Preliminary assessment of the second payment request of Romania

participants information on the status of their assets electronically, if participants have opted for it (Section 4, Art. 12(1)).

• - Diversify Pillar II pension investments.

Financial Supervisory Authority rule No. 2/2021 of 29 January 2021, amending and supplementing Rule No. 11/2011 on the investment and valuation of assets private pension funds, approved by Judgment Private Pension System Supervisory Commission No. 22/2011, published in the Official Journal No. 130 on 8 February 2021, allows investments in unrated corporate bonds and corporate bonds with a non-investment grade rating of Romanian issuers, but with grade no lower than BB-, BB-, and Ba3 (Article I(4)), therefore expanding opportunities for diversification of Pillar II pension investments as compared to the previous situation.

• - Regarding the Pillar II pension investments, the government shall: - explore the possibility

of making the regulatory regime applicable to privately managed pension funds’ investments more flexible by reducing quantitative investment restrictions and reducing risk budgetary restrictions applicable to privately managed pension funds. The explanatory note developed by the Financial Supervisory Authority titled “Analysis of how Romania carried out commitments related to milestone 213 of the NRRPs relating to making investment by private pension funds more flexible” (hereinafter referred to as “the final explanatory note from the Financial Supervisory Authority”) lays out on pages 2-5 the state of play on the regulatory regime applicable to privately managed pension funds’ investments at the time when the Council Implementing Decision and its Annex were adopted by the Council. According to its mandate, as outlined in the Cover Note and in Art. 2(1) of Law No. 113/2013 of 23 April 2013, for the approval of the Government Emergency Ordinance No. 93/2012 on the establishment, organisation and functioning of the Financial Supervisory Authority, published in the

Official Journal No. 234/2013 on 23 April 2013, the Financial Supervisory Authority exerts authorisation, regulation, supervision and control powers over the private pension system. In addition, the sole Article of Law 104/2023 of 13 April 2023 approving Government Emergency Ordinance No. 174/2022, published in the Official Journal No. 319 on 13 April 2023, specifies that the Financial Supervisory Authority shall regularly examine the possibility of drawing up regulations on the investment of assets of privately managed pension funds to help make the investment framework more flexible, with a view to encouraging appropriate diversification of pension fund assets in order to achieve fair risk-adjusted investment returns. Following the adoption of the Council Implementing Decision, the Financial Supervisory Authority explored in early 2022 the possibility to further enhance diversification of the regulatory regime applicable to privately managed pension funds’ investments. As explained in the Cover Note and the final explanatory note from the Financial Supervisory Authority, the Financial Supervisory

Authority started this exploration with a detailed risk assessment (page 5 of the final explanatory note from the Financial Supervisory Authority). As stated on pages 6-7 of the final explanatory note from the Financial Supervisory Authority, the risk assessment points to an unfavourable economic outlook and concerns about vulnerabilities in the financial system, including private pensions, and therefore, at this stage, a cautious approach to potential changes to the legislative framework regulating private pension funds’ investment should be adopted. The Financial Supervisory Authority will take into consideration future changes to further encourage diversification, in line with its mandate and the legislative framework outlined in the sole Article of Law 104/2023 of 13 April 2023 approving Government Emergency Ordinance No. 174/2022, published in the Official Journal No. 319 on 13 April 2023.

39