Articles

Relaxation of the Foreign Currency Regime

24 May 2005 (Insight)

Entered into force on April 11th 2005, Regulation no. 4/2005 regarding the foreign currency regime (the “Regulation”) issued by the National Bank of Romania („NBR”) is part of the calendar for liberalization of capital transactions agreed with the European Union.

Essentially, the legislative act above represents a new step towards complete liberalization of the foreign currency market, leading even more to the simplification of the regime pertaining to operations between residents and non-residents in Romania. On the other hand, in case of severe disturbances in the application of its monetary policy and in the exchange rate, NBR has the right to intervene on the foreign currency market. In such case, NBR may proceed to the application of protective measures, for a period that shall not exceed 6 months, with the notification of the European Commission.

Starting with the date referred above, residents and non-residents have the possibility to freely carry out operations in both domestic and foreign currency. Exceptions to this rule shall be established by NBR through norms issued for the application of the Regulation.

Importantly, with respect to residents, the Regulation provides that all transactions performed between the latter, not subject to trade in goods and services, may be freely carried out in either domestic or foreign currency, upon the parties’ consent.

Within the framework of the new enactment residents may acquire, hold and use financial assets denominated in foreign currency, while the amounts in domestic currency and listed foreign currencies held by them may be freely converted through the currency market.

On the other hand, the requirement to receive NBR’s authorization in case of opening current and deposit accounts in foreign currency by residents abroad is maintained.

The most significant change of regime relates to the provisions applicable to non-residents. Thus, the Regulation grants non-residents the possibility to open and operate bank accounts in both foreign and domestic currency, waiving the requirement for NBR’s authorization in respect of the above.

Repatriation and transfer by non-residents of the financial assets held in Romania may be performed freely. Non-residents may acquire, hold and use foreign and domestic currency denominated financial assets. The amounts in domestic currency and listed foreign currencies held by non-residents may be freely converted through the currency market.