NATIONAL BANK OF ROMANIA

Transcription

1 NATIONAL BANK OF ROMANIA SaFIR SYSTEM RULES March 2017 Unofficial translation (provided for information purposes only)

2 Contents: 1 General provisions The sole depository of government securities and other dematerialized financial instruments Principles on the SaFIR system operation The Delivery versus Payment principle (DvP principle) Free of payment (FoP) transfers Processing of payment instructions within the system Sending messages to the participants Validation of messages Matching Checking the availability of financial instruments in the book-entry account and their reservation for settlement Settlement of payment instructions within the system Delivering notifications to confirm the final settlement or the cancellation of participants unsettled instructions Restrictions regarding the operations performed within the system Participation in SaFIR Eligible institutions Conditions for participation in the system Operational capacity Legal soundness Financial soundness Additional requirements for critical participants Adding or modifying a participant Suspension or termination of a participant s access Access suspension Access termination Creation and maintenance of users General provisions User registration Creation and maintenance of user profiles User profile modification User suspension or termination User training and certification Participants security administrator Accounts Book-entry accounts for financial instruments Cash accounts Settlement ceiling Processing of operations in financial instruments in SaFIR Processing of operations performed by participants in relation to the issuer Settlement of primary market results Settlement on a net basis Calculation of multilateral net positions for settlement on a net basis Funds settlement Settlement of government securities Settlement on a gross basis Settlement of foreign currency-denominated government securities Settlement of certificates of deposit Page 2 of 143

3 RON-denominated government securities issues with settlement on the placement date Special issues Management of payment events Coupon/interest payments and partial/total redemptions Optional redemptions Repo agreements Processing of operations between the participants and/or their customers Sale-purchase operations The settlement in RON of sale-purchase operations The settlement in foreign currency of sale-purchase operations Free of payment transfers Repo/reverse repo operations (repo agreements) Settlement of repo/reverse repo operations (repo agreements) Replacement of financial instruments in a repo agreement Margin calls Intraday reverse sales-purchases (repo intraday) Pledge agreements Registration of pledges in SaFIR Change of pledges registered in SaFIR Change of pledges at the request of the parties Change of pledges at the request of the parties Release of pledged financial instruments Release of pledged financial instruments at the request of the pledgee Release of pledged financial instruments in order to guarantee settlement in payment systems ensuring funds clearing, including those related to operations in financial instruments Automated release of pledged financial instruments Execution of pledged financial instruments Execution of the pledge involving two participants Execution of pledge for net settlement systems or clearing houses Pledges associated with Lombard credits Processing of operations performed by the S.C. Central Depository S.A. via the connection between the SaFIR system and the RoClear system General provisions Government securities that can be traded on the regulated market Processing of operations between the two systems Free of payment transfers Pledge contracts Blocking-unblocking of the government securities assigned to pledge contracts registered in the RoClear system Collateralized financial instruments execution Processing of payment events Reports Daily reconciliation Processing the transfer of financial instruments through the connections between SaFIR and other central depositories systems General provisions Financial instruments that can be transferred between SaFIR and other central depositories Processing the operations between the SaFIR system and other central depositories Payment events processing Processsing of financial instruments garnishments Making debtor s financial instruments unavailable Transfer to beneficiary (garnishor-creditor) of the garnished financial instruments Replenishment of the debtor s financial instrument account Waiting queues Waiting for Matching queue Page 3 of 143

4 Page 4 of 143 SaFIR SYSTEM RULES 6.2 Waiting for Securities queue Waiting for Funds Confirmation queue Waiting for Deferred Start queue Waiting for Authorization queue Waiting for Supplementary Funds queue Waiting for Execution Confirmation queue Gridlock mechanism The moment of instructions entering into the system and their irrevocability Irrevocability of instructions Revocation of instructions by the participants Cancellation of instructions by the system administrator Finality of settlement Procedure applied by the system administrator for the opening of insolvency proceedings against a participant General provisions Opening of insolvency proceedings during the operating day Opening of insolvency proceedings after the end of the operating day Suspension or termination of access to the system on grounds other than the opening of insolvency proceedings Communication means Procedures Communication means used in participants notifications to the system In writing SWIFT network STFD TRANSFOND S.A. proprietary network Communication means used in SaFIR notifications to the participants Reports, enquiry facilities and reconciliations Reports and enquiry facilities Reconciliation between participants and SaFIR Daily reconciliation Monthly reconciliation Reconciliation with the National Bank of Romania Pricing General provisions Discounts and incentives Surcharges Billing Operating days and operating hours Compliance with the requirements set out in the present rules and in the Documentation General provisions Annual assessment Preservation and archiving of documents Audit trail Error handling General provisions Telecommunication failure Failure of the SWIFT network Failure of the STFD TRANSFOND S.A. proprietary network... 85

