Over the past few years, from a regulatory perspective, Romania has managed to align its national legislative framework to European standards in several areas relating to financial services, thus avoiding infringement procedures. The EU Directives that have been transposed into Romanian legislation include: The Directive governing shareholders’ rights at companies listed on regulated markets (“SRD II”), the Payment Services Directive (PSD II), the Insurance Distribution Directive (IDD), as well as the Directive on anti-money laundering measures and on combatting the financing of terrorism (AML).

The banking sector in Romania has continued to consolidate through mergers and acquisitions, and is one of the busiest markets in the CEE region in this respect. The outbreak of the COVID-19 crisis found the sector in good shape and ready to respond to the new challenges. The sector’s resilience in the crisis was based on several factors; the low rate of non-performing loans (approx., 4% in April 2020, but expected to grow after the moratorium period ends), as well as its strong position in terms of capital adequacy and liquidity.

The introduction of measures to combat the negative effects of the pandemic (such as the credit moratorium) are expected to show their impact in terms of the rate of unpaid loans. The total of deferred loans at the end of 2020 represented 41.7 billion RON as an absolute amount and 14.7% as a share of the total of non-governmental granted financing.

In autumn 2020, after three years of monitoring, the Romanian capital market achieved a long-awaited sign of recognition, and was promoted to the status of secondary emerging market by FTSE Russell. This represents an important step in terms of access to significantly higher investment flows and capital for Romania, but at the same time requires a commitment from the authorities to ensuring legislative predictability and improved liquidity.

The evolution of private pension funds has been positive over the last few years, notwithstanding a short period at the beginning of the pandemic when turmoil in the capital markets also affected the performance of these funds. According to the Financial Supervisory Authority (ASF), the total assets and the number of participants in the private pension system has grown constantly. Thus, on 30 September 2020, the value of total assets under management, at the level of the entire private pension system, reached 72.58 billion lei, an increase of 18% compared to September 2019. The share of private pensions as a proportion of Gross Domestic Product, at the end of September 2020, was 6.98%, above the level of December 2019.

During the last few years, certain steps have been taken to develop and enhance financial education for individuals and a National Strategy for Financial Education has also been announced. In August 2020, the National Bank of Romania (BNR), together with ASF, the Ministry of Education, the Ministry of Finance and the Romanian Association of Banks started work on the National Strategy for Financial Education. The strategy will be based, among others, on a study conducted by the OECD that analyses the level of financial education of adults in the 7 countries included in the project: Bulgaria, Croatia, Georgia, Northern Macedonia, Moldova, Montenegro and Romania. In addition, programmes developed lately by the Financial Supervisory Authority (ASF) aimed at improving the financial education of employees (Wellness financiar) have been welcomed by the business environment. Even taking into consideration these steps towards the improvement of the financial literacy of the Romanian population and the private sector’s sustained efforts (especially the financial services sector) to develop financial education programs, Romania still has one of the lowest levels of knowledge in this regard and major measures should be adopted to tackle the problem, including by focusing on implementing financial education programmes in schools.

The financial services sector is undergoing important transformational changes in the context of the European Green Deal and the EU’s green finance taxonomy rules. Therefore, it is important to develop innovative responsible financing and sustainable investment solutions that follow the ESG criteria (meaning particular attention on behalf of investors to environmental, social and governance issues when making an investment). Credit institutions will have a positive impact on the development of the economy and society, aligning financing activities as quickly as possible with the objectives defined by the Paris Agreement and following the broader trend of actively supporting and encouraging sustainable investments.



During 2019 and 2020 a series of cases continued to raise concerns about the transparency and predictability of the legislative process, on the one hand, and about the suitability and the effectiveness of several laws on the other.  

These included several legislative initiatives presented as being necessary due to overriding consumer protection objectives which include multiple components with the potential to adversely affect the financial sector’s stability and the economic mechanisms of the market. Examples include those initiatives which were declared unconstitutional in March 2019, reintroduced and then withdrawn the same year, and which were finally reloaded at the end of 2019 in a package which aimed to protect the consumer against abusive or unexpected enforcement procedures, speculative debt assignments, foreign currency risk in loan agreements, and excessive interest. Those initiatives lacked impact studies and were intended to apply to new and ongoing lending contracts.


The alleged benefits for certain consumers need to be assessed against the overall effects on the economy, and thereby all consumers, as these initiatives have been taken in the absence of suitable impact studies and analysis or effective consultation with the business environment.
Thus, should the legislative process remain unpredictable, with complex and/or controversial initiatives being issued without consultation of main stakeholders and due impact evaluation, economic growth and general welfare will be limited accordingly. Instead, such initiatives could potentially have negative effects for consumers, such as higher costs or worsening access to lending, as well as multiple implications and effects at macroeconomic level because of their aggregated impact.


In 2020, as the Covid-19 pandemic hit, a multitude of legislative measures were introduced in Romania to ameliorate the economic impact of the health restrictions imposed, including with respect to consumer finance. Some of the new measures introduced were unprecedented in peacetime, including moratoria, while others introduced minor derogations from well-established norms. The key development in this regard for consumer lending was the entry into force on 30 March 2020 of Government Emergency Ordinance (GEO) no. 37/2020 on the granting of certain facilities for loans granted by credit institutions and non-banking financial institutions to certain categories of debtors. According to this new legislation, in the context of the Covid-19 pandemic, certain categories of debtors may benefit from the suspension of their payment obligations to their creditors (principal, interest and fees) for a period of between 1 and 9 months under credit and leasing agreements concluded before 30 March 2020. In its initial draft GEO 37/2020 suspended payment obligations to 31 December 2020, but it was amended from 1 January 2021 to allow debtors to continue to benefit from the moratorium if the total granted deferral period does not exceed nine months (irrespective of whether these nine months have been granted based on a legislative or non-legislative moratorium). Under the latest amendments, a moratorium of up to nine months is available until the end of March 2021. Eligible borrowers (opt-in) could  submit a request with their lender until 15 March 2021, while the lender had to issue its decision by 31 March 2021. 


