It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.
Methods of Payment:
The least risky for the American exporter and most widely accepted method of payment is by an irrevocable letter of credit. This method, however, is not necessarily the most competitive for winning sales in Romania. An L/C represents a credit obligation for the Romanian buyer, who may not be willing (or able) to borrow at a cost-effective rate. Cash-against-documents or open-account terms entail more risk for the exporter but may be preferable for the buyer. Each exporter must weigh the element of risk in a transaction against the relationship with the buyer and degree of competition.
Commercial banks offering international trade services can describe the risks and merits of each payment method, but American exporters are well advised to establish payment policies for international sales based on their business strategy. In addition to the due diligence tools discussed earlier, there are other forms of U.S. Government support for managing risks. The U.S. Export-Import Bank (Ex-Im Bank) offers a program of export credit insurance to enable U.S. exporters to extend credit terms with protection against the risk of non-payment.
On April 17th, 2021, Standard & Poor – S&P’s revised the outlook on Romania to stable from negative due to decreasing fiscal risks, while maintaining rating at BBB-/A-3. The stable outlook indicated that the government’s fiscal consolidation agenda was perceived as credible, and that Romania’s public and external finances has been seen stabilizing over the next two years. In the agency’s view, risks from Romania’s still-elevated twin deficits are mitigated by the prospect of sizable EU funds deployment, the government’s stated reform ambitions, and a return to economic growth. After contracting by a modest 3.9% in 2020, S&P expect Romania’s economy to rebound by a solid 5% this year, based on EU-funded investment and the return of domestic demand.
On April 20th, 2021, Moody’s maintained Romania’s negative sovereign outlook. The strengths of credit risk are seen by Moody’s as being the strong potential for medium-term economic growth, still moderate public debt burden, and favorable debt accessibility values, as well as Romania’s EU membership - which gives it a political anchor. These are balanced against the weakened government balance sheet, as the increased internal political volatility and the increased risk of external vulnerability “weigh heavily.”
On April 23rd, 2021, Fitch Ratings affirmed Romania’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a Negative Outlook. The Negative Outlook reflects uncertainty regarding the implementation of policies to address structural fiscal imbalances over the medium term and the impact from the coronavirus pandemic on Romania’s public finances. The current administration plans a series of fiscal and macro reforms to anchor medium-term fiscal sustainability, but a weak track record of fiscal consolidation and very high budget rigidities constitute key public finance challenges.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.
The number of Romanian and foreign banking institutions has increased from five in 1990 to more than 35 at present, and all are authorized to engage in a full range of traditional banking functions as authorized by the Romanian National Bank (BNR)
Romania’s membership in the EU and greater integration into world financial markets exposed its economy to the international financial crisis starting in 2008. The dominant role of foreign banks in the market has brought benefits but has also made Romania captive to the decisions of these banks’ home offices (especially in the Euro Zone) and their shareholders. However, Romania has proven a profitable market for these banks, and none have expressed plans to exit the market.
Major credit cards are accepted by large hotels, car rental companies and stores in the main cities in Romania. However, credit cards are unlikely to prove useful in small towns or away from tourist areas. A card with a chip and/or PIN may be required to make credit card purchases. Many American banks allow cardholders to set up a PIN prior to travel in case one is needed. Regardless, you should notify your bank of your international travel, and the potential legitimate use of your card abroad, prior to leaving the United States.
Foreign Exchange Controls
Romania has no foreign exchange restrictions. The local currency, the Romanian New LEU, (abbreviated RON) is fully convertible for business (current account) purposes, with a fully liberalized capital account, and a central bank applying a managed float to reduce currency fluctuations. Foreign investors may freely repatriate profits and dividends in hard currency. The exchange rate as of September 14th, 2021 was USD 1 = 4.1877 RON.
U.S. Banks & Local Correspondent Banks
All commercial banks now operating in Romania have international correspondent relationships, and all are members of the domestic inter-bank payment-settlement system.
Since 1996, Citibank has been the most well-known U.S. bank in Romania, owned by Citibank Europe. This is a credit institution authorized and supervised by Central Bank of Ireland. It carries out its activities in Romania by a branch, Citibank Europe plc, Dublin – Romania Branch. Although Citibank Romania does not engage in retail banking, it has corporate banking branches in major cities such as Bucharest and Timisoara.
In November 2018, a new American bank entered the Romanian market, including the retail banking sector. Greece-based Piraeus Bank was acquired by J.C. Flowers, a private U.S. equity leader, and it became First Bank Romania In April 2019, First Bank Romania announced the signing of an agreement with Israel-based Bank Leumi for purchasing all the bank’s holdings in its subsidiary Bank Leumi Romania. The purchase was approved by the National Bank of Romania and the Romanian Competition Council. After receiving the final approval from the National Bank and the Trade Register, First Bank finalized the integration of Bank Leumi in May 2021.
The Romanian financial landscape includes several international bank subsidiaries and several major Romanian banks. Most of these have parent corporations in other countries such as the U.S. (Citibank, J.C. Flowers & Co, NCH Capital), Austria (Erste Bank, Raiffeisen Bank, and Porsche Bank), France (BRD – Societe Generale and Credit Agricole Bank), Italy (Unicredit Bank and Intesa Sanpaolo Bank), Greece (Alpha Bank), Cyprus (Vista Bank), Hungary (OTP Bank), Holland (ING Bank) and Turkey (Garanti Bank).