Financial Services Industry, March 2009

Financial

Services

Industry

Insights In this issue:

Banking

- Clauses leading to changes of costs

in loan agreements

- “Tax gross-up” clauses under

cross-border loan agreements

Romanian law specifics

Insurance

- New AML/CFT regulation

International and domestic recent FSI regulatory developments.

Financial Services Industry Insights

Clauses leading to changes of costs

in loan agreements

Introduction The fair concern of the borrowers in any

finance transaction ‟ the costs ‟ becomes

increasingly critical in current times when

banks,

facing significant increases of their funding

costs, are tempted to

transfer such additional costs to the

borrowers.

The material herein presents several types of

clauses of credit

agreements which may trigger additional or

increased costs for the borrowers, without

however aiming to analyze the validity

thereof. It is worth mentioning that such

clauses have been developed for

corporate loans and the applicability thereof

for retail loans should be further investigated,

including from the perspective of the

consumer protection legislation.

Types of clauses The market disruption clause;

The mandatory costs clause;

The increased costs clause.

Market disruption In certain credit agreements the banks have

the contractual right to increase the interest

rates to align them to the market conditions.

In other cases, where the banks’ right to

unilaterally change the interest rate is not

discretionary under the contract, the banks

are protected through the clause known as

the “market disruption clause”.

This type of clause is specific for financings

structured on the cost ‟ plus basis (with the

interest rate based on EURIBOR/LIBOR) where

the interest is computed as EURIBOR/LIBOR

rate for a certain currency and time period,

plus the margin, i.e. the bank’s profit; also,

any other additional costs related to the

financing are transferred to the borrower.

The reasoning behind the use of this type of

clause is allocation of risks: namely, a bank is

assumed to fund itself from short term

deposits in the interbank market. The interest

paid for such deposits (EURIBOR/LIBOR)

represents its funding costs and the “plus” is

the margin ‟ the bank’s profit from the

transaction. This is the context where the

bank wishes to protect itself by transferring

to the borrower the risks which may affect

the profit rate corresponding to that

transaction.

The market disruption clause is standard in

the finance documents for syndicated loans

issued by the Loan Market Association (LMA)

and has also been adopted in the finance

documents of many Romanian banks. The

clause becomes operative in two cases: when

the quotations for EURIBOR/LIBOR are not

available or when the financing costs for the

lender (or, in case of syndicated loans, for a

certain percentage of the banks in the

syndicate) are increased, case where it allows

the lender to increase the interest rate when

its financing costs are in excess of

EURIBOR/LIBOR. The interest increased in

such manner shall reflect and cover the

lender’s actual costs of funds.

History

Historically, the clause appeared due to the

fact that the banks often grant loans in

foreign currencies ‟ without having domestic

financing resources for such currencies ‟ and

at rates which are entirely linked to the

functioning of the interbank market. The

clause appeared in the 60’s ‟ 70’s in the

context of the concerns regarding the

potential freezing of the financings in US

dollars in the European markets ‟ hence the

first situation regulated by the clause: the

absence of quotations.

The second situation covered by the clause

protects the banks when differences appear

between EURIBOR/LIBOR and the actual

funding costs.

Until the 90’s, the market disruption clause

covered only the case of absence of

quotations. During that period, Japanese

banks were granting loans based on LIBOR

plus margin. As Japanese banks’ rating

decreased, their actual funding costs grew

substantially and the LIBOR rate was no

longer representative. In the absence of the

second case regulated by the market

disruption clause, the Japanese banks did not

have the possibility to transfer the additional

funding costs to the borrowers and ended up

having to sell their credit portfolios, in certain

cases with significant losses.

The market disruption clause in the context

of the global financial crisis

Currently, in the context of turbulences on

the international financial markets and the

liquidity crisis, banks, facing real increases of

their funding costs, turn to this clause. In the

UK, the British Bankers’ Association (BBA), in

response to recent reports according to

which more and more banks turn to the

market disruption clause, issued a press

release stating that the application of such

clause should be a last resort and only after

certain measures have been undertaken. BBA

considers that this clause should only operate

when the banks face real difficulties in

obtaining funds or if the interests payable for

the interbank deposits are substantially

higher than EURIBOR/LIBOR.

