Romania achieves medium overall compliance with international standards and codes, with a score of 50 out of 100 in our Standards Compliance Index. Romania's adherence to best practices in the area of macroeconomic fundamentals is progressing towards full compliance. However, in the areas of market infrastructure and financial supervision, its performance is mixed. Romania achieves high levels of compliance in the banking supervision area, but it is non-compliant with international standards in accounting. There is insufficient information publicly available to assess Romania's compliance in the areas of payment systems and insurance supervision. Romania is harmonizing its auditing standards with the revised international codes. It has sound corporate governance, insolvency, anti-money laundering, and securities regulatory frameworks, but there are gaps in implementation.

Macroeconomic Policy and Data Transparency

On May 4, 2005, Romania became a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS). Romania meets all specifications for the coverage, periodicity and timeliness of data and disseminates advance release calendars for all data categories. In its 2007 Annual Observance report, the IMF notes that Romania met all SDDS requirements at the time of subscription. Similarly, as is clear from both the IMF Article IV Consultation of 2007, as well as the data made available on the IMF's Special Data Dissemination Standard (SDDS) website, Romania has made significant progress in the area of data reporting. Information on the SDDS website indicates that Romania satisfies the conditions for access, integrity, and quality for most data categories. In the areas of producer price index and central bank's analytical accounts, Romania has availed itself of the IMF's timeliness flexibility option. The IMF's 2007 Article IV Consultation report, however, cautions that data quality remains problematic in the areas of national accounts, prices, fiscal data, and balance of payments. More »

In 2003, the International Monetary Fund (IMF) published its Financial System Stability Assessment (FSSA) of Romania, in which it reported that the National Bank of Romania, (NBR) practices very good transparency in the planning and implementation of monetary policy. With regard to the clarity of roles, responsibilities, and objectives of monetary policy, the NBR's practices are also deemed to be "high," whereas, for the principles of public availability of information, as well as accountability and assurances of integrity, the FSSA rated Romania's transparency practices as "good." Since the time of the FSSA, the NBR has further revised its policies and procedures in order to bring them into alignment with the requirements of European Union accession, and many of these revisions have contributed to the improvement of transparency. Romania became a subscriber to the IMF's Special Data Dissemination Standard (SDDS) in May 2005, and meets or exceeds nearly all requirements for timeliness, periodicity, and coverage. On January 1, 2007, Romania acceded to the European Union. It currently aims to adopt the Euro in 2012 or soon thereafter. More »

Since the filing of the International Monetary Fund's (IMF) 2002 Report on the Observance of Standards and Codes (ROSC), Romania has significantly progressed in fiscal policy transparency, motivated by the goal of European Union accession. Accession took place on January 1, 2007. Legislative reforms in 2002 and 2004 helped bring Romania into greater compliance with the IMF Fiscal Policy Transparency Code, particularly with the passage of the Law on Public Finance and the consolidation of fiscal legislation into the Fiscal Code of 2004. On May 4, 2005, Romania became a subscriber to the IMF's Special Data Dissemination Standard. More »

Institutional and market infrastructure

Romania's insolvency legislation is comprehensive, and its provisions regarding the liquidation and reorganization of troubled firms are largely consistent with international standards. According to a survey conducted by the European Bank for Reconstruction and Development (EBRD) in 2003, Romania's legislation has a high overall degree of compliance with the international standards of a number of organizations, including the World Bank. However, the EBRD assessment looks only at the text of the insolvency law, and makes no judgment as to its efficacy or enforcement. However, a 2006 report by the EBRD on the commercial laws in Romania did assess the effectiveness of the insolvency framework. The report concluded that there exists a large "effectiveness gap" between Romanian insolvency law and its application, and suggested that more reforms should be undertaken to improve the practical implementation of the law. It was also noted that, even though the reorganization provisions of Romanian insolvency law were relatively weak compared to the rest of the legal provisions, it nonetheless was well-defined and provided for a reasonably functional process. The report suggested that the law would benefit from incorporating a more rigorous definition of what constitutes insolvency, provide for set-offs, and more clearly indicate how bankruptcy affects the rights of secured creditors. More »

