The Financing Surveillance Authority (ASF) monitors the Romania’s capital market, private pensions market and insurance market. A DNA investigation has revealed a wide net of corruption at the heart of the institution, which has brought the ASF to the attention of the media more than ever before.
Though the authority has been part of the economic landscape for less than an year, it is a highly controversial institution. Here are ten things you should know in order to better understand ASF’s role and place in Romania’s economy.
1. 3 institutions in 1
Romania’s Government decided in December 2012, by way of emergency ordinance, to create a new surveillance authority for the financial sector.
The authority would take over the functions and attributions of three different institutions: National Commission of Securities (CNVM), the Surveillance Commission for Insurance (CSA) and the Surveillance Commission for Private Pensions, three entities that would stop functioning as soon as the new Authority became functional.
The three bodies together had over 450 employees and ended 2011 on losses, because of high staff expenses, writes romania-insider.com.
The ASF would act as an “integrated authority of the finance sector comprised of the stock market, insurance sector and private pension funds”.
At the time, Mugur Isarescu said that unifying the three entities was a measure recommended by the European Central Bank, especially in markets that are not as developed. Furthermore, the creation of ASF was a demand on behalf of the IMF, writes wall-street.ro.
2. A market of over EUR 25bln
Given that CNVM supervised companies with a total value of over EUR 20bln, CSA – EUR 2bln and the Private Pension Commission oversaw a market of over EUR 2,3bln, when the Authority was finally formed, it had in its charge a financial market of approximately EUR 25 bln euro (to keep things in perspective, that is the equivalent of 20% of Romania’s total GDP), according to adevarul.ro.
3. High taxes and commissions
The stock market in Romania is one of the most expensive in Central and Eastern Europe on account of high commissions enforced by ASF and BVB, argues US Charge d’affaires Duane Butcher.
How big are these commissions?
Although it is a public institution, ASF pays the salaries of their employees with taxes imposed on the supervised companies, not out of the public budget. Further down the line, the brokers in the capital and insurance market pass on their deductions to their clients. ASF collects anywhere between 15 and 25% of the earnings of a broker registered with it.
According to a Conso.ro report, quoted by romanialibera.ro, 15-25% of sums retained by private pension administrators from their clients accounts represent ASF taxes.
On the capital market, in the case of collective placements (SIF, Property Fund), ASF supervision accounts for 0.1% of the net asset. Individual investors pay a fee of 0,08% of a transaction’s total value to the ASF. It may not seem like much, but brokers charge a 0,5% commission, which means that ASF slashes the intermediaries’ revenues by 15%.
In the field of insurance, it is harder to make the proper calculations since only insurance brokers charge commissions. However, insurers pay ASF an annual tax of 0,3% from the brute volume of premiums, and RCA insures pay an extra contribution of 1% from premiums charged.
Overall, ASF has generated in less than a year of activity and through the three different fields of activity over EUR 35 mln. However, the institutions still manages to accumulate losses, because of high salaries.
4. Political struggles
The law that established the new institution and the set-up of the administration board was sent to President Basescu in March 2013. He rejected the law, motivating that relatives of members of Parliament should not be part of the new administration board. The deputies ignored his request, but did accept the requirement to set a limit of experience (7-1o years) for the future executive directors of the ASF.
Seeing as they were the big winners in the most recent parliamentary election, PNL and PSD divided the administrative functions within the new authority: PNL would have three people would executive power at the head of the ASF and social-democrats got two. ASF would be managed by a board consisting of 5 members with executive power and 12 members with non-executive functions.
President Traian Basescu officially passed the law to form the new Financial Supervision Authority on April 23, 2013.
5. The ASF board
Dan Radu Rusanu, a politician with the ruling Social Liberal Union (USL), and former finance minister Daniel Daianu were selected in April 2013 as president and vice-president of the new supervisory body.
Rusanu was accused of incompatibility, seeing as members of the ASF should not be allowed to be involved in companies that would make the object of the institution’s supervision. The Rusanu family owned a stake of 91% in International Sinaia, listed on the Rasdaq Index. Rusanu defended himself claiming that International Sinaia operates in the field of tourism, and according to the ASF charter, executive members should not be involved in financial institutions or insurance companies.
