Foreign Currency Regime

08.02.2013 ZF English

The main provisions currently regulating foreign currency operations are incorporated in NBR Regulation no.4/2005, on the foreign currency regime and Norm no.4/2005 on foreign exchange transactions.

Currency Convertibility

The national currency, (leu, pl. lei) has been convertible since 1998. In 2005, a currency reform took place by which four zeroes were removed from the old leu (ROL) to form the new leu (RON).

Inter-bank Foreign Exchange Market

The leu’s exchange rate is determined on the inter-bank foreign exchange market which was established in August 1994 as a permanent market, where foreign currency can be bought and sold in exchange for lei, at spot or forward exchange rates freely determined by the credit institutions authorised by the NBR.

Based on the currency exchange rates used on the inter-bank market, the NBR establishes the daily exchange rate.

Foreign Currency Operations

According to the applicable regulations, current and capital transactions between residents and non-residents may be performed in both foreign and domestic currencies.

As a general rule, payments made between residents, related to the trade of goods and services must be carried out in RON. In certain situations, such as those presented below, payments can also be made in foreign currency by the following categories of residents:

    Legal entities, for payments and cash receipts from cross-border trade of goods and services.
    Any individual or legal entity, for trading operations inside harbors, airports, customs or on external routes of international trains, ships or airplanes.
    Any individual or legal entity, for operations related to the organization or supply of cross-border services.
    Individuals, for incidental operations.
    Any individual or legal entity, for operations performed abroad.
    Any individual or legal entity, for operations not related to the trade of goods and services.

Residents and non-residents may hold financial assets in both foreign currency and lei. Non-residents may repatriate or transfer, locally and abroad, financial assets held in Romania.

However, where short-term capital movements of exceptional magnitude impose severe strains on the foreign exchange market and lead to serious disturbances in the conduct of monetary and exchange rate policies, which are reflected in particular in substantial changes in domestic liquidity and severe imbalances in the balance of payments, the NBR may take safeguarding measures with respect to capital transactions.

NBR regulations provide notification obligations with respect to certain transactions concluded between residents and non-residents, for statistical purposes, for the monitoring of the external private debt and the balance of payments at national level.

Thus, capital transactions causing external obligations arising out of commitments longer than one year, other than those qualifying as external public debt, must be notified to the NBR. These operations include (i) financial credits granted by non-residents to residents with reimbursement periods longer than 1 year (e.g., standard financial loans, syndicated loans, credit lines, financial leasing, mortgage loans), (ii) foreign trade loans with reimbursement periods longer than 1 year granted by non-residents to residents and (ii) primary trading with financial instruments with the initial reimbursement period longer than 1 year (bonds or other financial instruments) issued by residents on a foreign capital market.

These notifications are made for statistical purposes only, i.e. for the monitoring of external private debt at national level, and do not require NBR authorization.

Also, under the NBR norms regulating the balance of payments, transactions concluded between residents and non-residents as mentioned above, transactions carried out by residents through accounts opened with foreign credit/ financial institutions abroad, participations owned by residents in foreign companies exceeding 10% of the share capital and the branches or other entities without legal status set up by resident companies abroad, must be notified to the NBR for statistical purposes and do not require NBR authorization.

 

Source: KPMG - Investment in Romania report (May 2013)