According to the 2007 Ernst & Young "Doing Business Guide," pursuant to Ministry of Economy and Finance (MoEF) Order No. 1752/2005, all companies are required to prepare financial statements according to Romanian statutory accounting rules, which differ from International Financial Reporting Standards (IFRSs). However, MoEF Order No. 1121/2006 requires listed entities to prepare an additional set of IFRS financial statements for the year ending December 31, 2007. Moreover, under MoEF Order No. 907/2005, banks, other credit institutions, and insurance companies have to prepare financial statements in accordance with IFRSs for the year ending December 31, 2006. Other public interest entities may prepare an additional set of financial statements pursuant to IFRSs for internal purposes. The Deloitte IAS Plus website indicates that Romania, which became a member of the European Union (EU) on January 1, 2007, complies with European Commission Regulation No. 1606/2002 by requiring listed companies to prepare their consolidated financial statements according to IFRSs. More »

Corporate governance legislation in Romania has undergone major changes in the run-up to its accession to the European Union (EU). Prior to the Romanian adoption of the acquis communautaire, the EU body of law, the European Bank for Reconstruction and Development (EBRD) had assessed Romania's legislation in 2004 as being in "Low Compliance" with the Organization for Economic Cooperation and Development's (OECD) "Principles of Corporate Governance". The most relevant laws for corporate governance are the Company Law and the Capital Markets Law 2004. The Company Law was amended in 2006, and again in 2007 by Government Emergency Ordinance 82/2007. According to the 2006 International Financial Law Review, the changes to the Company law were intended to incorporate the European aquis communautaire and OECD corporate governance principles. The objectives were to clarify the rights and duties of directors, improve shareholder protection and synchronize regulations governing mergers and acquisitions with EU law. Given this extensive legislative reform the focus of Romanian authorities, especially the National Securities Commission should now be on implementation and enforcement of the body of law. This view is supported by Duca et al., who in a 2007 paper note that Romania has made relatively large advancements in corporate governance; but suffers from frequent discrepancies between the written law and implementation of the law. More »

According to a 2005 self-assessment by the Romanian Body of Expert and Licensed Accountants (BELA), listed and large entities are audited by financial auditors who follow International Standards on Auditing (ISAs). The Romanian Chamber of Financial Auditors (CFA) is the agency responsible for the translation of ISAs. In its 2006 self-assessment, the CFA reports that the most recent fully translated ISA set was the one that became effective in 2003. However, as of November 2006, the CFA was in the process of translating the 2006 version of ISAs. Entities other than listed companies with a balance sheet total less than 5 million EUR are audited by censors. These audits are conducted pursuant to auditing standards issued by the BELA, which claims to have harmonized its standards with ISA requirements. However, there is insufficient information publicly available as to the extent of ISA harmonization that has been achieved. Romania, as a member of the European Union (EU), also has to comply with European Commission (EC) Directive 2006/43, which requires all statutory audits to be carried out on the basis of ISAs as adopted by the EC. In its 2007 Doing Business Guide, PricewaterhouseCoopers reports that the Ministry of Economy and Finance (MoEF), the BELA, and the CFA have begun their work on the implementation of the Directive. More »

In a 2007 Article IV Consultation report on Romania, the International Monetary Fund (IMF) notes that the legislative framework for anti-money laundering (AML) and combating the financing of terrorism (CFT), after recent updates, is currently in line with international standards. A 2007 report by the U.S. Department of State (DoS) also arrives at the same conclusion. According to the 2007 U.S. DoS report, the latest update of the AML law (in 2005) meets the requirements of European Union (EU) Directive 2001/97/EC and EU Directive 91/308/EEC. Nonetheless, both the 2007 IMF report and the 2007 U.S. DoS report conclude that the AML/CFT system in Romania is still lacking in many areas, especially with regard to the proper supervision of non-bank financial institutions. The 2007 U.S. DoS report also notes that the freezing of assets and confiscation regime could be further improved, and the Financial Intelligence Unit - the National Office for the Prevention and Control of Money Laundering - could enhance its reporting and investigation activities. In 2003 the IMF conducted an assessment of Romania's AML/CFT regime based on the old Financial Action Task Force (FATF) methodology, and concluded that Romania had a very high level of observance with the FATF's 40 recommendations and 8 special recommendations. However, the FATF revised its methodology in 2004, and there is no comprehensive assessment publicly available as to Romania's compliance with the revised FATF recommendations. More »

