New rules for non-banking financial institutions

New rules for non-banking financial institutions

The National Bank of Romania (“NBR”) Regulation no. 1/2017 (the “Regulation”) amending the NBR Regulation no. 20/2009 on non-banking financial institutions was published with the Official Gazette on 25 September 2017 and entered into force on 1 October 2017.

The Regulation sets forth new prudential rules to be complied with by non-banking financial institutions (“NBFI(s)”). Such rules were adopted to counterbalance potential risks arising from certain NBFIs’ business model relying on the provision of short-term, low-value credit products which involve high costs and which are mostly accessed by individuals already facing difficulties in managing their payment obligations. The risk is all the more significant as the demand for such loans increased, leading to consumer over-indebtedness potentially having systemic effects.

As a result, the Regulation sets forth two new criteria triggering the registration of NBFIs with the Special Registry held by the NBR and hence their supervision by the NBR. These new alternative criteria are:

  • the volume of loans granted over a period of three quarters (revealing the true dimension of an NBFI’s activity) exceeds RON 75,000,000 (equiv. of approximately EUR 16.3 million) and
  • the monthly average of the effective annual interest for consumer loans (revealing potential excessive risks) exceeds the limits in the table below:
    Maturity Effective annual interest for credits in lei Effective annual interest for credits in foreign currency
    Not exceeding 15 days 200% 133%
    16-90 days 100% 67%
    Exceeding 90 days 10 x NBR lombard rate 6.7 x NBR lombard rate

The Regulation also provides for additional capital requirements, 10 times higher than the maximal current requirements, for NBFIs providing loans having interest rates higher than the levels set forth in the table above. These new capital requirements will apply as of 1 February 2018 and may bring about changes in the current NBFIs market.

If you are interested in receiving further information on this topic, please do not hesitate to contact us.