FOREIGN EXCHANGE POLICY

    By courtesy of  the National Bank of Romania

ESTABLISHMENT OF FOREIGN EXCHANGE REGIME

Main tasks of the NBR:

1. to formulate and implement the exchange rate policy;

2. to draw up the balance of payments and other papers on Romania's international investment position;

3. as regards the exchange rate:

• to set the exchange rate of the domestic currency for its own operations on the forex market;

• to compute and publish the average exchange rates ruling in the forex market for statistical purposes;

• the exchange rate ruling in the interbank forex market is determined freely, based on the interaction of demand and supply;

4. to authorise natural and legal persons to perform certain Foreign Exchange Regime stipulated in the Regulation on foreign exchange regime;

5. to keep and manage official reserves.

    FOREIGN EXCHANGE REGIME IN ROMANIA

• Regulation No. 4/2005 (published in Monitorul Oficial al Romāniei, Part I, No. 297/8 April 2005) issued by the National Bank of Romania sets the foreign exchange regime in Romania, for want of any foreign exchange law;

• Romania accepted - as notified on 25 March 1998 - the obligations laid down in Art. VIII, Sections 2, 3 and 4 of the IMF's Articles of Agreement, namely:

  • the authorities' commitment to remove all restrictions on current transactions;

  • non-introduction of other restrictions in the future;

  • creation of conditions as favourable as possible for the relaunching of economic reform;

  • the foreign exchange policy should not be subject to significant alterations.

• The policy of the National Bank of Romania consists in moderately accelerating the liberalisation of capital transactions, in compliance with its fundamental objective. According to the liberalisation calendar, long-term flows with a bearing on real economy were liberalised by end-2003; restrictions on non-residents' access to RON-denominated deposits with credit institutions in Romania and on operations in current and deposit accounts opened by residents abroad were lifted in 2005, while operations in securities and other open market instruments will be liberalised by September 2006.
  

BASIC PROVISIONS OF THE REGULATION ON FOREIGN EXCHANGE REGIME

I. Rights of residents and non-residents

Residents and non-residents:

• may acquire, hold and use any foreign- and domestic-currency-denominated financial assets ("full retention");

• may open and keep accounts in both foreign and domestic currencies in Romania, with authorised credit institutions;

• may perform freely and without restrictions current and capital transactions (except those subject to authorisation by the National Bank of Romania);

• non-residents may repatriate and transfer abroad financial assets held in Romania.
  

II. Access to forex market

• Access of residents and non-residents to purchasing/selling of foreign currency is free for all the operations that may be performed in compliance with the provisions of the Regulation on foreign exchange regime;

• Convertibility of current transactions is ensured for both residents and non-residents;

• Purchasing/selling of foreign currency may be performed by forex market intermediaries alone;

• Purchasing/selling of foreign currency by resident natural persons via exchange houses and credit institutions is not limited.

III. Capital transactions

Operations in securities normally dealt in on money market are further subject to prior authorisation by the National Bank of Romania unless they represent external public debt.

For statistical purposes, capital transactions causing external obligations arising out of commitments longer than one year, other than those of the nature of external public debt, shall be registered with the National Bank of Romania in "Romania's Register of External Private Debt".

IV. Collections and payments between residents

Collections and payments between residents may be performed:

• in domestic currency (leu) and in foreign currency - for the operations that are not subject to goods and services trade;

• in domestic currency (leu) - for the operations that are subject to goods and services trade;

• in foreign currency - for the operations that are subject to goods and services trade and are authorised in accordance with the provisions of the Regulation on foreign exchange regime:

  • legal persons - for operations arising out of trade contracts and provision of external services based on agency contracts; subcontracts arising out of international economic co-operation contracts, export contracts for complex units and long manufacturing cycle products;

  • natural persons - for occasional Foreign Exchange Regime between natural persons;

  • natural and legal persons and other entities - for operations laid down by express legal provisions; for operations arising out of organisation and/or provision of external services (transport, tourism); for operations arising out of external contracts under outward processing traffic arrangements; for operations arising out of trade carried out in harbours, airport "free zones", border checkpoints, international trains, aboard aircraft and ships on international routes; operations performed abroad.