In its 2007 publication on Payment and Securities Settlement Systems in the European Union (EU), the European Central Bank (ECB) concludes that Romania has established a modern and efficient payment system, which is in line with those existing in other EU countries. This is largely a result of improvements made by the National Bank of Romania (NBR) and the banking community, particularly through the harmonization of major parts of the national legislation with EU legislation, as well as the introduction of a new, fully automated Electronic Payment System (EPS) at the end of 2005. The EPS has four components: the real-time gross settlement system (ReGIS) the automated clearing house system (SENT), the Settlement and Financial Instruments Registration System (SaFIR), and the backup and recovery system. As part of its reforms, the NBR issued several regulations, such as Regulation No. 1/2005 on Clearing Payment Systems, Regulation No. 2/2005 on Payment Orders Used in Credit Transfer Operations, Regulation No. 3/2005 on Direct Debits Executed Via the Automated Clearing House, and Regulation 10/2005 on the Facilities Granted by the NBR for Smooth Settlement within ReGIS. Also, Law No. 253/16 on Settlement Finality in Payment and Securities Settlement Systems fully implemented the EU Settlement Finality Directive. Finally, Law No. 119/19 implemented the EU Cross-Border Credit Transfer Directive. However, apart from the above descriptive information there is no publicly available information as to Romania's compliance with the Committee on Payment and Settlement Systems' Core Principles for Systemically Important Payment Systems. More »

Financial Regulation and Supervision

According to the 2003 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), the Romanian banking supervisory framework complies with a majority of the Basel Core Principles. The National Bank of Romania (NBR), which is the banking supervisor, has sufficient and efficient means to carry out its supervisory functions. On the other hand, in 2003, some shortcomings existed, particularly with respect to interest-rate risk, country risk, transfer risk, and operational risk management. At the time of the 2003 IMF assessment, the NBR was in the process of addressing weaknesses related to consolidated supervision and investment policies and procedures. Overall, per the PricewaterhouseCoopers 2007 report, Doing Business Guide, Romania in recent years has made significant changes to the banking legal framework in order to harmonize it with European Union legislation. This is reflected in a new banking law adopted at the end of 2006 and accompanying secondary legislation. More »

In its 2003 Financial System Stability Assessment (FSSA), the International Monetary Fund (IMF) found the Romanian securities regulatory framework to be compliant with best practices in many areas. However, the assessment also revealed shortcomings, particularly with respect to disclosure, transparency, and the integrity of the capital markets. The IMF recommended strengthening the enforcement powers of the National Securities Commission (NSC), enforcing listing requirements, delisting inactive companies, and improving transparency and disclosure of the Financial Investment Funds. The 2004 European Bank for Reconstruction and Development Securities Market Legislation Assessment, which benchmarks Romanian securities market legislation against the Objectives and Principles of Securities Regulation published by the International Organization of Securities Commissions, found Romanian legislation to be in medium compliance with international standards. More »

According to the International Monetary Fund's (IMF) 2003 Financial System Stability Assessment, Romania is at a developmental phase that requires greater institution-building and stronger prudential supervision. Although the Insurance Supervisory Commission (ISC) has been established, its supervisory processes and capacities are still underdeveloped and the regulatory framework needs to be strengthened particularly in the areas of corporate governance, internal controls, reinsurance, and prudential rules on assets and liabilities. The European Commission reports in its 2005 Comprehensive Monitoring Report that, although significant progress has been made in aligning Romanian insurance legislation with the applicable European Union directives, significant deficiencies remain, including in the areas of insurance mediation and the activities and supervision of pension institutions. The EC also recommends focusing the ISC's supervisory functions on risk-based supervision, enhancing cooperation with insurance companies, and strengthening staff training. However, there is insufficient information regarding Romania's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) in 2003. More »

Legend:

Credit Ratings

Moody's Baa3/Stable

Fitch BBB/Negative

Standard & Poor's BBB/Negative

Macroeconomic Data

2007 GDP (Current Prices): 166 billion USD (IMF)

2007 GDP (Per Capita): 7,697 USD (IMF)

2008 GDP (Growth Forecast): 5.4% (IMF)

2008 Inflation (CPI): 6.9% (IMF)

2007 Unemployment: 4.5% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 11.4 billion USD (UNCTAD)

FDI (Outward): 0.04 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)