Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

ROMANIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of January 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: March 25, 1998.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
Other security restrictionsMeasures have been taken to freeze the accounts and assets of listed individuals, groups, and organizations associated with terrorism. These measures were taken in accordance with UN Security Council resolutions.
References to legal instruments and hyperlinksEmergency Ordinance No. 159 (modified by UN Security Council Resolution No. 1390 of January 24, 2002); Common Position of the European Council of February 27, 2002; Government Decision No. 467 of May 16, 2002, for the approval of the list of legal entities and individuals suspected of committing or financing terrorist acts.
Exchange Arrangement
CurrencyThe currency of Romania is the Romanian leu.
Other legal tenderThe transferable ruble continues to be used as a unit of account for outstanding balances of the former CMEA.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe exchange rate of the leu is determined in the interbank foreign exchange market. Residents and nonresidents are allowed access to the interbank foreign exchange market without supporting documents. Credit institutions are authorized within their scope of activity to participate in the interbank market as intermediaries. Juridical persons other than authorized credit institutions may purchase or sell foreign exchange through intermediaries. Natural persons may purchase or sell foreign currency either through intermediaries or through foreign exchange offices authorized by the National Bank of Romania (NBR). The NBR quotes rates for 17 foreign currencies based on the rates for these currencies against the euro in the countries concerned. Foreign exchange offices conduct transactions with banknotes of all the above foreign currencies and accept traveler’s checks denominated in those currencies.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketDespite the turnover increase of the forward exchange market, its relative size declined to some extent in 2006, mainly because of the development of other derivative transactions.
Official cover of forward operationsn.r.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirementsPayments to and from countries with which Romania has bilateral payments arrangements are made only in convertible currencies and in accordance with the procedures set forth in those arrangements.
Controls on the use of domestic currencyn.a.
Use of foreign exchange among residentsUse of foreign exchange among residents for trading in goods and services is prohibited with certain exceptions.
Payments arrangements
Bilateral payments arrangements
OperativeThere are arrangements with the Democratic People’s Republic of Korea, and some former CMEA members, aimed at liquidating the balance of the CMEA accounts.
InoperativeThere are arrangements with Albania, Algeria, Costa Rica, Egypt, and Greece.
Regional arrangementsOn accession to the EU on January 1, 2007, Romania terminated its membership in CEFTA as well as all bilateral trade agreements, and adopted all EU trade agreements.
Clearing agreementsThere are no operative clearing arrangements currently in force. The former clearing arrangements with Bangladesh, the Democratic People’s Republic of Korea, and a few countries of the former CMEA are used only to settle previous balances.
Administration of controlThe NBR issues rules and regulations related to the control of foreign exchange transactions.
Payments arrears
PrivateYes.
Controls on trade in gold (coins and/or bullion)Processing of and trade in gold by natural and juridical persons are subject to authorization by the National Authority for Consumer Protection.
On domestic ownership and/or tradeYes.
On external tradeYes.
Controls on exports and imports of banknotesCustoms declarations are required for amounts equal to or in excess of the equivalent of €10,000 in foreign currency or in domestic currency. Undeclared amounts exceeding these limits are subject to confiscation.
References to legal instruments and hyperlinksNBR Regulation No. 4/2005, as amended by NBR Regulation No. 6/2005; NBR Regulation No. 4/2006; NBR Regulation No. 5/2006.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksNBR Regulation No. 4/2005 on the Foreign Exchange Regime, as subsequently amended.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsAccounts are blocked in accordance with international security restrictions.
References to legal instruments and hyperlinksEmergency Ordinance No. 159 (modified by UN Security Council Resolution No. 1390 of January 24, 2002); Common Position of the European Council of February 27, 2002; Government Decision No. 467 of May 16, 2002, for the approval of the list of legal entities and individuals suspected of committing or financing terrorist acts.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsDocumentation is required for all import payments.
Import licenses and other nontariff measuresEffective January 1, 2007, Romania applies all EU trade policies, including the community import licensing system, which is regulated by Council Regulation (EC) 3285/1994.
Negative listEffective January 1, 2007, Romania adopted all EU trade policies. Previously, Romania’s list of products subject to licensing procedures was as follows: (1) hunting and target-shooting weapons; firearms for spreading harmful irritating or neutralizing gas; arsenal weapons; ceremonial weapons; weapons using air or other compressed gas; assemblies, subassemblies, and devices that can constitute or function as firearms; and the ammunition for these types of weapons; (2) explosive materials generally used in economic activities; (3) substances frequently used for the illicit manufacture of narcotic drugs (precursors); (4) nonhazardous waste; and (5) products dangerous to public health and the environment.
Other nontariff measuresEffective January 1, 2007, Romania adopted all EU trade policies. Previously, there was a customs fee of 0.5% for imports other than those from the CEFTA, EFTA, the EU, Israel, and Turkey.
Import taxes and/or tariffsEffective January 1, 2007, Romania adopted all EU trade policies. Previously, tariff rates ranged between zero and 220%, averaging about 19%.
State import monopolyNo.
References to legal instruments and hyperlinksCouncil Regulation (EC) 3285/94; modified Council Regulation (EC) 139/96; Council Regulation (EC) 2315/96, Council Regulation 2474/2000; Council Regulation (EC) 2200/2004; available at www.europa.eu.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasEffective January 1, 2007, Romania adopted all EU trade policies. Previously, export licenses were required for statistical purposes for certain raw materials and minimally processed goods, as follows: nonferrous concentrates, ashes, and residues; raw hides and skins of cattle and swine; wood in the rough; sawn wood; waste and scrap of paper or cardboard; ferrous and nonferrous waste and scrap; precious metals, stones, and objects made thereof; substances frequently used for the illicit production of drugs (precursors); radioactive materials; nuclear installations and apparatus based on the use of x-rays or of alpha, beta, or gamma radiation; hunting and target-shooting weapons; firearms for spreading harmful, irritating, or neutralizing gas; weapons; assemblies, subassemblies, and devices that can constitute or function as firearms; ammunition for these types of weapons; and explosive materials generally used in economic activities.
Export taxesNo.
References to legal instruments and hyperlinksCouncil Regulation (EC) 2603/69; modified by Council Regulation (EC) 2604; Council Regulation (EC) 3918; available at www.europa.eu.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersThere are no controls on these transactions; however, payments and transfers are subject to documentary procedures.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instruments
On money market instrumentsEffective January 1, 2007, these transactions do not require NBR authorization.
Controls on derivatives and other instrumentsEffective January 1, 2007, these transactions do not require NBR authorization or approval for issuance by the National Commission for Securities (NCS).
Controls on credit operationsNo.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsThe following transactions are restricted: (1) purchase of agricultural and forestland and other land outside town limits for a transition period of seven years after EU accession and (2) purchase of land inside town limits for secondary residence for a transition period of five years after EU accession.
Sale locally by nonresidentsYes.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksNBR Regulation No. 4/2005 on the Foreign Exchange Regime, as amended; Romania’s Position Paper and the Two Complementary Position Documents for Chapter 4—Free Movement of Capital (which stipulate transition periods for the maintenance of the above restrictions after January 1, 2007).
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsLaw No. 58/1998 on Banking Activity was repealed and new legislation took effect January 1, 2007: Government Emergency Ordinance No. 99/2006 regarding Credit Institutions and Capital Adequacy.
Lending locally in foreign exchangeEffective January 1, 2007, the limit of 300% on the exposure of credit institutions from foreign exchange loans was eliminated. Previously, the exposure of a credit institution from foreign exchange loans to legal entities and individuals, before the deduction of specific credit risk provisions, was limited to 300% of its own funds, a percentage applied to both individual and consolidated loans, at the national level.



