Regulatory amendments to the Romanian private pension funds activity

On 9 September 2013 the Romanian Financial Supervisory Authority (“FSA”) published in the Official Gazette several norms regulating the activity of private pensions sector: (i) Norm 8 of 2013 supplementing Norm 11 of 2011 regulating the investment and assets evaluation of private pension funds (“Norm 8/2013”); (ii) Norm 9 of 2013 amending Norm 3 of 2006 for the authorization of voluntary pension fund (“Norm 9/2013”); and (iii) Norm 10 of 2013 amending Norm 4 of 2007 for the authorization of privately managed pension funds (“Norm 10/2013”).

Under the new provisions of Norm 8/2013, the administrators of privately managed pension funds (pillar II pension funds) and of voluntary pension funds (pillar III pension funds) are allowed to invest assets of the pension funds in corporate bonds issued by certain Romanian entities (“Norm 8 Entity”). Characteristics of a Norm 8 Entity are as follows: (i) the Romanian state owns at least 33% of its share capital; (ii) the average total turnover for the last three completed financial years is not lower than RON 500 million (approx. EUR 111 million); and (iii) the entity has reported a profit to the Romanian tax authorities, in at least two of the last three financial years. Further, Norm 8 Entities can be rated below the rating of Romania and/or below BB-, BB-, Ba3 ratings of Fitch, Standard and Poor’s or Moody’s, respectively or unrated.

The provisions of Norm 8/2013 are applicable for a period of two years from 9 September 2013, the date of their publication in the Official Gazette. At the expiry of the two-year term, the corporate bonds in Norm 8 Entities held by the private pension funds can remain in their portfolio until they mature.

Norms 9/2013 and 10/2013 effect the FSA’s amendment of the provisions regulating the establishment of pillar II and III pension funds, in accordance with the provisions of the New Civil Code (“NCC”), especially those regulating the civil partnership agreement (based on which the private pensions funds are established as civil partnerships). The NCC states the requirement of unanimity of all members of the fund so as to modify provisions of the civil partnership agreement. In practical terms, it is almost impossible to reach the agreement of all fund’s members if it is considered that: (i) each pillar II fund has, according to the latest data released by the FSA on 28 August 2013 in the Informative Report no. 7 of 2013, at least 190,000 participants; and (ii) each pillar III fund has, as per the FSA data released on 28 August 2013 in the Informative Report no. 7 of 2013, at least 3,700 participants. The NCC failed to indicate any exception to this rule requiring unanimity, thus, representing a real barrier in the efficient management of pension funds.