5 16.5 Authentication errors in a SWIFT environment Contingency events Help Desk Parties obligations and liabilities Participants obligations and liabilities General obligations Monitoring of payment flows Obligations in case of contingency events Participants liabilities NBR s obligations and liabilities NBR s obligations in its capacity as system administrator NBR s obligations in its capacity as depository NBR s liability Force majeure Provisions relating to security, confidentiality, personal data protection and archiving Security Confidentiality of documents Protection of personal data Preservation and archiving of documents Penalties for breaching the rules Amendments to the system rules Acceptance of the system rules Notifications Appendix 1 - Glossary of terms Appendix 2 - SaFIR Accession Agreement Appendix 3 - Information on SaFIR Participants Appendix 4 - SaFIR User Registration/Modification Request Form Appendix 5 - SaFIR User Profile Creation/Modification Request Form a) Standard (general) profile for primary dealers b) Standard (master) profile for secondary intermediaries, participants trading solely on their own account and behalf c) Standard (master) profile for depository and settlement systems d) Standard (master) profile for the Ministry of Public Finance Appendix 6 Request Form for the Blocking/Unblocking/Termination of a SaFIR User Appendix 7 - Timetable of SaFIR Transactions Appendix 8 - SaFIR Operation Codes Appendix 9 - Pricing Appendix 10 - Annual Compliance Audit Certificate Appendix 11 Consent for processing personal data Appendix 12 Terms of reference for the legal opinions on the capacity and the country Page 5 of 143

6 1 General provisions The National Bank of Romania (NBR), in its capacity as administrator of the Settlement and Financial Instruments Registration (SaFIR) System, henceforth called the system, organizes and manages the registration of proprietary rights and other rights on financial instruments accepted by it in the system as well as the final and irrevocable settlement of operations in the respective financial instruments. The National Bank of Romania is mandated by the Ministry of Public Finance in compliance with Art. 5 paras. 4 and 5 of Government Emergency Ordinance No. 64/2007 on public debt, approved by Law No. 109/2008, as subsequently amended and supplemented and Art. 29, para. 2, letter b) of Law No. 312/2004 on the Statute of the National Bank of Romania, in its capacity as the sole depository of government securities (including benchmark issues). The National Bank of Romania, in its capacity as system administrator, manages and controls the operation of the system, authorizes the access to the system, establishes and amends the present rules and sees to their observance by the participants, imposing penalties in case of infringement. The rules establish the terms and conditions under which SaFIR may be accessed, the rights, responsibilities and liability of participants, the processing and settlement procedures of the systemgenerated payment instructions, the risk management approach, the procedures to be followed in case of contingency events as well as all the other conditions regarding the system operation. The rules shall mean the present SaFIR Rules, including Annexes thereto, as subsequently amended and supplemented as well as any documents provided by the system administrator (called Documentation), as subsequently amended and supplemented. The Documentation includes, without being limited to, the following: the SaFIR User manual, technical procedures and documents provided by the system administrator (the Materials), including the SWIFT User Handbook (the Handbook for using payment messages by means of the SWIFT network) and the User guides for the payment messages by means of the STFD TRANSFOND S.A. proprietary network, for the respective interface, the List of payment instructions initiated by SaFIR by means of secured , Requirements for the technical certification of EPS participants, Configuration requirements for the participants systems, technical specifications regarding users interfaces etc. The rules are embedded in the Accession Agreement, being attached thereto. If the last day of each period mentioned in these rules is not an operating day, the respective period will be automatically extended until the following operating day. The specific terminology of these rules is explained in Annex 1 thereto. Page 6 of 143

