Romania aligns with international standards on derivatives

Starting this year, Romanian financial institutions conducting derivative transactions have a standardized contractual documentation, aligned with international practices and adapted to Romanian legislation. This initiative was completed by ACI Romania – Asociatia Pietelor Financiare (Financial Markets Association), with support from law firm Clifford Chance Badea.

“We are confident that the existence of this standardised contractual framework will contribute to the development of derivative and repo transactions between local banks, as well as between such banks and their clients, for a better management of liquidity and market risks (foreign exchange risk and interest rate risk). At the same time, we comply with the European regulatory requirement to reduce counterparty risks by collateralizing exposures from derivative transactions,” said Victor Andrei, president of ACI Romania.

The new master agreements for derivative transactions (swap, forward, FX and interest rate options, etc.) allow Romanian financial institutions to use internationally recognised templates for transactions between residents, adapted at the same time to Romanian legislation.

Cosmin Anghel, counsel with Clifford Chance Badea and coordinator of the project team also added: “Initially, we drafted the Romanian version Global Master Repurchase Agreement (GMRA) for repo transactions, with governmental bonds. We have now supplemented the existing documentation with a master agreement for derivative transactions, based on the ISDA standard documentation. Another novelty is that financial institutions may now use a collateral arrangement (annex to the master agreement), also based on the ISDA standard documentation, that has been aligned with the most recent European legislative amendments from March 2017, and also with the Romanian legislation, being drafted in accordance with Government Emergency Ordinance 9/2004 on certain financial collateral arrangements.”