The plan defines eight barriers, which must be eliminated in order for the Romanian market to become an emerging market, as per Morgan Stanley Capital International (MSCI). These barriers were: market access (1), fiscal compliance for the investors (2), corporate rights for the investors (3), procedure for dividend payments aligned with the international standards (4), market participation costs (5), fiscal aspects regarding transactions on the capital market (6), primary market (7) and bond market (8). The Financial Supervisory Authority (FSA), with new leadership and strategy, is actively participating in this partnership with all market entities to shift the capital market identified barriers.
One of the first steps was materialised in June 2014, when the Ministry of Finance approved the Government Ordinance for amending the Fiscal Code, followed by the FSA, which decreased some of the costs for market participants by 25%. Residents in EU Member States, EEA Member States or jurisdictions with which Romania has entered into a treaty covering administrative cooperation in the field of taxation have an option in either appointing a fiscal representative resident in Romania or directly filing the relevant tax documentation with the Fiscal Authorities in Romania. Electronic communication and exchange of administrative documents between taxpayers and tax authorities also become possible with these Fiscal Code amendments. In August 2014, the FSA announced that fees for transactions concluded on the regulated markets or alternative trading systems by the market participants and transactions concluded outside of the regulated markets or alternative trading systems were reduced by 25%.
The determinant moment, when market participants had to prove their commitment and gather all forces for a change, was at the end of July 2014 when the Central Depository and Bucharest Stock Exchange announced their decision to launch two projects; trading and post trading system separation and T+2 implementation, both with the deadline 6 October 2014. In a common effort, the market community – brokers, custodians, the Central Depository and Bucharest Stock Exchange, issuers and investors – designed the plans and proposed changes for the code of rules. However, the process was by far not as easy as it looks now after it was implemented - and we proudly count good results and no failures.
The system separation means that trading and post-trading systems are segregated and brokers do not execute trades directly on the custodian banks’ accounts as in the past. Brokers maintain their proprietary accounts (house accounts), accounts for clients’ transactions, and special accounts for custodian banks’ clients (special mixed accounts). In this new set up, brokers conclude the transactions on the BVB trading system and, afterwards, allocate the custodian clients’ transactions to the special mixed account. The allocation is done through settlement instructions in the post-trading system, which matches with the custodian bank’s instruction in the RoClear system. For custodian banks this is an achievement as swift instructions may be sent directly in the post-trading system and the settlement confirmations are received in the same form.
The success of the system separation project opens the gate for further changes. The next major project for the market is corporate actions standardisation and swift implementation for communicating between the Central Depository and the market participants for corporate events. T2S is also another big challenge for the Romanian Central Depository which will connect to the European settlement platform in the first wave. At the very beginning, the connectivity with the T2S platform will offer limited functionalities.
On the other hand, the Financial Supervisory Authority started a friendly initiative and intends to make a tradition by gathering custodians, brokers, Central Depository and Bucharest Stock Exchange representatives in separate consultative meetings before major decisions are made. In this way market participants have the opportunity to express opinions and to address clients’ requests.
Last but not least, we have to stress the positive role played by the Romanian Banking Association through the Treasury and Capital Markets Commission, where UniCredit holds the Vice-President position, represented by Viviana Traistaru, Senior Relationship Manager in Global Securities Services.
Therefore, for Romania this summer and the beginning of the autumn brought not only the electoral campaign for presidential elections, but also significant changes for the capital market.
With all the above notes and good news about the Romanian market, we invite you all to share your opinions regarding our services in the upcoming industry surveys. We count on all contributions which help us to evaluate our current services and to improve in the future.
After all, I would like to thank all our clients for the trust granted us.
Irina Savastre
Head of Global Securities Services Romania