7 1.1 The sole depository of government securities and other dematerialized financial instruments The SaFIR system operates based on the indirect holding system. The financial instruments that may be held with the system are: government securities, certificates of deposit issued by the National Bank of Romania and other financial instruments agreed upon by the NBR Board. The financial instruments registered within SaFIR on the participants behalf and accounts acknowledge the participants legal title to the respective financial instruments. The financial instruments registered cumulatively in customer accounts are held by the system participants on their customers account. The operations in the said financial instruments will be performed in compliance with the provisions of these rules corroborated with the provisions of the specific regulations issued by the National Bank of Romania or the Ministry of Public Finance, as appropriate. All dematerialized government securities issued by the Ministry of Public Finance will be registered in the accounts opened with the sole depository of government securities on behalf of the SaFIR participants, the legal title to government securities being acquired in compliance with the provisions of Art. 18, para. 3 of the Regulation on operations in paperless government securities, approved by Order No. 2509/2008 issued by the minister of public finance, as subsequently amended and supplemented. 1.2 Principles on the SaFIR system operation The Delivery versus Payment principle (DvP principle) The system applies the DvP principle consistent with the recommendations of the Committee on Payment and Settlement Systems (CPSS) as follows: the system ensures the debiting of book-entry accounts for financial instruments if, and only if, the system receives the confirmation of funds settlement, guaranteeing the participants the settlement of funds and financial instruments on a mutual basis. In the case of primary market operations in RON-denominated financial instruments, the confirmation of funds settlements is sent by the ReGIS system in response to the request submitted by the SaFIR system regarding the debiting of settlement account of the paying participant. Page 7 of 143

8 As for primary market operations in foreign currency-denominated financial instruments, the confirmation of funds settlements is sent by the issuer or by his settlement bank (in the case of government securities by the central bank, in its capacity as the settlement bank of the state). In the case of secondary market operations with financial instruments, funds may be settled either in the currency of issue or in other currencies, as agreed by the parties. Thus, funds in RON or EUR are settled in real time by means of the ReGIS system, namely via TARGET2 platform. As regards the settlement in US dollars (USD), funds are settled via correspondent banks. The settlement may last longer than one day, but it will not exceed the cut-off time of the Delivery Free of Payment Service on the operating day subsequent to the receipt of the confirmation of funds settlement by the correspondent bank or the cut-off time indicated in the SWIFT messages. The confirmation of funds settlement will be sent: - by ReGIS, in response to SaFIR request on debiting the settlement account of the paying participant where the settlement of financial instruments is in RON; - by the settlement bank, in response to SaFIR request on the settlement in RON of transactions between two participants having the same settlement bank; - by the TARGET2 system in response to the funds settlement instruction sent by SaFIR to TARGET2, where financial instruments are settled in EUR; - directly by the selling participant, where the settlement of financial instruments is in USD. The DvP models used in the system are: a) gross-gross, in which both the transfer of funds and that of financial instruments are carried out on a gross basis, namely on a case-by-case basis. This model will be applied in the case of settlement of secondary market operations in RON-denominated financial instruments, intraday settlement auctions, operations excluded from a participant s multilateral net position calculated by the system, the settlement of primary market operations in certificates of deposit as well as in the case of the settlement of all operations in foreign currency-denominated financial instruments. b) net-gross, in which funds are settled on a net basis, and financial instruments are transferred on a gross basis. This model will be applied only in the case of settlement of the primary market results, namely payment events relative to RON-denominated government securities. SaFIR participants as well as any settlement agent or settlement bank must credit the beneficiaries funds accounts as soon as possible after completing the settlement of a transaction in financial instruments via SaFIR, regardless of the settlement currency. Page 8 of 143

9 1.2.2 Free of payment (FoP) transfers Within the meaning of these rules, a FoP transfer within the system is a transfer of financial instruments that is performed without the prior confirmation of the funds transfer being carried out. The participants may request the carrying out of a FoP transfer in the case of: - transfers of customers and/or participants portfolios; - updating participants account balances as a result of transactions settled in other depositories systems; - execution of pledges by appropriation; - substitutions within repo arrangements; - margin calls relative to repo arrangements; - operations between participants and their own customers, where the payment of financial obligations is made through the bank; The system may automatically initiate a FoP transfer for: - the transfer of financial instruments from issuer account (9) to investor account (0) of the issuer, on the occasion of the settlement of subscriptions/ auctions, and in reverse order on the occasion of optional or total redemptions; - government securities purchased on the primary market by a SaFIR participant, other than the primary dealer, will be automatically transferred into own holding account in SaFIR, after the settlement of primary market results; - the registration and settlement of special issues (see section ); - the transfer of financial instruments from the NBR s mirror accounts to the participant s account and vice-versa, through the connection between SaFIR and other central depositories systems Processing of payment instructions within the system The payment instructions processed within the system will be sent to the participants by the system via one of the communication means mentioned in section 10 of the present rules. The stages of payment instruction processing are as follows: Page 9 of 143

