The third meeting of this year of the General Board of the National Committee for Macroprudential Oversight (NCMO) was held on 20 October 2022.

The NCMO was established by virtue of Law No. 12/2017 on the macroprudential oversight of the national financial system, thus ensuring that Recommendation of the European Systemic Risk Board (ESRB) No. 3/2011 on the macroprudential mandate of national authorities was implemented. The NCMO brings together representatives of the National Bank of Romania, the Government of Romania and the Financial Supervisory Authority. The NCMO’s mission is to ensure coordination in the field of macroprudential oversight of the national financial system by setting the macroprudential policy and the appropriate instruments for its implementation.

During the meeting, Board members examined analyses and adopted measures concerning macroprudential policy and systemic risk, namely the regular analyses on the recalibration of the countercyclical capital buffer and of the capital buffer for other systemically important institutions.

The NCMO General Board was informed of: (i) the results of the regular analysis on the systemic risk buffer, (ii) the impact of credit institutions’ funding plans on the flow of loans to the real economy, and (iii) the systemic risks identified across the domestic financial system.

A major item on the NCMO agenda consisted in the discussions on the warning[i] issued by the European Systemic Risk Board (ESRB) at end-September regarding the risks and vulnerabilities in the European Union financial system at the current juncture. The ESRB points out that credit institutions should pay close attention to capital, liquidity and provisioning policies, by taking into consideration the negative effects that may occur in the period ahead. The ESRB calls on relevant national and European authorities, market participants and private sector institutions to prepare for materialisation of tail-risk scenarios. In this vein, the ESRB encourages the use of micro- and macroprudential tools in order to build up capital buffers that may be subsequently released for supporting the real economy if and when macroeconomic conditions deteriorate.

The NCMO General Board approved NCMO Recommendation No. R/4/2022 on the countercyclical capital buffer. Based on the analyses that capture the marked rise in uncertainties about the magnitude of risks at national and international level, risks that can affect households’ disposable income and companies’ profitability, as well as amid the persistence of significant macroeconomic imbalances domestically, the National Bank of Romania is recommended to raise the countercyclical buffer rate by 0.5 percentage points as of 23 October 2023. Consequently, the applicable rate for this macroprudential buffer shall be 1 percent in October 2023. The liquidity and profitability indicators of the banking sector in Romania, which stand significantly above the EU average, allow for the consolidation of macroprudential policy without negatively affecting loan supply to eligible borrowers.

This measure furthers the process of macroprudential policy tightening at national level, in line with the European trend, amid the build-up of additional risks, and also responds to the ESRB call for increased vigilance in the near future. According to ESRB data, Romania is currently one of the 16 Member States that have in place or have announced the implementation of a CCyB higher than zero in the period from 2022 to 2023.

NCMO Recommendation No. R/5/2022 on the capital buffer for other systemically important institutions in Romania was approved. Thus, the National Bank of Romania is recommended to impose, starting 1 January 2023, at the highest level of consolidation, a capital buffer for banks identified as systemically important, based on data reported as at the reference date of 31 December 2021. This measure is subject to prior notification of the ESRB. The NCMO recommendation and the buffer rate applicable to each systemic bank will be published on the NCMO website by 1 December 2022.

The NCMO encourages credit institutions to have a very prudent conduct in the period ahead as regards the dividend distribution policy, conducive to strengthening capitalisation, in order to adequately respond to the turmoil that may become manifest in the near future. The NCMO will carefully monitor, in close cooperation with the National Bank of Romania, the way in which credit institutions calibrate their dividend distribution policy.

The General Board members decided not to voluntarily reciprocate the macroprudential measure of Germany, i.e. a 2 percent systemic risk buffer rate on all exposures secured by residential real estate located in Germany, given that the eligible exposures of the local banking sector to this country are immaterial.

The NCMO General Board approved the regulation amending NCMO Regulation No. 2/2017 on the methodology and procedures used for setting capital buffers and the scope of these instruments, in order to ensure the transposition of Article 62 points (22)-(23) of Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU. The amendment consists in repealing some provisions concerning the capital buffers that apply to investment firms in order to ensure harmonisation with the provisions of Directive (EU) 2019/2034.

In the current macroeconomic and geopolitical context marked by high uncertainty, the NCMO gives particular attention to monitoring the systemic risks that may affect the stability of bank and non-bank financial markets in the event of a tail risk scenario materialising.

The NCMO recommendations and decisions were unanimously approved by the NCMO General Board.

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Note:

ihttps://www.esrb.europa.eu/pub/pdf/warnings/esrb.warning220929_on_vulnerabilities_union_financial_system~6ae5572939.en.pdf