Financial Services Industry Insights

Nevertheless, according to BBA,

EURIBOR/LIBOR rates should reflect, even in

current conditions, the average funding costs

for the panel banks. Renouncing to the

transparent system of calculating interest

rates based on these indicators and

determining interest solely based on the

individual funding costs of each bank, would

lead interest calculation to become difficult

and opaque. In addition, this would deprive

the borrower of the possibility to challenge

such computations or to request its lender to

document such additional costs (if such rights

have not been contractually granted to the

borrower).

According to the Association of Corporate

Treasures (ACT), it is essential that the

reasons why the indicators do not reflect the

market conditions are investigated prior the

banks using this as a reason for abandoning

the standard method of computing the

interest based on EURIBOR/LIBOR.

Other clauses imposing additional costs to the borrower in a loan agreement The market disruption clause is however not

the only clause in a loan agreement able to

trigger additional costs for the borrowers. In

addition to the bank’s commissions, the

transaction costs or early repayment fees, the

LMA - type agreements contain clauses that

transfer to the borrower the regulatory costs:

capital adequacy or costs of establishing the

minimum mandatory reserves by the banks

(„mandatory costs” and “increased costs”

clauses).

Mandatory costs The mandatory costs clause covers the

transfer to the borrower of all existing

regulatory costs, such as the costs related to

establishing minimum mandatory reserves

usually payable to the regulatory authorities.

Increased costs

The increased costs clause comes to protect

the bank against the risk of introducing or

amending legal or regulatory provisions (or of

changes in the application or interpretation

thereof) which may affect the bank’s profit in

a specific transaction or which are capable of

triggering certain additional costs for the

bank.

Borrower’s remedies

The LMA type agreements or those inspired

by the LMA create, however, a certain level

of protection for the borrowers. For example,

in case a market disruption event appears,

the LMA standard agreement provides the

possibility, upon request of any of the

parties, to enter into negotiations (usually for

a limited period of time) for determining an

alternative method for calculating interest.

Furthermre, in such a case, as well as in other

situations where the bank intends to apply

increased costs, the borrower is allowed to

early repay the debt (without prepayment

costs).

However, the additional costs imposed

through the above mentioned clauses are

owed by the borrower until repayment takes

place. In addition, in the case (very likely)

where the reimbursement takes place

through refinancing, this triggers additional

time and costs for the borrower and the

margin of the refinancing facility is likely to

be higher than the one in the refinanced

loan.

Author: Simina Mut - Senior Associate in

Reff & Associates SCA, the correspondent

law firm of Deloitte Romania.

“Tax gross-up” clauses under cross-

border loan agreements – Romanian

law specifics

It is a well known fact that any loan involves

the disbursement of a sum by a lender (or a

number of lenders in case of syndicated loans

/ club loans) to a borrower, with the

obligation for the later to repay the borrowed

amount (known as principal) plus an interest

(additional fees are usually also applicable).

On this basis the lenders all over the world

have developed standardized

documentations for loans, assignments and

participations. Additionally, a substantial

literature has been developed in this respect

(notably such doctrine is mostly availably

internationally, while only very limited is

available on Romanian law).

While at an international level, such

standardized documents have been

developed and adapted so as to suit the

particularities of the various interconnected

implications (regulatory, accounting, tax, etc),

using them now in jurisdictions which

historically did not pursue the same steps,

might be challenging both for the lenders

and the borrowers. For instance, the

contractual regulation of some tax

obligations in the loan documentation might

pose significant issues mainly due to the fact

that the realities of the international practices

have taken ahead the local Romanian fiscal

framework.

For example, the “tax gross-up” clauses

provided in most of the international loan

documentation is such a specific case where

the commercial reality is one step ahead to

the fiscal regulations which should offer the

grounds for assessing the fiscal impact of the

transaction.