10 1. sending messages to the participants; 2. validation of received messages; 3. matching; 4. checking the availability of the financial instruments in the book-entry account and their reservation in view of settlement; 5. settlement of payment instructions within the system; 6. sending notifications either to confirm performance of the final settlement or to abort participants payment instructions that have not been settled by the cut-off time Sending messages to the participants The processing of payment instructions within SaFIR relies on the dual notification principle, which means that both participants involved in a transaction will send standard format messages to the system, in compliance with the SWIFT User Handbook. As an exception to the dual notification principle, the following operations may be initiated unilaterally, by sending one SWIFT message: - selling or buying operations between a participant and its own customers; - intraday repo operations with the central bank; - realignment operations of positions resulting from transactions in other markets between house account and omnibus accounts for central securities depositories; - registration of pledges for the lending facility (Lombard credit), for the settlement of positions within the payment systems that ensure the clearing of funds, including those relative to operations in financial instruments and the pledges between a participant and its own customers or between the customers of the same participant; - pledge execution by appropriation; - pledge execution by sale of collateral where the buyer and the beneficiary of the pledge have opened an account for the same intermediary (own account or omnibus account); - release of pledge before the collateral arrangement reaches maturity; - cancellation of step two of a reverse sale-purchase transaction concluded on the basis of the Global Master Repurchase Agreement (GMRA) Protocol for reverse sale-purchase transactions in government securities GMRA (Repo-MRA operation). Page 10 of 143

11 This option is applicable, according to the contract between the parties, if the counterparty to the transaction is unable to fulfill its contractual obligations. The system does not accept instructions sent outside the time interval lapsed between the moment of start and the established cut-off time, the details relative to the different services being included in the SaFIR Operating program presented in Annex 7 to these rules Validation of messages Each payment instruction received by the system will be subject to validation, consisting in the checking of field formats (syntax), their content and the relations between them (context). The messages containing errors are rejected and each participant is notified about the reason and/or reasons of the rejection, via the SWIFT message, in compliance with the SWIFT User Handbook. For the operations that do not require dual notification, the completion of this stage coincides with the acceptance by the system that is the moment of entry into the system. In the case of these operations, after the validation (technical acceptance) the system will identify the transaction on which the instruction relies and to which it assigns a single identification number and a corresponding operation code Matching Matching is the process through which the instructions constituting a transaction are identified and through which an instruction sent by a participant is compared with the instruction sent by its counterparty in order to ensure that the terms of the transaction are identical in both instructions. The fields and data that are compared are described in the SWIFT User Handbook. No tolerance margins are accepted in SaFIR. All instructions validated by the system that require dual notification are subject to matching. The messages received and validated by the system are held in the Waiting for Matching queue (see section 6.1 of the rules) and are checked on a permanent basis for matching purposes. The process of identifying the matching instruction ceases when a revocation instruction is received from the participant or at the cut-off time set by the participant and the participant is notified. During the operating day, the participants may inquire the system relative to the status of the messages held in the Waiting for Matching queue. Page 11 of 143

12 The matching process allows the system to identify the transaction on which the instructions sent are relying and to assign a single identification number and a corresponding operation code (see Annex 8 to these rules). From that moment, the instructions initiated by the participants are accepted by the system. In compliance with Law No. 253/2004 on the settlement finality in the payment systems and securities settlement systems as subsequently amended, the moment of acceptance is the moment of entry into the system Checking the availability of financial instruments in the book-entry account and their reservation for settlement If there are not sufficient available financial instruments, the transaction is entered in the Securities Waiting queue managed in compliance with provisions of section 6.2. The pledge registration operations and intraday repo operations performed between the participants in relation with the central bank, for which the system cancel the transactions, are exempt. For operations requiring funds settlement, financial instruments will be reserved until the system receives the funds settlement confirmation or until the transaction cancellation. In the case of pledge registration operations, the moment of reservation coincides with the moment of settlement, by the registration of the pledge. Pledges lodged with the purpose of taking a Lombard credit (pledge scope code 200), when the moment of reservation coincides with the moment of message validation, with the pledge being registered after the start of the Lombard Service, are exempt Settlement of payment instructions within the system This stage takes account of the type of operation, as follows: a) in the case of free of payment (FoP) operations, the system transfers the financial instruments immediately after their reservation; b) in the case of delivery versus payment (DvP) operations, the system operates differently depending on the settlement currency: i. for RON-settled operations, the system initiates the funds settlement by sending a funds settlement confirmation request, either to ReGIS (where each of the Page 12 of 143