V. Foreign exchange control

• Natural persons must declare to customs authorities the cash payment instruments in both domestic and foreign currencies equalling or exceeding the equivalent of EUR 10,000 per person and per travel.

VI. Contents of foreign exchange regulations

   Some NBR Regulations

• Norm No. 3/2005 on the operation of interbank forex market;

• Norm No. 4/2005 on performing exchange transactions;

Regulation No. 4 provides for the regime of operations of foreign currency between residents and non-residents and between residents.

The appendices of the Regulation provide for the foreign currency operations that may be performed, as well as for the categories of residents that may perform foreign currency operations.

The herein Regulation is in force since 11 April 2005.

On the enforcement date of the herein Regulation, Regulation No. 1/2004 of the NBR regarding the performance of foreign currency operations, previously amended, is abrogated.

• Norm No. 5/2005 on authorising Foreign Exchange Regime;

Norm No. 5 provides for the foreign currency operations that are authorized by the NBR, the conditions to be fulfilled and the documents required for issuing the authorisation.

The authorisations issued, based on the provisions of Regulation No. 1/2004 of the NBR regarding the performance of foreign currency operations, previously amended, keep their validity after the date when the herein Norm comes into force.

The Norm is in force since 11 April 2005. .

• Norm No. 6/2005 on physical import and export of cash payment instruments;

Norm No. 6 regulates the physical import and export of cash paying instruments.

The Norm defines, therefore, the term cash paying instruments. Natural entities may enter or exit in/from Romania cash paying instruments in foreign or in national (ROL) currency, being compelled to declare to the Romanian customs authorities the amounts they hold and that are equal to or exceed EURO 10,000/individual/travel.

The herein Norm is in force since 11 April 2005.

• Instructions No. 9 of the National Bank of Romania
  
  Instructions No. 9 amends Regulation No. 1 of the National Bank of Romania regarding foreign currency operations. Thus, starting with 11 March 2005, resident and non-resident entities may act freely, under the provisions of the Regulation, having no longer restrictions in what concerns their access on the Romanian exchange market.

• Regime and Credit Risk - Regulation No. 5 of the NBR/2006

  Regulation No. 5 amends Regulation No. 4/2005 of the NBR regarding the foreign currency regime, as subsequently amended. Also, Regulation No. 5 abrogates the Norm No. 7/2005 regarding the safeguarding measures that may be undertaken due to the liberalization of the operations performed in national currency in deposit accounts (RON).

• Norm No. 20 of the NBR/2006

  Norm No. 20 amends Norm No. 10/2005 regarding the limitation of the credit risk for the credits granted to the natural individuals.

  The provisions of Norms 10/2005 are applicable also to the resident legal entities that are set up as non-banking financial institutions and to the subsidiaries of the non-resident non-banking financial institutions, registered with the General Ledger kept by the NBR.

  Norm No. 20 provides for the following amendments: 

  • the financial leasing may be included in the category of the consumption credit and of the real estate investment credit depending on its destination;

  • the internal regulations shall establish the method of determining the total monthly payment commitments, relevant to granting and rolling out credits, irrespective of the frequency of their payment, and not the monthly commitments deriving from credit incentives to which monthly due dates are not established;

  • the credit agreements shall state, besides the conditions referring to the due date and/or to the interest, also other costs related to granting and rolling out the credit;

  • the costs relevant to the credit agreements, provided by Norm

  No. 10/2005, include all the expenses which the applicant has to support for granting and rolling out each credit. Until 22 October 2006, the entities provided by Norm No. 10/2005 have to prepare or to amend accordingly the internal norms, without establishing requirements that are less strict than the ones provided by the Norm.

  The non-banking financial institutions that are Romanian legal entities and the subsidiaries of the non-resident financial banking institutions that shall register after 22 October 2006 with the General Ledger kept by the NBR shall apply the new regulations starting with the date of registration in the registry.

For more information: http://www.bnro.ro