In its initial draft GEO 37/2020 suspended payment obligations to 31 December 2020, but it was amended from 1 January 2021 to allow debtors to continue to benefit from the moratorium if the total granted deferral period does not exceed nine months (irrespective of whether these nine months have been granted based on a legislative or non-legislative moratorium). Under the latest amendments, a moratorium of up to nine months is available until the end of March 2021. Eligible borrowers (opt-in) could  submit a request with their lender until 15 March 2021, while the lender had to issue its decision by 31 March 2021. This extension has been enacted by the Romanian Government as a response to the European Banking Authority re-activating/re-amending its Guidelines EBA/GL/2020/02. After closely monitoring the developments of the COVID-19 pandemic and, in particular, the impact of the second COVID-19 wave and the relative government restrictions taken in many EU countries, on 2 December 2020, the European Banking Authority issued its latest amendment to the guidelines which have extended the deadline to apply for the moratorium until 31 March 2021.


While the overall impact of the measures mentioned above was for the benefit of debtors, special attention should be paid to consultation with credit institutions and other financial institutions before any further extension of the facilities beyond the terms mentioned above and introduction of any new facilities or moratoria. The right balance needs to be struck between the interests of debtors and those of financial institutions and the overall stability of the financial sector.

Moreover, any initiatives to increase taxes or to impose new burdens or to introduce or extend any facilities that could have an impact on the financial sector should be discussed in-depth and in advance with the business community. Such  measures, if implemented, should reflect not only the interest of consumers and of the authorities, but also the interest of the financial sector and the current situation of the Romanian economy, as well as its perspective in the coming years. 



Any new legislation should be subject to real consultations involving all stakeholders. Before it is considered, a comprehensive impact study/analysis should be carried out, to make sure negative, artificial market-distorting consequences are averted. Furthermore, Romania’s commitments under the EU Accession Treaty, such as consultation with the ECB before passing legislation affecting the banking sector, and strict observance of European Directives, should be respected.  

Populist legislative proposals that entrench over-regulation in favour of consumers remain of particular concern, and public consultation has been inadequate in recent years. Moreover, access to legal proceedings by professional lenders should not be sacrificed in the name of consumer protection, as happened, for example, in the preliminary procedures of Law no. 52/2020. 

In the context of the Covid-19 pandemic, while to a certain extent it is reasonable to expect that an emergency situation requires a rapid legislative response, it is at the same time critical to maintain an ongoing dialogue with the financial sector to use its expertise and include its input in the final drafts of laws, so that both lenders and borrowers will be able to have their interests properly balanced against the economic realities that await the financial sector in 2021.

Lastly, the government should reduce the number of emergency ordinances. Instead, the executive and legislature should work together on bills under regular legislative procedures. Even though this might increase the length of the legislative process, it would improve its quality and predictability. 


Romania is in last place in Europe for financial education, doing worse than all the countries in the region in the last four years. Only one in five Romanians has a fairly good understanding of financial products, according to the rating agency Standard&Poor’s, compared to one in three citizens worldwide.

The financial education rate in 2020 is 21% in Romania, compared to an average of 52% in the European Union and 65% in the Nordic countries. Moreover, Romania’s results are also worse than those of its neighbours. The Czech Republic has a financial education rate of 58%. In Hungary it is 54%, Slovakia 48%, Poland 42% and Bulgaria 35%.



In August 2020, the National Bank of Romania (BNR), together with ASF, the Ministry of Education, the Ministry of Finance and the Romanian Association of Banks, started work on the National Strategy for Financial Education. To prepare this strategy, BNR, ASF, the Ministry of Education, the Ministry of Finance and the Romanian Association of Banks (ARB) signed a protocol establishing the Financial Education Committee, a body that received specialised assistance provided by the Dutch Constituency programme, organised by the Dutch Ministry of Finance. The strategy will be based, among other sources, on a study conducted this year by the OECD  that analyses the level of financial education of adults in the 7 countries included in the project: Bulgaria, Croatia, Georgia, North Macedonia, Moldova, Montenegro and Romania. Both the creation and launch of the website of the National Strategy for Financial Education and the preparation of a first draft of the National Strategy for Financial Education to be launched for public debate were announced for 2020.Another step in the direction of developing programmes of financial education for the population was made this year by ASF, which initiated a new programme of financial education for employees in companies.


The National Institute of Statistics (INS) has stated that during the pandemic Romanians need to redistribute their expenses and rethink their priorities in order to be able to handle their families’ changed financial situation. 
If we look at the numbers, the families of employees have endured the most difficult period of the pandemic. Incomes have declined while some expenditure has increased. According to INS data, spending cuts were made on non-food items (a reduction of 6% on average) and services (reduction of 24%). Retiree families gave up services on average (reducing spending by more than 22%), increasing food spending by 6%. This was against a background of insignificant increases in cash income in the second quarter (an increase of 0.6%).
Moreover, the main items of household expenditure are consumption of food, non-food, services and transfers to public and private administration and social security budgets in the form of taxes, contributions and coverage of related needs. Household production (animal and poultry feed, sowing products, veterinary services, etc.) are also important. Investment expenditure, intended for the purchase or construction of housing, the purchase of land and equipment necessary for household production, the purchase of shares, etc., have a small share in the total expenditures of households (only 0.7 %).