13 participants involved holds a settlement account with ReGIS) or to the settlement bank (if the participants have the same settlement bank); ii. iii. for EUR-settled operations, the system initiates the funds settlement, sending a settlement instruction to TARGET2; the instruction will be automatically generated based on the messages received from participants and will include the cut-off time for funds settlement, which will be the cut-off time of the Free of Payment (FoP) Service. for USD-settled operations, the funds settlement is initiated directly by the buyer. After receiving the funds settlement confirmation, Safir system accepts for settlement the respective operation (moment at which it becomes irrevocable) and proceeds to making the transfer of financial instruments, completing their settlement Delivering notifications to confirm the final settlement or the cancellation of participants unsettled instructions If the transaction was settled, the system delivers to the participants concerned notifications to confirm the settlement. The RON- or EUR-settled delivery versus payment (DvP) operations for which the system has not received the funds settlement confirmation notifications from ReGIS, from the settlement bank (as the case may be) or from TARGET2 will stay in the Waiting Funds Confirmation queue until the Lombard Service cut-off time or the Free of Payment Delivery Service (FoP) cut-off time, when the funds settlement is confirmed or the funds settlement instruction is cancelled. If the funds settlement failed, the reserved financial instruments are unblocked following the cancellation of the operation by the system, and the participants concerned are notified. The USD-settled delivery versus payment (DvP) operations will stay in the Waiting Funds Confirmation queue until the selling participant sends the funds settlement confirmation or until their cancellation by the system. 1.3 Restrictions regarding the operations performed within the system No operation in financial instruments mentioned in section 5.2 will be settled on the redemption date of the respective issues. Page 13 of 143

14 The system will not settle operations in foreign currency-denominated financial instruments sent during the last two operating days prior to the redemption date of the respective instruments. The system will not settle intraday repo operations with foreign currency-denominated financial instruments, except those with the NBR (intraday liquidity facility - intraday repo - granted by the central bank) in order to take intraday liquidity for a smooth settlement in ReGIS. Operations in financial instruments brought to SaFIR from the RoClear system may not be made between participants on their own behalf and account or on behalf and account of their customers. The only operations allowed in such instruments are those with the National Bank of Romania. Foreign currency-denominated financial instruments issued by the Ministry of Finance on foreign markets which are deposited with DTCC (USA) and are registered under two distinct ISIN codes (one restricted for the U.S. market and the other unrestricted, aimed for markets outside the U.S.) are prohibited for use in transactions resulting in a transfer in the SaFIR system of those instruments from one ISIN code to the other (such as, for instance, on acquisitions of such instruments by a U.S. resident investor). 2 Participation in SaFIR 2.1 Eligible institutions The following categories of institutions are eligible for participation in the SaFIR system: a) credit institutions from the European Economic Area (EEA) even when they operate through a branch established within EEA; b) credit institutions outside EEA provided they operate through a branch established within EEA; c) the National Bank of Romania; d) the Ministry of Public Finance; e) brokerage companies admitted on the primary market and/or the secondary market administered by the National Bank of Romania. f) The system administrator may also decide upon accepting the participation in SaFIR of the following institutions: central securities depositories within EEA providing clearing and/or settlement services which are supervised by a competent authority; g) central counterparties from EEA delivering services within clearing systems for transactions in financial instruments which are supervised by a competent authority; Page 14 of 143

15 h) organizations within EEA delivering clearing or settlement services which are supervised by a competent authority. In order to participate in SaFIR, the eligible institutions must fulfill the participation criteria provided in section 2.2 of these rules and conclude an accession agreement with the NBR in its capacity as system administrator. With a view to participating in SaFIR the institutions belonging to the eligible categories mentioned at 2.1 letters a), b) and e) in the present section shall conclude the accession agreement whose clauses are provided in the model shown in Appendix 2 to these rules. The rest of the eligible institutions will sign, after an individual assessment, specific accession agreements depending on the requested services. The participants in the system, depending on the traded instrument, may acquire one of the following capacities: participant performing transactions only on its own behalf and account; participant performing transactions both on its own behalf and account and on its customers account; issuer; central bank; central securities depository and securities settlement system. For operations with government securities, according to the laws in force, the participants performing transactions both on their own behalf and account and on their customers account may acquire the status of primary or intermediary dealer on the secondary market. The change of status will be recorded by the SaFIR system administrator upon notification from the competent authority and produces effects on the accounts opened on behalf of a SaFIR participant, as appropriate, in compliance with the laws in force. A SaFIR participant will be considered a critical participant by the system administrator if its inability to settle (mainly due to an operational failure) may prevent the other participants from meeting their obligations in the system at maturity, which could lead to the manifestation of systemic risk. Any of the entities referred to at letters a), b) and e) of section 2.1 of these Rules shall be considered critical participant in SaFIR if all the following criteria are met: i) The market share of the participant, calculated as the monthly average of the daily value of transactions settled by that participant in SaFIR, is constantly (for at least 7 months out of 12) more than 10% of total daily transactions settled in the system in that month; Page 15 of 143

