The Hungarian Financial Supervisory Authority and the National Bank of Romania, hereinafter referred to as "the Parties", expressing their mutual interest in establishing and promoting bilateral ties in banking supervision and wishing to achieve a common understanding on issues related to banking regulation in order to facilitate co-operation in supervising the activities of credit institutions, have agreed as follows:

1. For the purposes of this Memorandum:
   • "countries" are Hungary and Romania;
   • the "banking supervision authorities" are the Hungarian Financial Supervisory Authority, which is responsible for the licensing and supervision of credit institutions in Hungary and the National Bank of Romania, which is responsible for the licensing and supervision of credit institutions in Romania;
   • a "credit institution" is an entity which carries on banking business (general or specialized) and whose activities are subject to licensing and banking supervision under the laws of the countries;
   • "supervisory information" is the information received or obtained in the process of fulfilling their supervisory functions, as well as through the exchange of information or through the conduct of on-site inspections in accordance with this Memorandum, by either of the banking supervision authorities; and
   • "cross border establishment" - a branch or a subsidiary bank licensed in Romania of a parent bank which is licensed in Hungary; or a branch, or a subsidiary bank in Hungary of a parent bank which is licensed in Romania.

   In accordance with definitions used by the Basle Committee on Banking Supervision:
   

   • a "branch" of a credit institution (a branch) is an operating entity which does not have a separate legal status and is thus an integral part of a credit institution incorporated in one of the countries;
   • a "subsidiary credit institution" (a subsidiary bank) is a legally independent institution, wholly-owned by, or otherwise under the control of a credit institution which is incorporated in the country other than that of the subsidiary; and
   • "home country" is the country of incorporation of a credit institution that has set up a branch or a subsidiary bank in the other country ("host country").
     
     
2. To maintain reliability and stability of the national banking systems, the Parties shall co-operate in the banking supervision of the activities of credit institutions on the basis of the provisions of this Memorandum, subject to the national legislation and the international obligations of each Party.
3. The Parties shall regularly provide, on a reciprocal basis, information on the applicable national banking legislation, banking regulations, banking supervision standards and requirements, and any major changes in them.
4. The Parties agree to hold, if necessary, meetings between them to discuss issues of mutual interest and ways to improve banking supervision over the activities of credit institutions within their respective jurisdictions.
5. Co-operation within the framework of this Memorandum shall be implemented at the initiative of or on the basis of requests for assistance in banking supervision from either Party.
6. Request for information under this Memorandum shall be made in writing, in the English language and shall be addressed to the contact person of the Party requested to supply information. All communications between the Parties should be between the principal points of contact listed in Annex 1. unless otherwise agreed.
   

   The request should indicate the following:
   

   • the subject matter of the request and the specific information requested;
   • the purpose for which the information is sought;
   • the sensitivity of the information sought and
   • the urgency of the request, or the desired time period for the reply.

   In order to enhance the quality of cooperation, representatives of the HFSA and the NBR banking supervisors shall convene regularly to discuss issues concerning banks which maintain cross border establishments within their respective jurisdictions.
   
   

7. A request for assistance within the framework of this Memorandum may be denied wholly or partially, if the requested Party believes that the fulfilment of the request will run counter to its national legislation or that it may harm important national interests. In such cases, the requesting Party shall be notified about the denial and given the reasons for it in writing.
8. The Parties shall take all necessary measures in order to provide a prompt and as full a reply as possible. They shall also notify one another about the circumstances preventing or delaying the fulfilment of a request for assistance.
9. Each Party shall independently bear the expenses involved in the implementation of this Memorandum, unless a different procedure is agreed upon.
10. Financial Crime
    

    The banking supervision authorities will co-operate closely when they identify suspected financial crime activities in supervised institutions. For the purposes of this agreement, financial crimes are in particular: money laundering and all violations of law on financial markets. This also includes unauthorized banking.

    The home- and host-country authorities may share information to the extent allowed under their laws on financial crime concerning the respective institutions which carry out cross-border activities in the other state or which could affect the other state. In the event that one of the Parties, during an examination or inspection, detects a serious criminal violation of the laws of its jurisdiction, the Party may be under a strict legal obligation to pass the information immediately to the appropriate law enforcement authorities in its home country. In these circumstances, the Party should inform the other Party of its action.
    

11. Customer Complaints

    Complaints made about any institution should be handled by the relevant authorising authority. If as a result any information comes to the attention of either the home or the host authority which is relevant to the other authority, the home and host authority will ensure that this shall be properly communicated.

    Any complaint against institutions laid with the banking supervision authorities would only be examined in order to find out whether supervisory measures should be taken on the grounds that the queried activities of the institution showed deficiencies in the fit- and properness of the management or even amounted to harmful tendencies in the banking industry.