For the most part, financial literacy in Romania is supported by financial institutions and they focus on basic financial literacy (personal budget, savings, and investments). Currently only 15% of micro-companies access financing, while they represent 95% of the total number of active companies in Romania. This situation needs to change through proper business education, resulting from a close collaboration between banks, the business community and government.  Micro-companies play an important role in supporting short-term economic growth and in supporting the development of the economy in the medium to long term. 

The future of producing better products and services Made in Romania is related to education and digitalisation. The more educated entrepreneurs are, the more resilience they will have in running a business.


Moreover,  the healthy running of a business starts with a clear and detailed explanation of the best methods of financing, how to prepare for difficult times and how to make proper investments. This is important, especially for startups (with less than a year’s activity), for which, worldwide, there are other sources of financing, such as the founders’ own money, crowd funding, private equity or business angels, while banks have limited options for financing.  The banks usually advise entrepreneurs to apply for European funds or local grants. 

With the increased rate of development of tech start-ups, there is real potential for the knowledge economy to be the next growth engine for Romania. To achieve this goal of the knowledge economy forming a higher percentage of the total, graduate skills must adapt to match the needs of future labour markets. With growing automation and machine learning, future work environments will demand soft skills and adaptability. At the CEE level, only 38% of young people and 35% of employers in CEE agree that graduates are prepared for work, according to the Legatum Institute’s 2019 Central and Eastern European Prosperity Report, released in partnership with Erste Group. 


It is time for two important trends to converge: the development of the knowledge economy should meet the current wave of entrepreneurial spirit in Romania. Students have above EU average preferences for Information and Communications Technology (ICT) and technical studies. This trend has led to the developments of many technical and ITC hubs and some cities have been transformed into “Silicon Valleys”. This is encouraging but it is not enough. Romania needs to scale up from hubs to full-grown ecosystems that create local unicorns, companies with valuations of EUR 1 billion or more, and provide the right tools and means for access to finance. There is a lot to catch up on. Romania ranked 27th out of the 28 EU member states in the European Commission's Digital Economy and Society Index (DESI) for 2019. Digital technologies are more present in businesses, but e-commerce is growing slowly in Romania. A growing number of businesses are using cloud services (18% compared to 11% in 2014) and social media platforms to interact with their customers and other stakeholders (21% compared to 15% in 2013). However, the number of SMEs selling their goods and services online has stagnated, remaining at 17% in recent years.




Financial literacy programs should be accelerated and scaled up to reach the entire population and ensure they have a basic level of financial literacy

Focus should be given to digital financial literacy. Clients of banks and financial institutions should be made aware of the importance of using digital products and how to use them safely. 

Financial literacy concepts and practical information should be integrated into the school curriculum, using a multidisciplinary approach. Teachers should introduce certain financial literacy concepts to teach children and teenagers that different topics are closely interconnected and that being able to understand them through a wider approach will help them to be better prepared for a more prosperous life. 

Focus should also be given to advising businesses on how to be prepared for difficult periods 
The role of governmental and European financial schemes and grants should be better explained, so that more businesses can take advantage of them. Many entrepreneurs do not understand how to access the available funding from governmental programs and how to apply for them, despite the extensive information available.  

Entrepreneurial educational platforms should be launched and accelerated and dedicated guides should be provided for entrepreneurs on their specific needs – finance, sales, e-commerce, marketing, human resources and investments.

Business acceleration programs should be launched and scaled up for start-ups to grow the knowledge economy and encourage entrepreneurs to develop new tech solutions. 


The underlying problems that have hindered the growth of financial intermediation for some time have persisted in the last two years. We note several issues in this respect: volatility of the legal framework, populistic legal initiatives with a negative impact on banking (such as the datio in solutum law, the tax on banking assets, the explicit definition of a hardship clause in lending contracts with individuals, the cap on interest rates in lending contracts with individuals etc.), the lack of predictability and dialogue with decision makers, as well as the precarious economic situation of certain categories of debtors. (Undercapitalisation of SMEs is a major negative factor along with falling profitability and liquidity). 

The lack of adequate measures to encourage banking institutions to clear their balance sheet of Non Performing Loans (the Fiscal Code still limits the deductibility of losses) runs counter to the European Commission’s action plan intended to prevent a future build-up of NPLs in the aftermath of the COVID-19 pandemic. Facilitating access to funding from capital markets would be another positive step. 


Thus, Romania continues to lag behind other EU member states in relation to the level of financial intermediation, despite its critical importance in providing access to capital for the Romanian population and its role in the sustainable economic growth of the country. For example, compared to the countries in the CEE region, Romania’s financial intermediation level (26,6%), measured as a proportion of non-government credit related to GDP, represents half that of other emerging economies, like Poland (52%) and  Bulgaria (51%). The European average for financial intermediation is 83%.

Times of crisis, such as the one triggered by the coronavirus pandemic, highlight even more the need for liquidity and for access to credit for both businesses and individuals, as well as the strategic role that lending has in the development of the Romanian economy and its economic recovery through the facilitation of investments, consumption and an increase in demand.



Long term economic growth for Romania should be based on investment and hence there should be a growth in financial intermediation. Development should also focus on financial inclusion and financial literacy, encompassed within a long term coherent strategy.  There is a proven strong connection between financial intermediation and economic growth.

Enhancing financial intermediation in Romania should be achieved through a partnership between the relevant stakeholders from the financial, political and institutional environments. This collaboration should be the basis for developing a strategy and roadmap for Romania to follow in the next few years and which will increase the levels of financial intermediation, inclusion and literacy.