In the summer of 2013, the Government made the decision to shrink the ASF’s board, from 17 members to 11. The organigram would still include a president, a first vice-president, three vice-presidents as executive members and six other members with non-executive status.
In October 2013, another normative act from the Government would’ve diminished the board even further, to nine members and it would’ve put vice-president Daniel George Tudor in incompatibility.
The law, signed by prime-minister, Victor Ponta, is at the center of a huge scandal.
6. “The ASF Mafia”
Through DNA’s investigation, it was revealed that Ilie Carabulea (owner of Carpatica Asig), Marian Mirzac and Radu Mustetea formed a criminal group and sought to take control of the ASF, in order to protect Carabulea’s interests and his firm. From his position as a non-executive member of ASF’s board as of April 2013, Mirzac tried to protect Carpatica Asig and help avoid its suspension. Radu Mustetea, a member of Carpatica Asigurari’s board, acted as a intermediary between Carabulea (who financed the group) and Mirzac, writes evz.ro.
The group were also supported by two executive managers within the surveillance authority. Their purpose was to remove Daniel George Tudor from the ASF board (Mirzac’s “sworn enemy”) and protect Carabulea’s interests.
After the Government adopted the law that would reduce ASF’s board, Daniel George Tudor quit his position on the board.
7. Corruption of the highest order
Laura Chitoiu is another one of the names associated with the Carpatica Asigurari investigation. What is different about her is that she is Daniel Chitoiu’s wife, the minister of Public Finances. Also involved in the scandal were the signers of the Ordinance in October that reduced the ASF’s board to nine members:
– Victor Ponta, prime-minister;
– Liviu Voinea, delegated minister for the Budget;
– Daniel Chitoiu, Finance minister.
Victor Ponta defended himself recently claiming that the reduction was “demanded” by the European Commission and the IMF.
DNA has already begun an in depth investigation into the circumstances under which the Government created and passed this law. According to transcripts of phone conversations, it seems that Daniel Chitoiu might have been the initiator, writes realitatea.net.
8. Activity in 2013
In spite of the scandals that saw its reputation destroyed, Romania’s Financing Surveillance Authority ASF gave a total of 43 fines between April and December 2013, with a total value of RON 782,000 (some EUR 177,000).
9. ASF’s black list
On November 20, 2013, ASF fined both Iulius Alin Bucsa – executive president at ASTRA and Liviu Stoicescu – member of the executive with RON 50,000 (over EUR 11,000) each, another fine of RON 30,000 (around EUR 6,800) being given to Irinel Dinu – head of the damage department at ASTRA insurance company.
Insurer Omniasig was also fined by the Financing Surveillance Authority. In July 2013, ASF decided to fine Mihail Tecau – executive president at Omniasig and Artur Borowinski – executive vice-president with RON 50,000 (some EUR 11,000) each. Daniela Camelia Covacescu, member of the executive, also received a fine of RON 30,000 (EUR 6,800).
Stamov Bozhidar Stoyanov, the head of Euroins Romania Asigurare Reasigurare’s damage department, was also fined with RON 50,000 (over EUR 11,000) in May last year.
In August, ASF fined Mihnea Tobescu, general manager of Euroins Romania Asigurare Reasigurare, with RON 50,000 (some EUR 11,000) and decided to temporary ban the company from providing RCA insurances. Also, the institution decided to withdraw the approval of Stamov Bozhidar Stoyanov.
10. Who’s running the ASF right now?
1. Ruşanu Dan Radu – president – executive member
2. Dăianu Daniel – first vice-president- executive member
3. Ursache Mircea – vice-president- executive member
4. Moldoveanu Corneliu – vice-president- executive member
5. Giurescu Ion – vice-president- executive member
6. Marcu Gheorghe – non-executive member
7. Biro Albin – non-executive member
8. Sârbu Marian – non-executive member
9. Mîrzac Marian – non-executive member (under probation)
The nine members of the board have a 5-year term, that started in November, and on average they have salaries of over EUR 15.000 per month, according to realitatea.net.