12. The Parties agree to co-operate in supervising credit institutions as follows:
    • 12.1. In licensing banking activities, the Parties agree that:
      • 12.1.1. If a credit institution incorporated in one of the countries applies to the Party in the other country for a license (permission) to open a branch or a subsidiary bank, the other Party shall consider such application within the time-limits and in accordance with the procedures established by its national banking legislation or regulations;
      • 12.1.2. The Party receiving an application, as referred to in 12.1.1 above, shall notify the other Party of the details of such an application and obtain the other Party's views as provided by the rules established by the Basle Committee on Banking Supervision;
      • 12.1.3. The Party receiving an application obtains from the other Party such information as it deems necessary to act in the application, including, the amount of own funds and the solvency ratio of the parent bank, whether it is in compliance with the home country banking regulations and the opinion of the home country supervisor about the quality of management, the adequacy of internal control systems and management processes and any information known to the home country supervisor about the prospective managers of the organization proposed to be established in the host country; and
      • 12.1.4. The Party receiving an application shall notify the other Party in writing about its decision with regard to the granting of license (permission) to a credit institution to open a branch, a subsidiary bank, which has applied to it, as provided in 12.1.1 above.
    • 12.2. In exercising off-site supervision of branches or subsidiary banks set up in one country by credit institutions incorporated in the other country, the Parties agree that:
      • 12.2.1. The banking supervision authorities of the host country shall exercise prudential supervision over the activities of branches or subsidiary banks in accordance with the national banking legislation or regulations; and
      • 12.2.2. The banking supervision authorities of the host country shall not prevent the entities mentioned in 12.2.1 above from submitting information and other reports to their Head Office or parent banks necessary to compile consolidated reports in accordance with the forms established in the home country, provided that such information shall not relate to any individual deposit account.
    • 12.3. With regard to on-site inspections, the Parties agree that:
      • 12.3.1. The banking supervision authorities of the home country shall notify the banking supervision authorities of the host country about their intention to inspect a branch or a subsidiary bank, giving details of the names of examiners, the purposes of the examination and its expected duration. The banking supervision authorities of the host country shall express readiness to provide, at the request of the other Party, any available supervisory information related to the conduct of on-site inspections. The Parties may conduct on-site inspections upon the request of the other Party and may consent that the on-site inspections shall be carried out by the requesting Party or the expert(s) mandated by the requesting Party;
      • 12.3.2. The banking supervision authorities of the host country shall not prevent the banking supervision authorities of the home country from carrying out on-site inspections, as referred to in 12.3.1. above, and shall give the banking supervision authorities of the home country access to supervisory information, as defined in article 1, which they may need to conduct banking supervision provided that if either Party has reasons to believe that an on-site inspection by the other Party is for non-supervisory purposes (such as fiscal/tax and foreign exchange control purposes), such Party shall have the right to prevent the inspection or terminate it; and
      • 12.3.3. Representatives of the banking supervision authorities of the host country have the right to be present during the on-site inspections conducted by the representatives of the banking supervision authorities of the home country.
    • 12.4. In connection with the supervision of the credit institutions incorporated in one country which have branches or subsidiary banks in the other country:
      • 12.4.1. The Parties agree to provide, on a timely basis, information about any events that have the potential to endanger the stability of the activities of a credit institution having operations in the country of one of the Parties, as well as material changes pertaining to such credit institutions such as restrictions to the range of permitted banking operations, suspension or modification or revocation of a license, appointment of a provisional administrator, and re-organization or liquidation of any such credit institution, if this information would be relevant for the host supervisor as it would have an important impact on the branch or subsidiary; and
      • 12.4.2. The host supervisor notifies the home supervisor and provides relevant information regarding any material developments or supervisory concerns in respect of a branch or a subsidiary bank.
13. Information would be shared to the extent reasonable and subject to any relevant statutory provisions, including those restricting disclosure. In addition, the provision of, or request for, information under the Memorandum may be denied on grounds of public interest or national security or when disclosure would interfere with an ongoing investigation.
14. The Parties consider that any information obtained in accordance with the principles of the Memorandum should be used exclusively for lawful supervisory purposes as determined in the relevant laws.
15. Each Party is liable in accordance with the relevant laws and regulations to keep confidential any information related to requests made under the Memorandum, the contents of such requests, and the information obtained pursuant to the Memorandum as well as any related matters, in particular consultations between the Parties. The requesting Party will not use any such information unless it is necessary for carrying out its supervisory responsibilities and will not pass on any information to third parties without the prior consent of the requested Party. The Parties shall not disclose any individual data and information received or sent on the basis of this Memorandum unless they have obtained a prior written consent of the other Party. The Parties will, if they receive any legally enforceable demand for information received from the other authority, promptly notify the other Party and will co-operate in seeking to preserve the confidentiality of such information.
16. It is recognized that employees of both Parties are bound to hold confidential all information obtained in the course of their duties.
17. For the purpose of this Memorandum, the HFSA and the NBR shall use the lists of the licensed banks, branches and subsidiaries within their jurisdictions published on their respective Internet websites. The HFSA website address is www.pszaf.hu. The NBR website address is www.bnro.ro.
18. The memorandum shall be changed or amended only in writing with the signatures of the Parties.
19. The Memorandum shall be drawn up in the English language in two original copies, each Party obtaining one copy.
20. Cooperation and assistance in accordance with this Memorandum of Understanding will continue until the expiration of 30 days after either Party gives written notice to the other Party of its intention to discontinue cooperation and assistance. If either Party gives such notice, cooperation and assistance in accordance with this Memorandum will continue with respect to all requests for assistance that were made before the effective date of notification until the requesting Party withdraws the matter for which assistance was requested. In the event of termination of this Memorandum, information obtained under this Memorandum will continue to be treated confidentially.
21. Date and place of signing the Memorandum: Budapest, 21 November 2005