A predictable and stable legislative framework should represent the bedrock on which the banking sector in Romania could develop and support sustainable economic growth, both for individuals and businesses. The more unpredictable the legislative framework, the more restrictive the lending conditions will become.

Further key measures which could enhance financial intermediation are guarantees and co-financing programmes that facilitate access to funding, especially for companies which do not have enough collateral or which do not have the risk appetite of commercial banks, Thus, SMEs with a precarious economic standing (negative capital, undercapitalisation, or falling profitability and liquidity) should continue to be predominantly targeted in the future, due to the crucial role SMEs play in employment (at national level, 2 out of 3 employees work in SMEs). 

An increased level of financial intermediation can also be supported via automation and digital technologies, which would allow better interaction between banks and customers. Digitalisation is an opportunity to help reduce the size of the “underground economy”, make the Romanian economy more attractive for investors and enhance financial autonomy for millions of vulnerable people.

Particular focus should be given to financial education for the population, which could contribute to a better understanding of how to access credit.


Plan for positive development of the insurance industry - how to create a positive environment

The main requirements for the effective functioning and development of the insurance sector are coordination of Romanian and European legislation, as well as the implementation of best practices in the field to improve consumers` confidence in the insurance industry and to ensure adequate protection of it. During the last two years, insurance companies have faced the challenging process of adaptation and market consolidation under IDD and GDPR regime requirements. The main strategies for stimulating the development of the insurance market in the next few years will focus on diversifying the business model of insurers, increasing the penetration of insurance products among consumers (including by digitalisation) and consolidation of the legislative framework based on previous experience. The insurance industry should focus on measures to permanently update and simplify the distribution of insurance products. This objective may be achieved by diversifying distribution channels. One potential approach would be to increase credit institutions’ involvement in the distribution chain, which would build on customers’ confidence in this market sector.  


Moreover, it is particularly important for the insurance market to take all necessary steps to generate customers’ interest in life and health insurance products, by making these more accessible and attractive, as it has been proven that stimulating the availability of insurance products is the most useful way to encourage consumers to see their benefits and purchase them. 



The regulator should maintain a close dialogue with the insurance industry to ensure the correct implementation of legal provisions, and avoid wrong interpretations. Poor implementation has a negative effect on the insurance market, both for insurers and for their customers. 
Insurers should also work to improve legislation and apply it correctly to set best practice within the market.  The industry should issue a code of conduct and a code of ethics for setting best practices among insurers. This would bring significant benefits to the entire insurance process. 

PAID, an insurance pool to protect Romanians against the impact of natural disasters

PAID is an insurance pool set up in 2009, after a study by the World Bank, to provide cover against earthquakes, flooding and landslides. The earthquake risk is significant in Romania, with 2 major earthquakes during the 20th century (in 1940, with a magnitude of 7.4 and in 1977, 7.2). Legislation sets out a requirement for homeowners to take out insurance cover for natural disaster risk up to an insured amount of EUR 20,000, but local municipalities do not carry out inspections and do not enforce the penalties set out in law. 


The yearly premium of EUR 20 for an insured sum of EUR 20,000, set by the 2009 law, is much lower than the EUR 34 recommended initially by the World Bank after thorough modelling. PAID was set up as a private company, with 12 insurers incorporated in Romania as its shareholders.  PAID is distributed by 21 insurers, which are also involved in the sale of optional home insurance for the risks of natural disasters above EUR 20,000 and for the other types of risks (fire, theft, liability).

Since August 2013, it has only been possible to cover the risk of natural disasters by PAID, and since mid-2015, it has been mandatory to subscribe to a PAID policy first before subscribing to an optional policy. PAID has now become a robust company, which is profitable, and which meets European Solvency 2 requirements.


The artificially low premium set by the 2009 law does not allow the purchase of enough reinsurance to face an extreme event. In the case of an extreme event like the 1977 earthquake, PAID would not be able to pay all claims.

With PAID’s current portfolio the % penetration rate is far too low for mandatory insurance. This low penetration is a major exposure for homeowners and for the state budget. An earthquake comparable to that of 1977 would create damage to housing in the range of EUR 5 billion, while only 1.5 billion is insured by mandatory PAID insurance and by optional insurance. The exposure of the state budget is, consequently, huge. Moreover, there would be a likely surge in the price of construction material due to high demand. 



The FIC recommends the correction of the policy premium deficit by the introduction of a 10% deductibility on the EUR 20,000 sum insured (meaning that in the case of a claim, the first EUR 2,000 of damage would not be indemnified by PAID). This solution has been thoroughly researched and discussed with ASF.

The FIC recommendation is to gradually increase the penetration of PAID; after the removal of the premium deficit indicated above, the law should be amended: 

  • To increase the commission level (currently 10%, i.e. only EUR 2 to cover sales incentive and administration costs) in order to make it affordable to sell a PAID policy as a stand-alone item.
  • To allow other distribution channels than home insurance companies to sell PAID policies, so enabling, for example, bundling of PAID policies with utilities.

Encouraging development of the life and health insurance market

Life insurance protects people and their families in cases of accidents and death, prevents financial collapse and avoids a family becoming dependent on the public social assistance system. Stimulating private behaviour is a measure of protection applied by most OECD countries and many European Union countries. In Romania, life insurance has developed slowly and now has a penetration rate of only 0.29% of GDP. 

Romania already has one of the highest rates of social security contributions in Europe. Moreover, projected demographic change will increase pressure on the social security budget and have a negative impact on economic growth in the long term, as well as leading to a likely fall in the amount of welfare available to Romanians.



To stimulate voluntary financial protection and support the development of the life and health insurance market in Romania, the FIC recommends the application of a tax incentive for the purchase of life and health insurance policies with deductibility for both employees and employers.