A cross-border loan agreement usually

contains a clause which (in the absence of a

withholding tax exemption applying) requires

the Romanian borrower to pay an additional

amount so that the amount of interest paid

to the foreign lender effectively is the same

as if there was no withholding tax. Actually,

under such “gross-up” clauses, the

Romanian borrower undertakes to pay to the

foreign lender the equivalent of a before-tax

amount of interest, in spite of the fact that,

under the law, the foreign lender is the one

liable for the tax. While cross-border loan

agreements will usually include a “tax gross-

up” clause, in local loan agreements (i.e.,

where both the lender and the borrower are

located in the same tax jurisdiction) such

clause is sometimes missing (i.e., as the

lender does not see the purpose of such

clause in the first instance). However, such

omission may fire back in cases where local

loans are to be subsequently assigned to a

foreign third party (e.g., a financial

institution located in a different tax

jurisdiction).

In cases where the loan agreement is silent

on this matter (i.e., no “gross-up” clause),

then the application of withholding tax will

most probably occur, reducing thus the

effective net amounts which a foreign

purchaser would prefer to receive from the

borrower under the loan. In such cases, in

order to assess the correct tax regime, one

should look into the applicability of the

relevant Convention for the avoidance of

double taxation (if any), as well as into any

other tax laws, regulations and rulings issued

by the relevant tax authorities, as applicable.

Financial Services Industry Insights

Whereas the “tax gross-up” clauses has been

essentially designed to ensure certainty of the

lenders in respect of the amounts to be

received from the borrowers, in many

jurisdictions the appropriate fiscal mechanism

to implement it has been put in place. The

tax issues raised currently at an international

level by the use of the “tax gross-up clauses”

are more sophisticated and focus more on

keeping abreast the variances of the loan

documentation and the interpretations rising

therein.

In Romania however, there is a strong need

to first reach an

understanding of this clause and the impact

is has:

„ first from a tax standpoint at the

level of the lenders and of the borrowers, but

also

„ from an economic perspective, if

such uncertainties would impair lending

activities and potentially lead to a blockage.

Lack of a “tax gross-up” clause

Normally, for a 100€ interest revenue derived

from Romania, a foreign lender would be

liable to have that income taxed in Romania

at a withholding tax rate as provided for in

the applicable Convention (assuming one is

in place and the conditions for its

applicability are met) or the local rate This is

done via withholding to be performed by the

Romanian borrower, which is liable in this

respect towards Romanian authorities.

Specifically, the borrower should withhold

16€ representing interest withholding tax

due by the foreign lender (assuming a 16%

rate applicable) and wire the money to the

Romanian tax authorities, while the

remaining 84€ would reach the foreign

lender’s pocket.

Going further, the foreign lender could claim

the provisions of a convention for the

avoidance of double taxation

(“Convention”), if such convention is

concluded between Romania and the country

of residence of that lender. Commonly, such

conventions reduce the withholding tax rate

with several percentages but there are

conventions which also bring the taxpayers to

a nil withholding tax due on interest

payments.

“Tax gross-up” clauses – option 1

Let us now take for example a simple type of

“tax gross-up” clause, whereby the loan

agreement concluded between a foreign

lender and a Romanian borrower, provides

only that if any withholding tax shall be

applicable to the payments due by the

borrower to the lender, such withholding tax

will be paid by the borrower.

In these conditions, the Romanian borrower

should gross the 100€ interest payable to the

foreign lender with such an amount that on

one hand, the tax authorities are not

deprived by an accurate amount of tax, and

on the other hand, the foreign lender

receives all 100€ interest in one stage only.

As most of those involved in this type of

activities know already, the polemics around

the gross-up mechanism arise in respect of

the tax rate applicable when computing the

tax. Specifically, the big question is: should

you apply only the domestic tax rate or could

you claim the provisions of the Convention

for the avoidance of double taxation?

It is relevant to say that the Romanian tax

laws state that the domestic tax provisions

are applicable in case the “tax due by a non-

resident is payable by the income payer”.