16 ii) The combined market share of those participants who settle at least 10% of the daily value of transactions represents at least 50% of total daily transactions settled in SaFIR. If this limit is not reached, other participants with market shares below 10% will be added to the list of critical participants until the specified 50% limit is achieved; iii) The difference between the market share of the participant ranked last and the first participant outside the ranking (regular participant) ranking based on the previous criteria should be at least 1%. The criteria listed at points i)-iii) may be subject to periodic revision by the system administrator, in order to reflect as accurately as possible the system participants criticality in relation to the actual market conditions. The list of critical participants shall be set up on a yearly basis by 15 January for the current year, based on the data in the previous calendar year. The critical participants shall be notified accordingly by the system administrator and they shall comply with the specific requirements, as provided in these Rules, within a maximum time limit which will be communicated to them as appropriate. The participants referred to at letters c) and d) of section 2.1. of these Rules shall not be deemed as critical participants in SaFIR, from a systemic risk perspective, based on the criteria listed at points i)- iii) mentioned above. The institutions that are part of one of the categories specified at letters f)-h) of section 2.1. of these Rules, which have an account opened with SaFIR, are deemed as critical participants in terms of their status in the SaFIR system. 2.2 Conditions for participation in the system Operational capacity In order to participate in the system, an institution must be technically certified by STFD TRANSFOND S.A., in its capacity as technical operator of the system, in compliance with the provisions set forth in "Requirements for the technical certification of EPS participants". The participants must comply with the operational capacity requirements on a continuous basis and participate in the tests regularly carried out for this purpose by the system administrator. The costs related to ensuring the operational capacity for participating in SaFIR will be borne by the participants. Page 16 of 143

17 The system administrator is not required to provide participants with either hardware equipment and (software) operating systems allowing them to access SaFIR or the kit necessary for the electronic signature within the system set forth in "Requirements for the technical certification of EPS participants". The participants may change the location of their primary connection to the system only with the approval of the system administrator. Any primary or back-up connection will be located only in a country in which, as determined by the system administrator, there are adequate arrangements for on-site review of a participant's payment instructions processing and computer facilities, adequate access to digital telecommunications facilities, legal framework and adequate arrangements for necessary authentication and security devices, and adequate assurances that operation of the system will not be subject to interruption or interference by internal or external political developments. The list of countries meeting these conditions, according to the system administrator, includes all EU Member States and will be made available to the participants upon request. The participant may not change the established cut-off time in case it of changing the connection site. Any participant wishing to change the location or the operational characteristics of a computer will present the system administrator a proposed plan describing the change and obtain its approval. The participant will ensure that the office in which the connection is located should be staffed by skilled professionals, in compliance with the requirements stipulated in section 3 of these rules. By signing a User registration form, as set out in Annex 4 to these rules, the participant empowers the above-mentioned staff to take appropriate measures on its behalf, relative to the connection to the system. If the participant in the system uses the services of an operating agent, the conditions on the operational capacity of the participant shall be regarded as fulfilled as long as the operating agent meets these requirements Legal soundness In order to participate in SaFIR, the applicant eligible institution governed by foreign laws (even those within the European Economic Area) must meet the following conditions: (i) provide a legal opinion addressing the applicant s capacity according to Appendix 12, unless the information and statements to be provided by such legal opinion have already been obtained by the NBR in another context; and Page 17 of 143

