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Romanian Banks Must Comply with Strict Capital and Liquidity Requirements

Introduction

The National Bank of Romania (NBR) has implemented strict capital and liquidity requirements for banks operating in the country. These regulations aim to enhance financial stability and reduce risk in the Romanian banking system by ensuring that banks maintain sufficient capital and liquidity.

Capital Requirements

According to recent regulations, banks must maintain a minimum level of initial capital of at least RON 25 million (approximately EUR 5 million), paid up in full and in cash on subscription. Additionally, banks are required to have their own funds permanently at a level equal to or above the requirements set forth in Article 92 of Regulation (EU) No. 575/2013, which includes:

  • Core Tier 1 own funds ratio of 4.5%
  • Tier 1 own funds ratio of 6%
  • Total own funds ratio of 8%
  • Leverage ratio of 3%

Liquidity Requirements

To obtain very short-term liquidity, banks can request a Lombard loan from the NBR, but only if they meet certain eligibility criteria. The lending period for Lombard credits is overnight, and the guarantees must be established before the loan is granted.

The NBR also requires banks to have their own funds to cover capital buffers imposed by the institution, in addition to the minimum own funds’ requirements. These capital buffers are intended to help banks withstand potential losses and maintain financial stability.

Qualifying Holdings

In related news, the NBR has implemented new regulations governing qualifying holdings, which require individuals who own such holdings to provide certain documentation to the bank. This includes:

  • A copy of their identity document
  • A curriculum vitae
  • Criminal record and fiscal record
  • A survey for persons who own qualifying holdings

For banks established in third countries, the NBR requires a description of the legal and institutional framework applicable in that country. This includes information on:

  • The regulatory environment
  • Supervisory authorities
  • Any relevant laws or regulations governing banking activities

In cases where an entity does not have legal personality, the NBR requires the identity of the person managing the entity to be disclosed. This includes information on:

  • The individual’s name and address
  • Any relevant qualifications or experience

Conclusion

Overall, these new regulations aim to enhance financial stability and reduce risk in the Romanian banking system by ensuring that banks maintain sufficient capital and liquidity to withstand potential losses and maintain financial stability.