The rationale behind this provision is that

once the Romanian borrower chooses to bear

the tax otherwise normally due by the

foreign lender, the subject of taxation is

switched from a non-resident to a resident,

therefore the grounds for claiming the

provisions of a Convention no longer exist

since there is no “double taxation” involved

in the first place anyway. Under this

rationale, the Romanian borrower, instead of

being a mere “collection vehicle” for the tax

due by a non resident, becomes a regular

resident taxpayer for that tax, thus subject

only to the Romanian tax provisions while the

foreign is discharged by its Romanian tax

obligations.

Furthermore, the tax born by the Romanian

borrower on behalf of the lender shall be

disallowed for deductibility for corporate

income tax purposes, incurring thus a cost.

It has been argued that the above Romanian

tax law provisions and the consequent

rationale, may contradict constitutional

provisions, specifically those that the

domestic legislative provisions cannot prevail

over those included in international treaties

concluded by the Romanian state with other

countries. However, the Romanian

Constitution provides for such prevalence of

international treaties over local law only in

respect of international treaties concerning

human rights and EU constitutive treaties or

other EU mandatory legislation. In our

opinion, a stronger argument challenging the

applicability of the above mentioned tax law

provisions comes from the Fiscal Code itself

which, under the section dedicated to the

application of the Fiscal Code versus existing

Conventions, provides for the applicability of

a Convention whenever it is in place and the

conditions for its applicability are met.

Even more, the Fiscal Code is explicitly stating

that in case any of its provisions would

contradict an international treaty to which

Romania is a party, the respective treaty shall

prevail.

On the other hand, it is also relevant to

mention a court precedent (i.e., Decision no.

4111 from 22nd of November 2006 of the

Romanian High Court of Justice) whereby,

among others, the court supported the

interpretation of certain specific fiscal

provisions under the local legislation in the

sense that, given the existence of contractual

provision stipulating the Romanian payer as

bearer of the burden of payment of any

withholding tax, the double tax treaty

existing in place between Romania and the

creditor’s tax jurisdiction cannot be invoked,

and therefore local withholding tax should

apply. While Romanian law is not a

precedent based system, it is recommendable

that the existence of relevant precedents (in

particular when resolved at the level of the

High Court) be considered when interpreting

arguable legal provisions.

Notwithstanding the above, in a case where

the agreement includes such gross-up clause

but the lender still wants to apply the

Convention, one should consider whether

this approach might not actually lead to an

avoidance of tax rather than to the avoidance

of a double taxation. Thus, while the foreign

lender has negotiated a clear neutral position

with respect to the taxes due in Romania by

discharging its obligations towards the

Romanian borrower, if it would receive from

the Romanian borrower the proof that tax

has been withheld and paid in Romania for

the respective interest, the foreign lender

could theoretically benefit of a fiscal credit in

its own tax jurisdiction for a tax that was

actually born by somebody else. Although

this may seem as an extreme case (and could

be viewed as a matter of bad faith), it might

not be very easy for the tax authorities to

identify such situations.

Financial Services Industry Insights

1

This is also in line with the standards recommended by the Loan Market

Association (“LMA”)

Conclusion

The most often used forms of contractual

drafting for “gross ‟ up” clauses have been

outlined above. Importantly, variations to

these may and sometimes are strongly

recommended to be considered. There are

also other matters of relevance in relation to

“gross-up” clauses (e.g., applicability of such

clauses in case of multi-lender structures,

differentiation between original lenders and

subsequent lenders, duties of the parties in

providing documents needed for invoking

double tax treaties, etc.), which are

addressed on a case by case basis when

drafting the loan documentation and which

may trigger additional tax implications.

The polemics around the tax rate applicable

under a “gross-up” mechanism are still

strong and the reality is that, in our view, the

problem of the gross-up mechanism has not

been approached by taking into account all

the factors surrounding the issue, as

presented above. It appears that the

legislator has taken the easiest path to solve

its immediate problem (i.e., imposing and

collecting a tax over the Romanian source

income) and left out the other factors,

external to taxation, thus missing the big

picture called the development of the

economy, under which taxation is only one of

the factors involved (a very important one

though).