18 (ii) provide a legal opinion on the country according to Appendix 12, unless the information and statements to be provided by such legal opinion have already been obtained by the NBR in another context. The system administrator will notify the applicant institution of its decision regarding the legal soundness within 30 banking days at most since the receipt of the above-mentioned documentation Financial soundness In addition to the provisions laid down in sections and 2.2.2, the system administrator may also establish requirements regarding the participants financial soundness Additional requirements for critical participants The SaFIR system administrator may impose additional system participation requirements to critical participants, listed as such according to the definition in Section 2.1. of these Rules. A critical participant shall therefore be required to: a) Have an operational secondary site, (preferably) located in an area that is not exposed to the same risks and not relying on the same public utility infrastructure (electricity, telecommunications, public transportation etc.) as the headquarters; b) Plan and conduct business continuity tests on a yearly basis to prove that, in case of a major disruption at the headquarters, the institution manages to perform the main operations, to close the present operating day, and to open the following operating day from the secondary site; c) Participate in business continuity tests organized by the system administrator; d) Report to the system administrator any operational incidents recorded in the previous calendar year which affected the functioning of their systems, resulting in the impossibility to run settlements in SaFIR within acceptable parameters for a period longer than 30 minutes, as follows: incident type, incident duration, solving method, number of incidents (listed by type). 2.3 Adding or modifying a participant The system administrator can introduce data on new participants into SaFIR and may modify these data, whenever appropriate. Page 18 of 143

19 Each participant will provide all the information stated in the form Information on SaFIR Participants in Annex 3 to these rules to the system administrator, at least 5 banking days before the entry into force of the Accession Agreement. Each participant will, in case of any change in the data required by the said form (including merger and split-off), notify the system administrator immediately and, as appropriate, will provide again the respective form. 2.4 Suspension or termination of a participant s access Access suspension In its capacity as SaFIR system administrator, the National Bank of Romania may suspend the access to a SaFIR participant (i.e. Block or Disable the participant) for a definite or indefinite period of time or until failures are corrected, in the following circumstances: (a) the participant is subject to prudential supervision and the relevant supervisor requests such suspension; (b) by agreement with the participant concerned; (c) the participant no longer complies with one of the access criteria set out in section 2.1 or section 2.2; (d) insolvency proceedings are commenced against a participant, provided they do not lead to access termination pursuant to section para. 1, letter b); (e) the participant breaches its obligations under the present rules or the applicable procedures and fails to rectify the breach or to provide a satisfactory justification thereof; (f) the system administrator considers, based on a country opinion addressing the legal system of the participant s jurisdiction, that the other participants or the system would run unacceptable risks should the participation continue. From the moment the system administrator decides that the suspension becomes effective, payment instructions from and for the respective participant are no longer accepted until the reinstatement date. The system administrator may decide on any term or grace period for failure correction before enforcing the suspension, taking into account the specific situation of the participant concerned. A participant whose access to SaFIR is suspended is not excused from discharging its obligations under the present rules, except as expressly provided for in the present rules. Page 19 of 143

20 The system administrator will immediately notify all SaFIR participants, by secured , of any suspension. The system administrator will notify all participants of any decision to reinstate a suspended participant and the re-commencement date for that participant. The procedure used in the case of a suspended participant is described in section 9 of these rules. Once the suspension has ceased, the respective participant enjoys, as from the following operating day, the same treatment within the system Access termination A participant ceases to be a participant when: (a) it resigns; (b) the decision on the commencement of insolvency proceedings against credit institutions, Romanian legal entities, is final and irrevocable; (c) insolvency proceedings are commenced against a participant, foreign legal entity, initiated and monitored by administrative or judicial authorities in order to capitalize on the assets of a credit institution, including the case where the proceedings are terminated by way of a concordat or a similar agreement; (d) the competent supervision authority in Romania withdraws the participant s authorization on grounds other than those laid down on in letters b) and c); (e) the system administrator terminates the access in accordance with the present rules; (f) following access termination, in compliance with the regulations in force and/or these rules. The system administrator will decide on the moment of the actual termination, taking into account the specific situation of the participant concerned. A participant may resign, by way of a written notification to the system administrator, with effect from the 10 th banking day after the date the administrator received it. The notification becomes irrevocable from the moment it was officially announced to the system administrator. In the case provided for in para. 1, letter e), the system administrator will terminate the access of the defaulting participant by a written notification to the participant concerned, if the following conditions have been fulfilled: (a) something has occurred causing the participant's suspension, which has not been mended within a reasonable period of time; Page 20 of 143