Boosting the distribution of insurance through electronic means

Since the regulation in 2015 of the selling of insurance products using electronic means, the insurance industry in Romania has taken advantage of the opportunities offered by digitalisation.  There are still substantial differences between various types of distributors, such as agents, brokers, credit institutions, insurance undertakings, travel agents and car rental companies in relation to the right to develop electronic methods for the distribution of insurance products. 

A level playing field between distributors is essential. Distributors should benefit from the same rights in relation to the development of electronic methods for the distribution of insurance products.   


This will firstly have a positive impact on the consumer, as it will be a guarantee that the same level of protection applies regardless of the channel through which customers buy an insurance product, whether directly from an insurance undertaking or indirectly from a distributor.  Secondly, it will make it easier for customers to access agents offering insurance products, credit institutions and retailers which sell insurance products on an ancillary basis, such as travel agents and car rental companies.



The distribution of insurance products through electronic means should be encouraged by enlarging the category of the distributors that are permitted to develop them. 


Since their launch in 2007-2008, private pension funds in Romania have reached combined net assets under management of almost EUR 15bn, with their portfolios exhibiting a balanced mix across asset classes. Due to their increase in asset size, pension funds are now a strategic investor on the local financial markets, playing an important role on both the Romanian bond and equity markets. With over EUR 2.5bn invested in BVB listed equity and over 10 years of holding participations in the local listed issuers, pension funds are currently acting as strategic stakeholders in the corporate governance structure of the companies which operate them. In terms of exposure, private pension funds hold above 90% of their assets domestically and retain a rather low risk profile, with 75%-80% of all holdings invested in money market instruments and various bonds. Their main role is to provide the much-needed capital for development, contributing to the financing of private or public listed companies and the optimal allocation of resources in the economy via the financial markets. Recent legislative developments have enlarged the eligible investment universe by adding asset classes such as private equity, real estate or public private partnerships. These instruments support the additional channeling of pension fund assets into alternative vehicles that are also contributors to the development of the local economy. For example, they might fund a group of companies in need of finance for their early stages or on a larger scale infrastructure project such as a motorway or a hospital.


Recent legislative developments have enlarged the eligible investment universe by adding asset classes such as private equity, real estate or public private partnerships. These instruments support the additional channeling of pension fund assets into alternative vehicles that are also contributors to the development of the local economy. For example, they might fund a group of companies in need of finance for their early stages or on a larger scale infrastructure project such as a motorway or a hospital.

Fortunately, the mandatory private pension system (2nd Pillar) has successfully overcome the negative effects of GEO 114/2018 and has bounced back, thanks to the partial revocation of some of the most damaging measures through GEO 1/2020. Currently the risk of (partial or total) nationalisation of these pension funds by the Government has been averted. The FIC believes that maintaining a strong and legally predictable private pension system (especially the 2nd Pillar) is critical to improving the levels of investment in and liquidity of capital markets, which are essential for consolidating the newly acquired status of the Bucharest Stock Exchange as an Emerging Market.


Despite the difficult economic conditions generated by the Covid-19 crisis at the beginning of 2020, the local private pension fund system has proven its resilience, as the performance exhibited by all local funds turned positive at the end of September 2020. Moreover, the 5 year annualised performance, as published by the regulator, shows that the pension funds have displayed a positive real yield, thus preserving the purchasing power of invested contributions for their participants.



Private pension funds make up a solid bedrock of national capital, which can be used to consolidate financial markets and develop infrastructure. They also act as a stabiliser for the financial markets as they channel the incoming contributions into the economy and support the public debt by investing in the instruments issued by the Ministry of Finance. Consequently, the FIC considers that the continued development of Pillar 2, by phasing in contributions as provided initially by law, would bring significant benefits. We also recommend that the Government should continue the privatisation of state-owned-companies through the Bucharest Stock Exchange.


The last two years have been marked by numerous amendments to the legislative framework and lively discussions about the future of Pillar 2 pensions in Romania. First, a new minimum share capital limit to manage Pillar II pension funds (percentage of the contributions) was introduced. At the same time, both the contribution fees and the management fees for Pillar II were significantly reduced. Additionally, the possibility for participants to transfer from Pillar II (private) to Pillar I (public) was introduced. All these measures significantly damaged the profitability and capital requirements of the administrators, raising the risk of no longer being a going concern under these difficult business conditions. However, a few months later, the minimum share capital limit to manage Pillar II pension funds (percentage of contributions) was changed.  After another few months, a new change to the minimum share capital limit to manage Pillar II pension funds was enacted (the new minimum reverted to the initial levels set by the primary legislation), while the option for participants to transfer from Pillar II (private) to Pillar I (public) was withdrawn.
All the changes set out above emphasise the high level of uncertainty surrounding one of the most important pillars of savings for most of population. Consequently, the FIC believes that maintaining a strong and legally predictable private pension system (especially Pillar 2) is critical to the sustainable development of the pension system.  


 After another few months, a new change to the minimum share capital limit to manage Pillar II pension funds was enacted (the new minimum reverted to the initial levels set by the primary legislation), while the option for participants to transfer from Pillar II (private) to Pillar I (public) was withdrawn.
All the changes set out above emphasise the high level of uncertainty surrounding one of the most important pillars of savings for most of population. Consequently, the FIC believes that maintaining a strong and legally predictable private pension system (especially Pillar 2) is critical to the sustainable development of the pension system.  



When legislation is changed, quality over quantity is always preferable. The authorities should maintain a close dialogue with all involved stakeholders, so that expert input can be given in the early stages of the legislative process on any potential negative impact over the private pension industry. 


