Romanian banking law changes implemented

In 1999 a number of developments in Romanian banking law took place concerning the establishment of The Agency for Recovery of Bank Assets; the establishment of real moveable securities; and amendments to the Bankruptcy law.

Brief details of these developments are as follows:

1. The Agency for Recovery of Bank Assets

The Agency for Recovery of Bank Assets has been established by the Romanian Government in order to handle distressed bank loans, which have formed a large proportion of the credit portfolio for state owned banks. The Agency's terms of reference have been supplemented and the Agency is now empowered to turn to account bank assets through additional means such as public tenders and capital markets mechanisms.

The Agency is also empowered to:

- Negotiate the value of the accounts receivables and reschedule their maturity dates;

- Reschedule the maturity date of loans by amending the value of the guarantees;

- Swap debt into equity;

- Take any other steps towards an optimum return of receivables; and

- Sell the debts that it has taken over.

2. Real moveable securities

A new type of security that can be granted over moveable assets has been established by Title VI of Law 99/1999. A

"real moveable security"

secures the performance of a civil or commercial obligation under any contract concluded between any natural or legal persons, and can be granted either by effective transfer of the moveable asset to the creditor or third party, or without dispossession of the debtor.

Title VI of Law 99/1999 regulates:

- the legal regime of real moveable securities;

- the publicity and the priority order of real moveable (and other) securities;

- enforcement of a real moveable security; and

- international law rules applicable to real moveable securities, where there is a foreign element to the legal relationship.

The new law now unifies the legal regime by introducing a new security registration procedure, whereby security rights are registered in the "Electronic Archive of Real Moveable Securities". A new enforcement procedure has also been introduced, which permits the enforcement of the security without court intervention.

3. Insolvency

Title IV of Law 99/1999 has amended and supplemented the Romanian Bankruptcy Law, allowing creditors to recover their debts by way of a "judicial liquidation" which can consist of either judicial reorganisation or bankruptcy, instigated by the creditors or the company itself. Judicial reorganisation requires a plan to either reorganise the company's activities or liquidate some of the assets of the company. The bankruptcy procedure contains rules which regulate the disposal of the assets, and under the new law, the priority order for payment of debts has been amended.

Other amendments to the Bankruptcy law are the transfer of the competencies and powers of the court to the specially appointed judge (who is specially appointed to handle bankruptcy cases) and the transfer of the specially appointed judge's powers to the administrator or liquidator.

For further information please contact:

Cristina Brinzan on 00 401 231 647075 or [email protected] (Bucharest) or

Nicholas Zervos on 0171 367 2016 or [email protected] (London)