MUNICIPAL BONDS, AN ALTERNATIVE FINANCING INSTRUMENT FOR THE DEVELOPMENT OF ROMANIAN CITIES
On September 19, the Palace of the Chamber of Commerce and Industry of Bucharest hosted the event “Development of the Municipal Bond Market”, organized by the financial consulting company VMB Partners, with the support of the Financial Supervisory Authority and the Bucharest Stock Exchange. The objective of the event was to discuss and find constructive solutions for the development of the municipal bond market as an alternative financing instrument for the development of Romanian localities
The event was attended by representatives of the Ministry of Finance, the Prime Minister’s Office, the Financial Supervisory Authority, the Bucharest Stock Exchange, the Bucharest Stock Exchange, the mayors and county councils, as well as representatives of institutional investors: pension funds, investment funds, insurance companies and intermediaries
At the opening of the event, Mr. Gabriel Grădinescu, Vice President of the Financial Supervisory Authority, emphasized the importance of municipal bonds as a financing instrument for municipalities and the support of the ASF for completing the legislative framework so that municipal bonds can be subscribed through public offer. The Vice President of the FSA also floated an innovative idea according to which several localities can join together in a financing company to raise, through the issuance of bonds, the necessary funds for infrastructure projects that otherwise could not be realized by the efforts of a single locality.
Mr. Radu Hanga, President of the Bucharest Stock Exchange, reiterated te BVB’s support for the development of this municipal bond market, which can be a flexible financing mechanism.
The event continued with a panel addressed to potential municipal bond issuers, local authorities, on “How to accelerate the development of the municipal bond market”. The assumption supported by Valentin Miron, President of VMB Partners, and organizer of the event, was that bonds are a financing instrument exclusively for infrastructure projects, investment projects of cities, thus serving an objective of growth of local communities. It also stressed the importance of identifying alternative sources of funding for municipal projects, or to complement the NRRP programs.
The panel discussed the current legislative framework, the incentives and especially the barriers that municipalities currently face when seeking financing through this instrument; the advantages of such an instrument for municipalities were reviewed and the executive’s plans to adjust the legislative framework to allow municipalities to take out loans to co-finance NRRP programs were discussed. In the same panel, Adrian Tănase, CEO of the Bucharest Stock Exchange, presented the needs and expectations of investors, which municipalities need to take into account when planning their issues.
Alexandru Drăghici, Executive Director of the City Hall of District 4, presented the investment projects of the City Hall he represents, which in turn will issue municipal bonds.
The second panel discussed the attractiveness of municipal bonds to institutional financial investors. Representatives of international financial institutions gave details about their programs in Romania and in Europe and mentioned that green bonds are currently very attractive for institutional investors.
In Romania, the first issue of green bonds belongs to the municipality of Resita and will be launched in October this year. Mr. Ioan Popa, Mayor of Resita, presented this premiere on the municipal bond market in Romania. Worth €17 million, the issue aims to supplement the financing funds for the project to reintroduce the electric tram in Resita, a project which is about 85% completed. Reșița is thus the first city in Romania to reintroduce the tramway after the Revolution, thus ensuring a modern and comfortable transportation linking the city areas.
Mr. Andrei Carabelea, Mayor of Piatra-Neamț, also explained his municipality’s decision to issue municipal bonds to refinance major infrastructure works, long postponed by previous administrations, but now at an accelerated pace.
Other institutional investor representatives emphasized the need for municipalities to build and gain trust among institutional investors as a very important prerequisite for a bond issuance process
The event was appreciated as a beneficial premiere, which brought together representatives of all institutions and organizations interested in municipal bonds, from the public and private sectors, and which can contribute to the growth of this market and implicitly to the development of local communities in Romania.