Over the past 2 years, EU member states have been legally required under recent landmark EU legislation to align their national legislative frameworks to European standards, in financial regulatory fields including shareholders’ rights and payment services, as well as in terms of anti-money laundering and combatting the financing of terrorism. Shareholders’ rights at companies listed on regulated markets have been strengthened by the landmark EU Directive 2017/828 on the encouragement of long-term shareholder engagement (“SRD II”), which amends the existing EU Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies. The basic transposition date of SRD II was 10 June 2019 and, in the face of the threat of an EU infringement procedure, the Romanian legislature finally transposed SRD II into Romanian law on 28 August 2020, through the amendment of Law no. 24/2017 on the issuers of financial instruments and market operations. SRD II is intended to encourage the long-term engagement of shareholders in order to strengthen corporate governance at listed companies. There is a 12-month implementation period, ending at the end of August 2021, for some of the provisions of the SRD II transposition, including on remuneration policy. While the overall impact of SRD II should be positive, issuers should be aware of it, and implement the obligations arising from it by summer 2021. In this respect, further clarity on implementation is necessary, which could be achieved by issuance of secondary legislation and guidance on specific matters such as remuneration policy and related party transactions. 


A further major legal development in Romania was the introduction of the new framework for the harmonisation of payment services across the EU, through the transposition of EU Directive 2015/2366 on payment services in the internal market (“PSD II”). PSD II, which repeals and replaces the previous EU Directive 2007/64/EC on payment services in the internal market, was finally transposed into Romanian legislation on 13 December 2019 through Law no. 209/2019 (“Law 209”) on payment services, repealing Government Emergency Ordinance no. 113/2009 (which had implemented PSD1 on the same date). Law 209 was passed after a delay of nearly 2 years from the prescribed transposition deadline of 13 January 2018. The PSD II framework facilitates the growth of open banking, specifically by adding two new payment services – payment initiation services and account information services. Its aim is to contribute to a more integrated and efficient European payments market by extending the scope of PSD1 to intra EU payments in all currencies and to payments where only one of the payment service providers is in the EU/EEA, for those parts of the transaction that are carried out on EU territory – i.e., the so-called ‘one-leg transactions’. 


Law 209 has also changed the approach to the application of certain exemptions, such as the limited network exemption, which may now be applied only after the criteria are checked with the National Bank of Romania, if the total value of payment transactions in a period of 12 months exceeds one million EUR. 
Moreover, to enhance payment transaction security, Law no. 209/2019 requires, in line with PSD 2, strong customer authentication (SCA), entailing the use of two or more of the following elements:

  • Knowledge (something only the user knows);
  • Possession (something only the user possesses); and
  • Inherence (something the user is).


In terms of SCA, Law 209 should be read together with the Commission Delegated Regulation (EU) 2018/389 on regulatory technical standards for strong customer authentification and common and secure open standards of communication, which has been applicable since 14 September 2019 and provides detailed requirements that payment service providers should consider and observe.
Under the Insurance Distribution Directive 2016/97/EU (IDD) consumers were offered greater transparency in relation to the price and costs of insurance products, as well as simpler, standardised insurance product information for non-life insurance products to help them make more informed decisions and established rules on business conduct to help consumers to buy products that meet their needs. In Romania the Directive has been implemented by Law no. 236/2018 on insurance distribution. However the effects were felt only in 2019 or 2020.
EU Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money institutions (ELMID) was transposed in Romania on 13 December 2019 through Law no. 210/2019 on electronic money issuance, revoking the previous law governing this area, (Law no. 127/2011 on electronic money issuance). This law contains the main rules to be observed by electronic money issuers.


On 23 January 2020, Law no. 243/2019 on the regulation of alternative investment funds (AIFs) entered into force, followed on 24 April 2020 by the entry into force of FSA Reg. no. 7/2020 on the authorisation and operation of AIFs. This new legal framework extends the existing regulations in the field of investment funds, through the introduction of a broad set of specific requirements on the authorisation and operation of AIFs.
Even though MiFID II has been transposed in Romania through Law no. 126/2018, followed by Reg. no. 2019 for its implementation, the effects of the introduction of this legislation are still being felt. For banks, these rules mean implementation of various organisational processes and procedures, changes to IT systems, reviews and amendments of the contractual framework and development of the reporting of transactions to relevant authorities. Moreover, the legislation brings important compliance challenges to brokerage houses acting on the capital market.


Another important piece of legislation for the financial sector is Law no. 129/2019, which came into force on 21 July 2019 (the “AML Law”), to implement Anti Money Laundering Directive 4 (Directive (EU) 2015/849 - "AMLD4") in Romania. The AML Law was further amended on 15 July 2020 by Emergency Ordinance no. 111/2020, which brought additional changes to Romanian AML legislation, to align it with the provisions of Directive (EU) 2018/843 (“AMLD 5”). 
The most important provisions and requirements of the AML Law include:

  • Declaration and registration of the beneficial owner’s data with relevant public registries and keeping records of such data and identification measures.
  • Extension of the scope of reporting entities, by also including other relevant players, such as: gambling service providers, providers engaged in exchange services between virtual currencies and fiat currencies, custodian wallet providers, persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by art galleries and auction houses, where the value of the transaction or a series of linked transactions amounts to EUR 10 000 or more. 


  • The requirement to set-up internal policies and rules, as well as internal control/audit mechanisms.
  • A prohibition on the issuance of bearer shares.
  • Substantial fines, which are applied to total reported revenues.

Romania implemented PSD2, AMLD4 and AMLD5 only after infringement procedures were started by the European Commission. 