The provisioning costs for foreign exchange credits to unhedged borrowers are kept higher than for local currency lending.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsRatios on reserves differ according to the currency and residual maturity involved. Effective July 24, 2006, the reserve requirement rate is 20% (previously, 16%) for leu deposits. Effective March 24, 2006, the reserve requirement for foreign currency deposits is 40% (previously, 35%). The reserve requirement on foreign currency deposits includes foreign exchange inflows of all maturities, including maturities longer than two years. The reserve requirement for foreign currency deposits includes all deposits in foreign currency.
Liquid asset requirementsn.r.
Interest rate controlsn.r.
Credit controlsn.r.
Differential treatment of deposit accounts held by nonresidentsn.r.
Investment regulations
Abroad by banksA bank is not allowed to have an investment of 10% or more in the capital of a nonfinancial entity, either resident or nonresident, that exceeds 15% of the bank’s own capital. The total amount of investments outside the financial sector may not exceed 60% of the bank’s own capital. A bank may not acquire participations in a nonfinancial entity, either resident or nonresident, if as a result the bank will gain control over that entity.



In addition, NBR approval is needed if a bank intends to invest in a financial entity outside the EU, if this entity will be included into the scope of the bank’s prudential consolidation.
In banks by nonresidentsNBR notification is required for investments by residents or nonresidents of 10% or more in a bank’s capital. Within three months of notification, the NBR may oppose the acquisition.
Open foreign exchange position limitsThe daily maximum foreign exchange limits are 10% of a bank’s own funds for each currency and 20% of a bank’s own funds for all currencies in aggregate. For branches of foreign banks, the daily maximum foreign exchange limit is up to the domestic currency equivalent of €5 million.
Provisions specific to institutional investors
Insurance companiesn.r.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksRegulation No. 8/2005 amending Regulation No. 5/2002 on the Classification of Credits and Investments, as well as the Establishment, Adjustment, and Use of Credit-Risk Provisions, as further amended and supplemented; Government Emergency Ordinance No. 99/2006.
Changes during 2006
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsMarch 24. The reserve requirement for foreign currency deposits was raised to 40% from 35%.



July 24. The reserve requirement on local currency deposits was raised to 20% from 16%.
Changes during 2007
Arrangements for payments and receiptsJanuary 1. On acession to the EU, Romania terminated its membership in CEFTA as well as all bilateral trade agreements, and adopted all EU trade agreements.
Imports and import paymentsJanuary 1. Romania adopted all EU trade policies.
Exports and export proceedsJanuary 1. Romania adopted all EU trade policies.
Capital transactions
Controls on capital and money market instrumentsJanuary 1. NBR authorization was no longer required for money market and derivative transactions.
Controls on derivatives and other instrumentsJanuary 1. NBR authorization or approval for issuance by the NCS was no longer required for these transactions.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJanuary 1. Government Emergency Ordinance No. 99/2006 took effect, repealing Law No. 58/1998 on Banking Activity.



January 1. The limit of 300% on the exposure of credit institutions from foreign exchange loans was eliminated.

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