BANCA TRANSILVANIA S.A. Romanian joint-stock company ...

undergone significant changes over the last years. Amendments to the existing legislation orenactment of new regulations may bear a major negative impact on the Bank’s activity, itsfinancial conditions or operational earnings.4.3. Risks related to the Bank and the BondsBusiness Environment; Dependence on Romanian EconomyThe activity of the Bank depends on the Romanian economy, but not to a greater extent thanthe activity of the other Romanian Banks of the same size. Therefore, despite the prudentpolicy of the Bank, the financial performance of the Bank (especially its capacity toincrease its profits) depends on the development of the Romanian economy.The economic situation of Romania, afflicted by the recession it has been undergoing since2008, showed the first positive signs at the end of 2011, when it registered a slight growth.Following the financial consultancy services contracted by the Romanian Government fromthe International Monetary Fund (2009), the Government adopted a series of legislativemeasures aiming at economic reform, which led to a more stable economy in early 2011, asconfirmed by the evaluation report submitted by the IMF.Also, the International Monetary Fund has cut the government bond risk in August 2012,after most of the political conflicts had been settled once the final decision of thereferendum from 29 th of July was known, according to BNP Paribas.The IMF and Romania reached a staff-level agreement to unlock the next tranche of aprecautionary 5 billion-Euro ($6.2 billion) loan, as established on Aug. 14 after a review ofthe country’s loan accord. The leu is slightly undervalued and has scope to appreciateA possible delay in Romania’s stabilization and economic growth could be detrimental tothe macro-economic results of Romania, and consequently to the Bank’s activity, itsfinancial conditions or operational earnings.Liquidity of the Bonds and the SharesAt this time, the Bank does not intend to list the Bonds for trading on the BVB. If at somepoint in the future, the Bank does list the Bonds on the BVB, no guarantee can be givenregarding the liquidity of the Bonds or their trading value on the secondary market.Moreover, the BVB is a rather new and small stock exchange, and has the similar issues asother small stock exchanges in emerging countries with respect to the fragility and volatilityof the market and value of the quoted securities. The Bonds and the Shares may beinfluenced by these factors.In addition, the market for quoted bonds on the BVB is particularly small and characterized47