Given the close links between the financial sector and  electronic identification and trust services, specific attention should be paid to correlating Romanian legislation with Regulation (EU) no. 910/2014 (“e-IDAS”), given that Romanian Law no. 455/2001 on electronic signatures has not yet been repealed, even though it is obsolete. We note that draft legislation on repeal and application of e-IDAS is still pending, although already adopted by the Senate .



Both Government and Parliament, in their capacity as initiators of legislation for the transposition of European law, should make it a priority to involve professional associations and other interested and relevant entities in working groups, with the aim of identifying the best implementation options.  Existing local practices, the local context and existing local laws should also be considered when transposing EU legislation, with the aim of effectively achieving its real objectives. Moreover, successful implementation of EU legislation involves more than reproducing the directives into national laws. It also requires time and effort to be devoted to completing the process by issuance of secondary legislation. Thorough business and operational impact analyses need to be conducted together with market participants, as the necessary clarity and detail can only be set out in the implementation norms. Furthermore, the process of implementing a directive into national law should aim to properly fulfill this purpose, through clear and predictable legislation, without the need for further amendments of transposition laws. 

In this respect, in the case of complex EU regulations, such as that mentioned above, we believe that the authorities should consider the proportionality principle, when issuing secondary legislation or imposing compliance rules, considering the emerging status of the Romanian market. One way to implement this principle is through Romanian transposition laws or the secondary legislation, which should not impose stricter obligations than the minimum EU provisions.

To enhance the clarity and predictability of legislation in the financial sector, issuance of official guidelines by the relevant authorities – the National Bank of Romania, the Financial Supervision Authority, the Financial Intelligence Unit, etc. - would help all players in the market, considering that many concepts and requirements continuously generate practical implementation issues. 

Timely cooperation between lawmakers and market participants and sharing and acknowledgment of implementation cases/examples in other EU Member States, together with proper consultation of relevant European institutions in the implementation process, are therefore the right ingredients for the effective transposition of EU regulations. 

The recent transposition of SRD II signals a move towards more shareholder involvement in the oversight and governance of publicly listed companies in Romania. The new rights facilitate the ability of shareholders to exert meaningful influence over the strategic direction of companies. We recommend that secondary legislation should be issued for its implementation or guidelines for complex aspects arising from SRD II such as remuneration policy and related party transactions, to help issuers to make the operational and structural changes required in order to comply with the new provisions.

The introduction of third-party payment service providers challenges the current status quo and the conventional structure with respect to payment services, All involved parties along with the authorities should support the growth of this sector, for the final benefit of consumers.


Since 2014, the Romanian capital market has passed through a number of reforms which aimed to improve the investment landscape. Their main focus has been on: easing investors’ access to the market and fiscal compliance, reducing the cost of the market, improving the servicing of investors’ rights, simplifying procedures related to primary markets for equities and bonds and developing the market infrastructure. Moreover, the largest IPO of a state-owned company (Electrica) in the history of the Romanian capital market took place in 2014, as well as the unfreezing of the IPOs of privately-owned companies, starting with Medlife in December 2016 and followed by several other companies in the subsequent years. More recently, we have observed increased interest from SMEs in accessing financing on capital markets, either through equity financing or through bonds. Even though the amounts are still small, the increased interest from local entrepreneurs is encouraging. After several years of effort, the Romanian Stock Exchange met the nine criteria needed to be promoted to Secondary Emerging Market Status on the FTSE Russell global index. With effect from September 2020, two Romanian companies, Banca Transilvania (TLV) and Nuclearelectrica (SNN) met the necessary criteria to be included in the Emerging Markets indices. 


The effective promotion to Emerging Market status will allow the Romanian capital market and economy to absorb new funds in the coming years and sends a strong signal to privately-owned and state-owned companies that they can grow significantly via the stock market. New investment funds that manage billions of euros will be able to invest in the Romanian companies listed on the BVB, which was previously impossible due to the restrictions generated by the country’s former Frontier Market status.

The Emerging Market status should be consolidated by increasing the number of companies included in FTSE Russell Indices. This will increase the representativeness of Romania in the indices and attract more capital towards Romanian companies. An important goal remains achieving an upgrade to Emerging Market status with the index provider MSCI. MSCI is the main provider of EM indices with significantly more investment funds tracking the MSCI EM indices than FTSE Russell. MSCI requirements are split into qualitative and quantitative. Qualitative requirements are already met by the BVB, while to achieve the quantitative criteria at least three companies need to meet the minimum requirements for size and liquidity. Banca Transilvania is the only company that constantly meets the requirements, while OMV Petrom and SNGN Romgaz only periodically meet the thresholds. 


BRD Groupe Societe Generale and Societatea Energetica Electrica are two other candidates that could meet the requirements in the future. Hidroelectrica’s listing remains an important topic as it would be large enough to allow the Romanian stock market to comply with the outstanding MSCI criteria (single stock and broad market liquidity criteria) and the FTSE Russell criterion (broad market liquidity criterion).  

Corporate governance remains an important topic for most State Owned Enterprises (SOEs), where in many cases the board is appointed on discretionary criteria rather than based on experience in a specific field. In addition, temporary mandates for the board lead to difficulty in defining a long-term strategy for the company. Further development towards both increasing the presence in FTSE Russell indices and entering the MSCI Emerging Market index is needed for the Romanian capital market to become a viable financing alternative for Romanian companies, and to allow the Romanian economy to better absorb shocks while increasing the valuation for Romanian businesses (Emerging Markets companies are more highly priced than Frontier Markets companies). 


). Moreover, this would aid the development of the pensions system and local institutional investors, support the privatisation programme of state-owned companies, and increase the transparency and performance of Romanian companies (both state and privately owned) by applying corporate governance standards, as per the Corporate Governance Code and related regulations. Becoming a representative member of Emerging Markets indices would benefit not only the capital market, but also the whole economy of Romania.  



