Romania: Market Improvements, Harmonisation Efforts, Achievements

Tue, 05/11/2013

For Romania 2013 began with a boost in trading of government bonds in the secondary market. The high volumes were registered in the context of including Romanian Government Bonds in the GBI-EM index series starting on 1 March 2013. This attracted higher inflows from foreign investors and increased the visibility of our local market.

Following the government decision in December 2012 to consolidate the financial supervision of the regulated sectors outside the regulatory competence of the National Bank of Romania the Financial Supervisory Authority (FSA) was established on 30 April 2013. The FSA took over the supervision and regulation of the securities, insurance, and private pensions sectors from the Insurance Supervisory Commission (ISC), National Securities Commission (NSC) and National Private Pensions System Supervisory Commission (PPSSC).

The newly established FSA together with the Romanian Banking community and capital market participants, mainly the Bucharest Stock Exchange and the Central Depository in Bucharest, addressed the ESMA rules to the market. These rules include the common requirements governing the authorisation and supervision of AIFMs and the regulation of OTC derivatives, central counterparties (CCPs), and trade repositories (TRs). Recently, the FSA published, for public consultation until 29 October 2013, a draft of Regulation to implement the European Regulation for the OTC derivatives, central counterparties, and trade repositories. This is in line with global efforts to mitigate risk through timely confirmation, portfolio reconciliation and compression, dispute resolution, marking-to-market and marking-to-model, the exchange of collateral, and adequate capital to cover the exposures arising from OTC derivatives not cleared by a CCP. The National Bank of Romania invited the banking community to share their intent on participating in the settlement process through a local CCP or to assume the requirements for capital adequacy in case of the clearing outside of such CCP.

The Central Depository in Bucharest is working together with the Romanian National Users Group and the Romanian National Market Practice Implementation Group to harmonise legislation and operational processes with international and European standards. The Central Depository treats the standardization of the corporate actions process and documentation with high priority. Based on the global solutions offered for the issues of corporate events processing, capital flow is considered by the Central Depository to be a key sector not only for market infrastructure and participants, but also for the customers. With this clear declared determination, the Central Depository in Bucharest signed the T2S Framework Agreement, committing to the project.

Continuing the presentation of the capital market improvements, in a joint domestic effort to balance external and internal financing sources, local banks launched corporate bonds listed on the Bucharest Stock Exchange. UniCredit Tiriac Bank raised RON 550 million (EUR 121 million), in five-year bonds in July this year, as the first large scale bank bonds issuance conducted in the Romanian capital market. This was done in a quite difficult market environment caused by a high volatility of the interest on the secondary government bonds market and foreign exchange rate, the FED announcement to stop the “quantitative easing” program, and the maturity of the existing agreement with the IMF. The issue of corporate bonds conducted by UniCredit Tiriac Bank in Romania was oversubscribed at a level of 110%.

New listings on the Bucharest Stock Exchange represent a powerful driver for the local capital market which is behind other similar institutions in the region.

After years of continued efforts to implement rules to allow local companies to issue depository receipts based on their underlying ordinary shares, this year on 4 October, the regulation regarding the underlying shares for depository receipts was approved and published by the FSA. This new regulation is closely linked to the biggest IPO in the local market for the state owned gas producer company, Romgaz. The offer is expected to raise about EUR 200 – 220 million from the local market and the difference up to the total of EUR 600 million, is expected to be issued in the form of GDRs and listed on the London Stock Exchange. According to the head of the Privatization Division of the Economy Ministry, for the first time, the Romgaz listing will act as a stabilization mechanism.

We expect a busy end of the year for the local capital market and UniCredit Tiriac Bank through its Global Securities Services Department, supported by the GSS Central Team and local management, will continue to provide top services to the clients with dedication and flexibility to reach all clients’ needs and expectations.

This is also an opportunity to reiterate our invitation to contribute your opinions regarding our services in the upcoming industry surveys. We value all contributions, which help us evaluate our current services and improve in the future.

I would like to thank all of our clients for their trust in our services.

Irina Savastre
Head of Global Securities Services Romania