The development of the financial sector

depends not only on an accurate banking

legislation, but also on other factors such as

taxation of financial operations. Foreign

lenders and Romanian borrowers are entitled

to a sound fiscal environment which does not

impair them in conducting their operations,

offering them certainty in respect of taxation

as well as the proper fiscal mechanisms to

cope with the tax requirements.

“Tax gross-up” clauses – option 2

Another drafting option is to provide in the

loan agreement that if any withholding tax

applies, then the amounts payable by the

borrower shall be increased with such

amount necessary, so that the net amount to

be paid to the lender (i.e., upon applying the

withholding tax) be the same as if no

withholding tax would have applied in the

first instance. Under this option, depending

significantly also on the actual wording used

in the loan agreement, one could argue that

the borrower may be seen as paying a

variable interest rate rather than merely

paying the withholding tax on behalf of the

lender.

If, again ‟ depending on the actual wording

in the agreement, such qualification would

correctly interpret the will of the parties, such

variable interest should be evidenced as such

in the books of the borrower, and in fact,

also in those of the lender. But under a

cross-border transaction the means of the

authorities to check the records of the

foreign lender may be limited and raise

cumbersome issues including significant

resources (time, money and personnel), and

could be a matter that the authorities may

further consider and regulate. Also, it is

debatable, to say the least, whether such an

approach would be convenient to the foreign

lenders.

This second manner of drafting the gross-up

clause seems to be superior to the first

option1

, yet it should be noted that given the

ultimate effect, which is quite similar with the

one of the first option above (i.e., one way or

another the borrower bears the withholding

tax due by the lender), there is still a

significant risk that the Romanian fiscal

authorities / courts see such clause as having

the same purpose.

Notably, the Romanian borrowers and the

foreign lenders have now the means to

interrogate the tax authorities directly and

clarify their specific tax matters arising from

the “gross-up” clauses included in their loan

agreements by applying for an individual tax

binding ruling. If the parties would take this

path, the tax authorities would need to deal

with this matters concretely and due to the

multitudes of possible situations arising from

the application of the various tax gross-up

clauses, the legislator may need to adjust the

tax frame work accordingly so that the

optimal solution is found.

Optimal from the perspective of a fair tax

treatment but also from a wider economic

perspective, i.e., that of allowing the lending

activities to develop properly, without

hindrances and barriers “imposed” by the

local tax framework.

Authors:

Raluca Cojocaru ‟ Manager in Deloitte Tax

Andrei Burz Pinzaru ‟ Senior Manager in

Reff & Associates SCA, the correspondent

law firm of Deloitte Romania.

Financial Services Industry Insights

Insurance: new AML/CFT regulation

1

Adopted by the Moneyval Plenary in July 2008.

2

The Council of Europe Select Committee of Experts on the Evaluation of

Anti-Money Laundering Measures

The Insurance Supervision Commission (CSA)

has recently undertaken a broad initiative to

overhaul the regulatory framework dealing

with anti-money laundering and combating

the financing of terrorism (AML/CFT). The

new regulation, Order no. 24/2008 amends

the law to both reflect the Third EU AML

Directive and address the recommendations

of the Third Round AML/CFT Report on

Romania1

of Moneyva2

.

The new norms are substantially different

from the previous ones, introducing further

obligations both for private companies and

for the supervisory authority. It introduces

new requirements including those relating to

politically exposed persons, beneficial owner

and a risk-based approach to the detection

and prevention of money laundering and

terrorist financing.

A. Companies’ obligations

Insurance companies must draft policies,

procedures and appropriate mechanisms in

terms of KYC, risk assessment and risk

management, internal control, reporting and

records storage to prevent and stop their

involvement in money laundering and

terrorist financing.

The mechanisms should allow for the

identification of suspicious transactions based

on risk indicators, applying appropriate

measures for different categories of

customers, products, services, operations and

transactions.

Insurance companies should apply three

levels of customer due diligences (standard,

simplified and enhanced), will need to

perform a risk assessment in relation to their

lines of business and will need to risk rate

their clients and monitor their activities.