We think now more than ever that having a strong local capital market is vital for Romanian savers, investors and companies.  We echo the comments of Valdis Dombrovskis, Executive Vice-President of the European Commission: “The capital markets union is a major element of our post-coronavirus recovery strategy. Savers and investors will play a vital role in getting the economy moving again and they need to have the confidence to invest through capital markets. And companies need to be able to access diversified sources of market-based financing anywhere in the EU”. For the Romanian economy to develop on a strong footing in European Union, the capital market needs to be actively developed and strengthened, for the benefit of local companies, savers and the overall economy. 

The programme for state owned companies to be listed on the BVB should be continued, by both accelerating the listing of new companies on the capital market, as well as by encouraging SPOs for already listed companies. There are several suitable IPO candidates, such as Hidroelectrica, CE Oltenia, Romtelecom, Bucharest Airports, Tarom, CFR, Salrom, Constanta Port, and CEC Bank.

The listing procedures should be formalised in a multi-year strategy approved by the Government, where companies being prepared for listing are named, with clear timelines and expected listing dates set for each of them. For the transactions to have high chances of success, stakes to be listed should be at least 20% of the total shares issued by these companies. Organisation of all IPOs and privatisations should be centralised under one government entity, which should help ensure the highest market standards for each transaction. Consequently, a formalised decision- making process related to initiation of the listing process should be established.  

An experienced team of consultants should be involved in the completion of the listing process from the stage of approval of the privatisation strategy. The remuneration of the privatisation committees should largely focus on the completion of the privatisation process so that delays are avoided.

Considering the oversubscription to retail tranches in previous public offers, the FIC recommends that the government should offer dedicated retail tranches to stimulate retail investors to buy shares in the public offers of state-owned companies and thus they will be encouraged to act as active participants.

Corporate governance in state owned companies should be improved. Corporate governance of State-Owned Enterprises (SOEs) is a prerequisite for sound preparation of a company for an IPO and this will continue to be enhanced after the company becomes listed. The listing of minority stakes in state-owned companies provides a framework in which those companies can become more efficient, gain greater visibility for the business environment and contribute to sustainable economic growth in Romania. 

Application of Corporate Governance standards should be a priority and the legislation should be enhanced to impose higher corporate governance standards. 
Support should be given to the private pension sector both for the long-term sustainability of the pension system and for the development of the Romanian capital market. Pension funds are the main institutional investors in the capital market and one of the largest investors in Romanian government bonds, thus providing stability and liquidity. 

A developed market of local long-term investors provides a solid base for financing both local companies and the Romanian government, thus increasing the resilience of the economy. The regulatory framework for Pension Funds should be updated to:

  1. Allow greater flexibility in investment policy including permitting investments in asset backed securities.
  2. Allow investments in corporate bonds which are not rated or which are sub-investment grade (the Romanian state is BBB, so most potential issuers are non-investment grade or do not have a rating; moreover, pension funds can invest in any listed equity without a rating restriction and thus from a risk perspective a bond investment would be safer). This will also support the funding diversification of local companies and overall development of the capital market. market. 
  1. Lift the restriction on trade with the depository bank / companies from the same group. This restriction hinders best execution policies by eliminating a potential trading partner.
  2. Increase the limit on maximum investments in investment funds / ETFs. In developed countries investments funds are one of the most frequently used instruments by pension funds for the implementation of investment strategies. This allows the funds to be more efficient by avoiding multiple trades (some indices have hundreds of constituents) and concentrating on choosing the right asset allocation instead of stock/bond picking. 

Maintaining the country rating is also a priority given that Romania’s rating is the lowest in the investment grade category. A potential downgrade would lead to higher financing costs for the Romanian state and consequently for Romanian companies, which would hence be at a comparative disadvantage vs regional competitors.

Fiscal bureaucracy related to capital gains tax is frequently an impediment for individual investors. In the case of bank deposits, the tax is withheld directly by the bank with no involvement from the client. In the case of capital markets, the bureaucracy is significantly higher and for small individual investors it represents a burden that few are ready to take on themselves. As such, the fiscal environment for capital market investors should be simplified by allowing taxation at source together with the implementation of fiscal incentives to attract long-term investors willing to invest either indirectly, by subscribing to equity funds, or directly, by investing in companies listed on the stock exchange. (Currently Romania has one of the highest percentages of financial assets in bank deposits at EU level).

As such, the fiscal environment for capital market investors should be simplified by allowing taxation at source together with the implementation of fiscal incentives to attract long-term investors willing to invest either indirectly, by subscribing to equity funds, or directly, by investing in companies listed on the stock exchange. (Currently Romania has one of the highest percentages of financial assets in bank deposits at EU level).

A proposal endorsed by all market players (the Bucharest Stock Exchange, the Brokers Association and the Asset Management Association) has already been submitted to the Ministry of Finance to address these issues. Moreover, fiscal measures should be introduced to stimulate financing of companies through the capital market. 

A level playing field should be established for direct and indirect investments in government bonds. Currently, direct investments in government bonds are tax exempt, while investments made into an investment fund that invests in government bonds are taxed. A level playing field would enhance the distribution of investment funds that invest in government bonds, thus improving the Romanian Government’s distribution of bonds to retail investors (investment funds are distributed through all major banks in Romania including in many cases on online platforms), reduce the cost of funding (currently the Romanian government is paying a premium of up to 100 bps in order to sell government bonds directly to retail investors) and improve the maturity distribution of debt. (An investment fund buys bonds all across the curve while individual investors have a strong preference for short and medium term bonds).