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.
In April 2022, international rating agency S&P affirmed Romania’s sovereign rating at BBB-, in line with the other two major rating agencies and just above the investment grade lower border. The agency also maintained the “stable” outlook assigned to the country’s sovereign rating. For the time being, there are more negative risks that, if materialized, could result in a lower rating for the country: the effects of the war in Ukraine, failure to absorb EU funds and central bank’s failure to anchor the core inflation or its excessive manipulation of the exchange rate at the expense of allowing it to adjust to external shocks.
Also in April 2022, Fitch Ratings affirmed Romania´s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a Negative Outlook. Romania’s ‘BBB-’ rating is underpinned by EU membership and EU capital flows that supports investment and macro-stability, and GDP per capita, governance and human development indicators that are above ‘BBB’ category peers. These are balanced against larger twin budget and current-account deficits than peers, a weak record of fiscal consolidation and high budget rigidities, and a high net external debtor position. The Negative Outlook reflects continued uncertainty regarding the implementation of policies to address structural fiscal imbalances over the medium term and the impact from the Ukraine war and energy crisis on Romania’s economic, fiscal and external performance.
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.
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 June 2021 was USD 1 = 4.7049 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).