ENEffective Insolvency and Creditor Rights Systems
According to reports published by and for the European Bank for Reconstruction and Development, including an assessment by R. Harmer and N. Cooper, Romania's insolvency legislation prior to 2006 was comprehensive and its provisions regarding the liquidation and reorganization of troubled firms were largely consistent with international standards. The EBRD found that Romania's legislation had a high overall degree of compliance with the international standards of a number of organizations, including the World Bank. A 2008 EBRD report on the commercial laws in Romania looked at the changes to Romanian insolvency since the passage of the 2006 Insolvency Act, which superseded the previous laws. The new law is described by the EBRD as a "significant improvement" to the previous legal framework, although the challenge now lies in effective implementation. The report found that the new law provided for a faster route to initiating insolvency proceedings and attempted to strike a balance in respecting both creditor and debtor rights and responsibilities. The creation of a National Association for Practitioners of Insolvency, to which membership is mandatory, has provided a vehicle through which professional training is provided and oversight is achieved. The Association also maintains a government-paid fund that covers the cost of insolvency administration when the debtor estate lacks resources to cover such expenses.
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NCInternational Financial Reporting Standards
In Romania, the Ministry of Public Finance (MoF) is the accounting standard setting agency. According to the Horlaci and Collins report, pursuant to Accounting Law No. 82/1991 (republished in 2008) and the MoF's Finance 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). A number of MoF's orders, however, introduce mandatory application of IFRSs for banks, other credit institutions, insurance companies, and listed companies. The MoF Order No. 2374/2007 eases the burden for the above-mentioned companies by allowing preparation of only one set of fincial statements as these companies are exempt from the requirement to also comply with the MoF 1752/2005 standards. Other public interest entities may prepare an additional set of financial statements pursuant to IFRSs for internal purposes. The European Commission clarified in a compliance table that Romanian accounting regulations conform to the EC Directives on accounting. In a 2008 self assessment by the Body of Expert and Licensed Accountants of Romania (CECCAR) an action plan was identified for improving the adoption and implementation of IFRS in Romania. The action plan stated CECCAR's intent to translate all new and revised standards as they are issued by the International Accountings Standards Board within ten days of their publication.
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ENPrinciples of Corporate Governance
In 2004 the European Bank for Reconstruction and Development (EBRD) had assessed Romania's legislation in as being in "Low Compliance" with the Organization for Economic Cooperation and Development's (OECD) Principles of Corporate Governance. Since the 2004 EBRD assessment, a number of amendments have been enacted in the run-up to Romania's accession to the European Union (EU) and adoption of the acquis communautaire, the EU body of law. The 2008 EBRD Corporate Governance Sector Assessment noted that these measures have improved the quality of legislation across the board and concluded that corporate governance legislation in Romania had reached "high compliance" with the OECD Principles. However, the actual results on a principle by principle basis of the EBRD Assessment reveal major shortcomings in the areas of responsibilities of the board, rights of shareholders, and disclosure and transparency. Nevertheless, progress can be observed in the development of corporate governance in Romania, such as in January 2009, when the Bucharest Stock Exchange published an updated Corporate Governance Code, which is required for all listed companies on a "comply or explain" basis. Still, with respect to the enforcement of the corporate governance framework, frequent discrepancies between the written law and implementation of the law can be observed, indicating that the challenge in Romania lies now particularly in enforcement.
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IDInternational Standards on Auditing
A 2006 KPMG report notes that Article 3(1) of Order 1752/2005 requires all public interest entities and companies which meet certain size criteria to be audited in accordance with International Standards on Auditing (ISAs) as approved by the Chamber of Financial Auditors of Romania (CFAR), an agency responsible for the adoption and translation of ISAs in Romania. As stated in its Action Plan prepared for the International Federation of Accountants (IFAC) in 2008, the CFAR intends to publish the latest 2008 version of ISAs translated in line with the IFAC translation policy by November 2008. However, as of February 2009, only the 2007 edition of ISAs was available on the CFAR's website. Entities not subject to the statutory audits, according to the 2007 self-assessment by the Body of Expert and Licensed Accountants of Romania (CECCAR), may choose to have audits performed by censors following Professional Standards developed by the CECCAR, unless ancillary legislation, such as the company law, compels them otherwise. These standards, the assessment notes, are "harmonized," but not identical, with ISAs.
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ENAnti-Money Laundering/Combating Terrorist Financing Standard
A 2008 Article IV Consultation report by the IMF reports that Romania recently updated its legislative framework for anti-money laundering and combating the financing of terrorism (AML/CFT) so as to fulfill the requirements set forth by the third EU directive on AML/CFT, and thereby bringing the country in line with international standards. The third EU directive requires that all EU member states implement the Financial Action Task Force's (FATF) recommendations. Moreover, the FATF, in its 2007-2008 Annual Report names Romania as one of the jurisdictions that have undertaken to implement the FATF's forty recommendations and nine special (40+9) recommendations. The Council of Europe's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) conducted a mutual evaluation of Romania's AML/CFT system against the FATF's 40+9 recommendations in May 2007. MONEYVAL published its findings in a July 2008 report, in which it concluded that Romania either complied or largely complied with over half of the FATF's recommendations and special recommendations. Although in theory, Romania has enacted legislation to criminalize money laundering and terrorist financing, the effectiveness and comprehensiveness of these laws does not appear to be robust. For example, the 2008 MONEYVAL report rates Romania as only partially compliant with FATF special recommendation II on the criminalization of terrorist financing since the country's law does not comply with one of the FATF's essential criteria on this recommendation. Romania is also rated as partially compliant with FATF recommendations 5, 10, and 13 on customer due diligence, record keeping and suspicious transaction reporting, respectively, since the assessment found significant shortcomings, including weakness in the regulatory framework with regards to these recommendations.
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IICore Principles for Systemically Important Payment Systems
In a 2007 publication, 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 European Union (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 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 2007 Annual Report (published in 2008) by the NBR mentions three payment systems currently operating in the country: (1) the real-time gross settlement (RTGS) payment system for large-value and urgent payments in domestic currency (ReGIS), (2) the central depository and securities settlement system for government securities and certificates of deposits issued by the National Bank of Romania (SaFIR); and (3) the payment system ensuring paper-based clearing of payments made via debit payment instruments (PCH). The ReGIS and SaFIR systems are owned and operated by the NBR. The NBR, however, does not identify which of these systems are systemically important in Romania. Furthermore, there is no publicly available assessment on Romania's compliance with the Committee on Payment and Settlement Systems' Core Principles for Systemically Important Payment Systems. Romania became a member of the EU in 2007. According to the IMF's 2008 Article IV Consultation, the Romanian authorities intended to have a Financial Sector Assessment Program Update conducted by the end of 2008.
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