New Regulation on Corporate Governance for Regulated Entities

UniCredit Bank S.A.
Summary: 
Regulation 2/2016 sets out a uniform regulatory framework for the application of the principles of corporate governance for entities authorized, regulated and supervised by the Financial Supervisory Authority (FSA)
Wed, 06/04/2016

The Regulation establishes a set of requirements underlying the application of the principles of corporate governance by the following regulated entities:

  • investment firms;
  • investment management companies;
  • undertakings for collective investment, established by instruments of incorporation/alternative investment funds (AIFs);
  • alternative investment fund managers (AIFMs);
  • central depositories;
  • clearing houses;
  • market/system operators;
  • insurance and/or reinsurance undertakings;
  • managers of privately managed pension funds and of voluntary pension funds.

According to the regulation, the entities that are under the supervision of the FSA must apply corporate governance systems complying with a set of minimum requirements such as: ensuring a transparent and appropriate organizational structure, proper allocation and appropriate segregation of duties, efficient risk management, adequacy of policies and strategies, internal control mechanisms, application of sound operational procedures to prevent disclosure of confidential information, and the creation of an effective communication system. The regulation also includes provisions to prevent conflicts of interest, ensure regulated entities have the obligation to establish procedures for identifying the relationships, services, activities or transactions in which conflict of interests may arise.

Regulation 2/2016 on the application of the principles of corporate governance by the entities authorized, regulated and supervised by the Financial Supervisory Authority is structured under four main chapters aimed at clearly defining the responsibilities of the board, responsibilities of the executive management/senior management and persons holding key functions, the conflict of interests thereof as well as risk management and risk management functions. The regulated entities must file with the FSA the statement on the application of the principles of corporate governance within a maximum of 30 days after entry into force of this regulation. The regulation on the application of corporate governance principles was published in the Official Journal of Romania and shall enter into force with effect from 1 January 2017 for all entities supervised by FSA.

Impact on investors: The FSA has established a unified framework for the application of corporate governance principles by the authorized, regulated and supervised entities aiming to increase the management quality, transparency, accountability, implicitly, as well as the consumers’ trust in the non-banking financial markets.