21 (b) the system administrator has been consulted the relevant supervisory authority regarding such termination; (c) the system administrator has given the participant the opportunity to make submissions regarding such termination. The system administrator shall specify, in the written notification sent to the participant, the reasons underlying the decision for access termination. The system administrator may revoke such a decision at any time prior to its enforcement. A participant whose access is terminated pursuant to this section will continue to be bound by these rules in respect of: (a) any act, matter or thing having occurred prior to the access termination moment or being a result of the respective termination; and (b) any fees, costs, charges and expenses owed by other participants or which are about to be returned to these in accordance with these rules with regard to any period prior to the time such termination takes effect or which relate to any such act, matter or thing. The system administrator will immediately notify the participants (by the most expeditious means available) of any termination under this section. Upon access termination of a participant and subject to any rights of set-off, counterclaim or combination, which are available at law, the following will apply: a) the terminating participant will pay/transfer all the sums of money and/or financial instruments it owes to any other participant or to the system administrator (when appropriate), in respect of obligations arising from the exchange of payments; b) any participant who owes money amounts and/or financial instruments, in respect of operations made in the system, will make payments/transfers to the terminating participant. A participant whose access is terminated is not entitled to be repaid all or part of any entry fee, different charges or other kinds of fees, which it has already been paid. The system administrator is free to charge an exit fee in accordance to the pricing information in Annex 9 to these rules, which will be modified whenever appropriate. Any participant whose access is terminated is no longer entitled to send instructions with immediate effect in the system, according to these rules. Page 21 of 143

22 The procedure applicable in the system in the case of a terminating participant is the same as that followed in the case insolvency proceedings are commenced against a participant (see section 8 of the Rules). 3 Creation and maintenance of users 3.1 General provisions Only authorized and uniquely identified staff (users) will be permitted access to the system. For each user, the participant will fill in and send a User registration request form (as shown in Annex 4 to these rules) which will be modified whenever appropriate. The user is the authorized person or the person pointed out by filling in and sending the user registration request form as authorized to receive, send and/or confirm data and instructions within specified limits, if any, on the user registration form. Central depositories not operating through an office located in Romania may appoint an operating agent which, on the basis of contractual arrangements with the respective depository, shall send and receive on its behalf the messages in SaFIR. The operating agent shall forward all the registration request forms of participant and user profiles. The operating agent shall be a primary dealer registered in SaFIR. If the central depository has no settlement account opened in the ReGIS system, it shall choose an operating agent which is registered in ReGIS and fulfills the role of a settlement bank. The system administrator will act in compliance with the communication and data security methods set forth in these rules, as they may be amended whenever appropriate in accordance with the procedures in these rules, having no further duty to check the identity or authority of the person sending or confirming instructions, or their content. Without hindering any other provision of these rules to come to effect, the system administrator has the right, in its sole discretion, to refuse to execute any instruction, provided that, acting in good faith, it doubts the authenticity or authorization thereof. The system administrator will instantly notify the user, even by telephone, regarding such a refusal. The system administrator is entitled to rely on the authorization and user list submitted by each participant via the User registration request form until it receives a written request of revocation or modification of such User registration request form. Each written request for revision of a User registration request form received from a participant and Page 22 of 143

23 signed by an authorized person is being subjected to the system administrator s consent in accordance with the procedure laid out in sections 3.3, 3.5, and 3.6 of the present rules. A participant will inform the system administrator as soon as possible if any person authorized to use the services on behalf of that particular participant ceases to be employed by that participant or ceases otherwise to work for it or to be, any other way, under its control. Each participant is required to regularly check and, if necessary, revise their own user profiles and rights. 3.2 User registration Each participant requesting the authorization of a user will fill in and send the system administrator the following: - a user registration form, as provided in Annex 4 to these rules, dated and signed by a participant's representative; - a user profile request form as provided in Annex 5 to these rules, dated and signed by a participant's representative. The system administrator has the exclusive right to authorize new users upon request for authorization of a user by a participant. The participants may require the access of a user to the system only if it has followed the authentication procedure. Moreover, only the system administrator has the right to add new users to the system. The access of a SaFIR user to the system will be possible only by means of the application user name assigned by STFD TRANSFOND S.A. and its related authentication elements (password to access the system, secured device to generate electronic signature with digital certificates issued by a certification service provider appointed by STFD TRANSFOND S.A. and its associated password). 3.3 Creation and maintenance of user profiles The system administrator adds and amends information about a user, including the user profile, according to the information provided by the participant. The system administrator will approve specific master templates for each participant (general profile). Within the restrictions of this template, the participant management can define profiles for its staff, consistent with the principle of duty segregation by filling in and sending the respective form, as Page 23 of 143