In practice, insurers must:

review their internal AML/CFT policies

and procedures and amend them to

incorporate the new regulation;

analyze their AML/CFT company risks;

develop a new mechanism to determine,

verify and register the identity of clients

and real beneficiaries or adjust the

existing one as appropriate;

monitor the activity of their clients in

order to ensure the proper risk

classification.

The new regulation contains several

indicators in order to assist in identifying

suspicious transactions. Nevertheless it

should be borne in mind that the indicators

listed are only examples and should be

supplemented by other guidance available

and relevant industry and company

experience.

Deadlines

The new regulation entered into force at the

beginning of this year and sets up strict

deadlines for insurance companies, for:

adopting internal procedures;

appointing a designated person to be

responsible for implementation and

compliance with laws and regulations in

force;

notifying the CSA of the above.

The regulatory obligations of insurance

companies carry sanctions for non-

compliance. Obviously, these are in addition

to the reputational risk associated with

money laundering and terrorist financing.

Authors:

Paula Lavric ‟ Manager, Forensic & Dispute

Services

Catalina Stroe ‟ Senior Consultant,

Forensic & Dispute Services

B. Insurance Supervisory Commission’s obligations

The new norms enhance and detail the role

of CSA in the AML/CFT field. In this respect,

CSA shall:

supervise and control the companies

operating in the insurance market, to

ensure that they comply with the new

legal provision on identification,

verification and registration of clients

and transactions, reporting and record

keeping;

verify the AML/CFT policies and/or

internal procedures of the insurance

companies;

require amendments of the policies

and/or internal procedures when found

not reflect prudential measures

stipulated in the new rules.

Financial Services Industry Insights

International and domestic recent

FSI regulatory developments

A. International I. Regulations/Decisions

1. Commission Regulation no. 1261/2008

of 16 December 2008 amending

Regulation no. 1126/2008 adopting

certain international accounting

standards in accordance with Regulation

(EC) no. 1606/2002 of the European

Parliament and of the Council as regards

International Financial Reporting

Standards (IFRS)

2. Decision of the European Central Bank

of 17 November 2008 laying down the

framework for joint Eurosystem

procurement.

3. Decision of the European Parliament and

of the Council of 19 November 2008 on

the mobilization of the European

Globalization Adjustment Fund in

accordance with point 28 of the Inter

institutional Agreement of 17 May 2006

between the European Parliament, the

Council and the Commission on

budgetary discipline and sound financial

management.

II. Proposed Regulations

1. Proposal for a Regulation of the

European Parliament and of the Council

of November 12, 2008 regarding Credit

Rating Agencies

2. Opinion of the European Central Bank

of 18 November 2008 at the request of

the Council of the European Union on a

proposal for a Directive of the European

Parliament and of the Council amending

Directive 94/19/EC on deposit-

guarantee schemes as regards the

coverage level and the payout delay.

3. Proposal for a Decision of the European

Parliament and of the Council of January

23, 2009, establishing a Community

programme to support specific activities

in the field of financial services, financial

reporting and auditing

B. Domestic I. Regulations/Decisions

1. National Bank of Romania’s Order no.

13/2008 for the approval of the

accounting Regulations compliant with

the European Directives, applicable to

credit institutions, non banking financial

institutions and the deposit guaranty

fond in the banking system.

2. National Bank of Romania’s Order no.

14/2008 for the approval of the

reporting forms comprising the

statistical information of accounting -

financial nature and the methodological

norms regarding their drafting and

utilization applicable to the Romanian

branches of other EU credit institutions

3. National Bank of Romania’s Regulation

no. 1/2009 amending National Bank of

Romania’s Regulation no. 11/2007 on

the authorization of Romanian credit

institutions and Romanian branches of

non ‟ EU credit institutions.

4. National Bank of Romania’s Regulation

no. 2/2009 amending National Bank of

Romania’s Regulation no. 3/2007 on

limiting credit risk as regards loans for

individuals.

5. National Bank of Romania’s Norm no.

1/2009 amending National Bank of

Romania’s Norm no. 6/2008 on

amending National Bank of Romania’s

Norm no. 7/1994 on the trade

performed by credit institutions with

checks.

