-intensive sectors in the economy at present. In this vein, 16 proposals for recommendations were adopted, addressed to the National Bank of Romania, the Financial Supervisory Authority and the Government, under three categories of measures, namely: (i) the sustainable increase in the financing of green projects, (ii) supporting structural changes in the economy towards generating higher value added, and (iii) enhancing transparency and raising awareness on the impact of climate change in the economy and the financial system.
In addition, the NCMO General Board issued NCMO Decision No. D/4/2021 on not applying through voluntary reciprocity the macroprudential policy measures adopted by Luxembourg and Norway – Given that the eligible exposures of the Romanian banking sector to Luxembourg and Norway are immaterial, the measures adopted by these two countries are not applied domestically. Nevertheless, the National Bank of Romania will further monitor the related exposures on a regular basis.
Moreover, the NCMO issued Decision No. D/5/2021 on the assessment of materiality of third countries for the Romanian banking sector in relation to the recognition and setting of countercyclical buffer rates. The available data at end-2020 did not indicate any significant third country for the Romanian banking sector in relation to the recognition and setting of countercyclical capital buffer rates at national level.
The NCMO also issued Decision No. D/6/2021 on the draft of NCMO Procedure No. 1/2021 regarding the transposition at national level of the provisions of the guidelines issued by the European Banking Authority addressed to the National Committee for Macroprudential Oversight – the NCMO Procedure refers to identifying, analysing, adopting and notifying the compliance/non-compliance decision, as well as to implementing the EBA guidelines addressed to the NCMO.
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 macroprudential mandate of national authorities was 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.