Banca Naţională a României

Legal framework:

Government Emergency Ordinance no. 99/2006 on credit institutions and capital adequacy, approved with amendments and supplements by Law no. 227/2007, and subsequently amended and supplemented (further referred to as G.E.O no. 99/2006)

I. Before brexit

The Romanian legal framework provides for the following ways of providing banking activities in Romania:

1. Establishing a new credit institution (in particular a subsidiary credit institution), Romanian legal entity, subject to licensing and supervision by the National Bank of Romania (art. 4 (1) GEO no. 99/2006). All the EU requirements for access to banking activity (initial capital, effective direction of business, shareholders, program of operations and structural organization, proofs of actually carrying the banking business in Romania, not only relocating the registered office) should be complied with in order to obtain banking license in Romania (art. 10-17 GEO no. 99/2006).
   
   

   The licensing procedure has two stages (art. 32-38 GEO no. 99/2006):

   • Stage I. the approval of the credit institution setting up, which can take up to four months from the date the application and the complete information and documentation is received by the National bank of Romania. The time limit provided for this stage is without prejudice to the suspension period possible if some additional information is to be provided by the applicant. (art. 33 (4) GEO no. 99/2006)
     * The credit institution should undertake the legal steps in order to establish itself as a Romanian legal entity within two months from receiving the NBR approval for setting up.
   • Stage II. the authorization for the pursuit of business, within four months from the receiving of the incorporation documents. Although some assessments might be eased due to the fact that the main shareholder is a credit institution already authorized and supervised by an EU competent authority, the licensing procedure remains a complex and long one (without exceeding a twelve months’ period).
2. Opening a Romanian branch or providing directly banking services in Romania, via single passport notification procedure. (art. 45 – 57 GEO no. 99/2006). In this case no new licensing proceedings are due, the UK license is sufficient; the UK supervisor shall notify accordingly the NBR and it will remain responsible for the supervision of the UK credit institution including for the business conducted in Romania.
3. Becoming a significant shareholder of an existing Romanian credit institution (art. 25-31 GEO no. 99/2006). In this case, an evaluation of adequacy of the UK credit institution – as significant participant to the capital of the Romanian credit institution will be conducted by the National Bank of Romania, in terms of reputation, competence, financial soundness, credit institution’s capacity to further comply with the prudential requirements, the existence of reasonable grounds to suspect money laundering or terrorism finance offences.
   This procedure is in line with the EU rules, which highly harmonized the requirements and the assessment process.
   The assessment will take at most 60 working days from the date of written acknowledgement of receipt of the notification and of all documents required, (which represents a significant shorter period than in the case of establishing a new credit institution).
4. Merging with a Romanian credit institution, a Romanian financial institution or a Romanian ancillary services undertaking (art. 92 – 951¹ GEO no. 99/2006), when the UK credit institution ceases to exist as a legal entity.
   The merger operation is subject to prior approval by the National Bank of Romania, when the entity resulting from this process is a Romanian credit institution.
   The main evaluation elements considered refer to the fulfilment of the licensing criteria by the new Romanian credit institution, its capital adequacy, the transparency of its ownership structure, the managers of the resulting credit institution fit and proper assessment.
   This prior approval process would take at most three months.
   The UK supervisor’s consent is also required.
   The merger should be realized within 4 - 6 months from the prior approval.
   After the merger is complete, if a new Romanian credit institution is created, it has to obtain a banking license from the National Bank of Romania, which has two months to decide on the matter.
   To a merger operation complexity, which has to be completed within a limited timeframe, is added a comprehensive prudential assessment in order to ensure the credit institution capacity to comply with all the prudential requirements.
   

II After brexit

Considering the present EU legal framework, transposed accordingly into the national legislation, a UK credit institution will become a third country credit institution.
Having in mind the current negotiations between EU and UK, it is premature to envisage what will be the approach in relation to the entities previously established in Romania by UK credit institutions (particularly as regards branches, i.e. whether the single passport regime or a similar one shall apply or whether they shall be required to apply for a Romanian banking license).
For establishing in Romania after brexit:

• All the possibilities listed at point I above remain available in the new context as well, except for the single passport regime which could no longer be applicable. Instead, the opening of a Romanian branch by an UK credit institution will become subject to licensing and supervision by the National Bank of Romania (art. 67 – 77 GEO no. 99/2006), in a similar way as in case of a Romanian credit institution.
• Having in mind that UK applies a prudential legal framework which transposed the EU rules, it is fair to assume that the UK legislation, as a third country, will be considered equivalent to that established at EU level. By consequence, and provided that a cooperation agreement between the Romanian and the UK supervisors is concluded, ensuring the exchange of information for supervisory purposes, all the evaluations regarding the UK credit institution will be heavily based on the cooperation with the UK competent authority (art. 262, 77, 94 let. g) GEO no. 99/2006).

A particular way for a UK credit institution to transfer its business in Romania, is by transferring, partially or totally, its assets and liabilities to a previously established entity (art. 96 GEO no. 99/2006). If the Romanian entity is subject to the National Bank of Romania supervision and the transfer is significant, the approval by the National Bank of Romania is required in similar conditions as for a merger operation.