6. National Bank of Romania’s Norm no.

2/2009 amending National Bank of

Romania’s Norm no. 7/2008 amending

National Bank of Romania’s Norm no.

6/1994 on the trade performed by credit

institutions with bills of exchange and

promissory notes.

II. Proposed Regulations

1. National Bank of Romania’s Regulation

regarding the internal administration of

activity, the internal process of

evaluation of capital adequacy to risks

and the outsourcing of activities of the

credit institutions.

2.

Reorganisation services for financial

services industry

Crisis management and turnaround management When faced with a liquidity crisis, companies

can get the support of our cash flow

management process designed to facilitate

the stabilisation of the business. In addition,

we are able to bring into the company short-

term Chief Restructuring Officers who will

lead the turnaround process. These

executives have a hands-on style of

management designed for recovery. Non-performing loans transactions

As Deloitte has established itself as the

definite market leader in advisory and due

diligence capacities in NPL transactions, we

have accumulated a significant amount of

knowledge and expertise in the area of NPLs.

We have helped many of our clients to

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specific collateral) for negotiations with

various parties, such as banks and their

debtors.

Contact

Hein van Dam ‟ Financial Advisory Partner

tel: + 40 (21) 207 52 30

e-mail: hvandam@deloittece.com

Creditor services

Independent financial review for creditors: a

high speed review of the critical factors

facing the business at risk. This review is

designed to answer quickly the key questions

a creditor should have regarding the

exposure, for example, the liquidity position,

the value of its collateral, its options and the

viability of the management’s plans to

address its problems. Equipped with this

review, the creditor is able to make informed

decisions promptly and be able to support

viable debtors.

Distressed assets solution services Advising the owners of distressed assets, the

creditors or potential investors in distressed

assets on transactions by which the current

stakeholders can exit the exposure and

specialist distressed investors enter. The

distressed investor is able to bring fresh

capital and expertise to the situation that

may be what is needed to address the cause

of the crisis and allow value to be created.

We have extensive experience of this type of

transaction in this region and understand the

needs of creditors, investors and sellers alike.

As a result we are able to match

requirements and facilitate successful

transactions. Restructuring We are able to provide hands on support for

companies undertaking financial

restructuring under the pressure of a financial

crisis. This support extends beyond designing

plans to their implementation and the

negotiation of terms with creditors and other

stakeholders affected by the restructuring

plan.

Our Reorganisation Services

team is made up of

professionals with extensive

financial and project

management expertise related

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goal is to lead and co-ordinate

Deloitte’s services to the

participants of distressed

situations. Whether the client

is a troubled company, bank

lender, shareholder or

potential investor in the

troubled company, we will

bring the appropriate Deloitte

team of advisors lead by the

decisive leadership needed in

special situations.

Financial Services Industry Insights

Financial Services Industry Contacts:

George Mucibabici Chairman

tel: + 40 (21) 207 52 55

e-mail: gmucibabici@deloittece.com

Audit Santiago Pardo

Partner

tel: + 40 (21) 207 54 92

e-mail: sapardo@deloittece.com

Audit and review of individual and consolidated financial statements

prepared in accordance with Romanian and International Financial

Reporting Standards (IFRS);

Assurance services related to regulatory reporting (e.g., CSA, CSSP)

Tailored work-shops based on specific requirements in the area of the

IFRS;

Assistance with the implementation of the IFRS in financial institutions

Interpretation of certain troubled IFRS standards and its application in

practice

Agreed upon procedures on verification of subscribed share capital for

the purpose of registration

Stock exchange listings (IPOs);

Internal audit outsourcing and co-sourcing; internal audit quality

assurance reviews.

Enterprise Risk Services Gary Bauer Director

tel: + 40 (21) 207 52 19

e-mail: gbauer@deloittece.com

Risk Management Solutions (market, credit, operational and liquidity

risk)

Loan Business Process Review (retail and corporate)

A&L Management and Credit Portfolio Analysis

Advice and assistance regarding AML/CFT and technology relating to

AML/CFT

Fraud detection and prevention

Litigation Support and Dispute Consulting

Internal / external penetration testing, configuration reviews and

process reviews focused on applications, network and OS infrastructure

and DBMS in order to determine if any significant vulnerabilities exists.

