The NCMO meeting of 30 March 2021
The first meeting of this year of the General Board of the National Committee for Macroprudential Oversight (NCMO) was held on 30 March 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 draft Annual Report of the National Committee for Macroprudential Oversight for 2020, and the extension of the period to refrain from dividend distribution following the publication of Recommendation ESRB/2020/15 amending Recommendation ESRB/2020/7 on restriction of distributions during the COVID-19 pandemic.
In addition, the NCMO General Board was informed of: (i) the systemic risks identified across the domestic financial system, (ii) the actions taken by the addressees in order to implement the recommendations issued by the NCMO in 2020, as well as those which have not been completed and those that are applicable on a permanent basis, (iii) the manner of implementation of NCMO
Recommendation No. R/6/2020 on addressing vulnerabilities from the widening of the agri-food trade deficit, and (iv) 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.
On this occasion, NCMO Recommendation No. R/1/2021 on the countercyclical capital buffer was unanimously approved. Considering the persistence of uncertainties about the evolution of the economy and of lending, 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.
Moreover, NCMO Recommendation No. R/2/2021 on the extension of the period to refrain from dividend distribution was approved, following the publication of Recommendation ESRB/2020/15 amending Recommendation ESRB/2020/7 on restriction of distributions during the COVID-19 pandemic. Specifically, the national competent authorities, namely the National Bank of Romania and the Financial Supervisory Authority, are recommended to extend until 30 September 2021 the restrictions on dividend distribution by credit institutions, investment firms or insurance and reinsurance companies.
Another item on the agenda of the NCMO General Board referred to the possibility of a future recalibration of the methodology for the application of the systemic risk buffer, in the context of transposing the CRD V provisions, to avoid any increase in capital requirements over the short term and, hence, to maintain a countercyclical macroprudential policy stance and to preserve a part of the built-up capital reserves to be used if banking sector stability is affected.
In addition, the NCMO General Board decided to issue a decision to comply with the provisions of the Guidelines of the European Banking Authority on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer in accordance with Article 133(5)(f) of Directive 2013/36/EU – EBA/GL/2020/13, in the sense of using them to set and regularly reassess at a national level the systemic risk buffer as a macroprudential tool.
Furthermore, it was decided that the NCMO, as designated authority, comply with the provisions of EBA Guidelines on the specification and disclosure of systemic importance indicators – EBA/GL/2020/14, which set out: (i) the indicators used for the identification of global systemically important institutions (G‐SIIs) and (ii) the reporting of the underlying data and the annual disclosure of the resulting indicator values used for the identification of G‐SIIs. NCMO Recommendation No. R/3/2021 on compliance with the provisions of EBA Guidelines on the specification and disclosure of systemic importance indicators – EBA/GL/2020/14 was issued in the same context, recommending the National Bank of Romania, in its capacity as a sectoral financial supervisory authority, to comply with the provisions of EBA/GL/2020/14 from the date when there is a relevant institution (G-SII) within its jurisdiction and to ensure their enforceability against the relevant credit institutions.
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.