IT attestation audits (e.g. internet banking attestation, Electronic

Payment System attestation)

Financial Advisory Antonis Ioannides Partner

tel: + 40 (21) 207 56 26

e-mail: anioannides@deloittece.com

Corporate Finance Lead Advisory on Sell or Buy-Side. On Buy-Side,

expertise in coordination of Financial, Tax, :Legal IT DD

Transaction Services, Financial Due Diligence or Vendor Due-Diligence.

Significant FDD expertise in banking, insurance and leasing sectors.

Valuation and Financial Modelling

Debt Advisory

Tax Rodica Segarceanu

Partner

tel: + 40 (21) 207 52 31

e-mail: rsegarceanu@deloittece.com

Assistance on corporate income tax matters related to funding

operations, transfer of receivables, debt write offs (fiscal treatment of

income and expenses, thin capitalization rules, withholding tax

exposures, etc)

Corporate tax assessment and structure tax efficiently significant

transactions, such as mergers and spin-offs, IPOs, etc.

Assistance during tax authorities’ inspections and assistance in

obtaining individual binding rulings

VAT tailored solutions applicable to financial institutions with focus on

streamlining the VAT deduction right on acquisitions as well as correct

assessment of VAT treatment of financial services

Legal Andrei Burz-Pinzaru

Senior Manager, Reff&Associates

correspondent law firm of Deloitte Romania

tel: + 40 (21) 207 52 05

e-mail: aburzpinzaru@deloittece.com

Finance law: legal assistance on loan and security documentation, loan

restructuring and non-performing loans, transfer of loan portfolios, title

check on assets used as collateral

Regulatory and compliance assistance for banks and non-banking

financial institutions, insurance companies, securities firms, asset

management companies

Securities law: legal assistance on listing/ de-listing procedures, public

offerings, insider trading, price stabilization, share buy-backs, stock

option plans

M & A assistance in financial services industry: due diligence and

transaction support

Consulting Martin Stepanek

Manager

tel: + 40 (21) 207 53 60

e-mail: mstepanek@deloittece.com

Operational effectiveness: Enterprise Cost Reduction, Organizational

redesign / review, Process reengineering, Benchmarking analysis, IT

system’s selection / development, Activity Based Costing.

Support for increasing sales and market entry: Strategy development,

Strategy development for distribution channels, Support for sales force

network redesign aimed at professionalization and sales increase,

Design and implementation of sales management system

encompassing recruitment, training, talent management and

development of the sales force, Developing compensation and

motivation systems for sales force, Branches / sales outlets design, New

(direct) sales channel’s organization design and development.

Support for bancassurance operations: Strategy for bancassurance,

Support in choosing bancassurance model, Developing product

portfolio, Operational excellence for bancassurance, Support in setting

up new insurance companies, Designing new sales and customer

service processes, IT support.

Support for CFO: Finance organisation design, Finance systems

strategy, Target operating model, Budgeting and forecasting, Enhance

business analysis, Accounting and reconciliation remediation,

Centralization of accounting processes, Accelerating and improving

financial close, Treasury and cash management.

Actuarial & Insurance Solutions Slawomir Latusek

Consultant

tel: + 48 (22) 511 04 54

e-mail: slatusek@deloittece.com

Cash Flows projections and value based management (profit testing,

business planning, Embedded Value calculations and reviews);

Risks and Liabilities assessment (Risk and capital management, life and

non-life provision valuations);

Actuarial audit support (review of life and non-life reserving

methodologies);

Calculation of pensions and other benefits;

Actuarial trainings (IFRS 4, Prophet, Cross, Remetrica, CROS, Glean,

ReMetrica, Dynamic Financial Analysis according to Market Consistent

Embedded Value and Solvency II requirements);

Predictive modelling (with application in insurance, banking and

Human Resources).

For distribution inquiries please visit our registration page at www.deloitte.com/ro/FSI-Insights

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