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Riigikogu

At today’s remote-participation sitting of the Riigikogu, the Bill on Amendments to the Credit Institutions Act and Amendments to Other Associated Acts, initiated by the Government, passed the first reading.

The main purposes of the Bill (312 SE) are to ensure and increase financial stability, in particular to ensure the integrity and transparency of the banking sector, and to raise the resilience of banks and other credit institutions in stress and crisis situations. The Bill will also establish more proportionate requirements for credit institutions and will bind the requirements more tightly to the risks assumed by credit institutions. The Bill is based on the relevant European Union financial sector legislation.

The explanatory memorandum notes that the banking reform package presented by the European Commission in November 2019 is a step towards finalising the legal reforms of post-crisis Europe. The package aimed to reduce risks in the banking sector and the relevant risk reduction measures enable progress in the development of a single banking union and a capital markets union.

The reforms are also in compliance with the standards agreed upon with G20 international partners and the lessons learned from the financial crisis. The rules arising from the directives reduce banking sector risks, strengthening the banks’ ability to withstand possible shocks, updating the uniform rules in place in the banking sector.

Such uniform rules ensure that banks hold enough capital to cover unexpected losses and they are ready to withstand economic shocks. The insolvency of a bank is addressed by using the financial resources provided by banks, with a minimum impact on taxpayers (through the directive on the recovery and resolution of banks); and bankers have less incentives to assume excessive risks (the management requirements arising from the Capital Requirements Directive).

Minister of Finance Keit Pentus-Rosimannus presented the Bill to the Riigikogu and pointed out the major amendments proposed. The Bill will specify the capital requirements applicable to banks, the procedure for the approval of the authorisations of owner companies or holding companies of banks, and the competences of the Financial Supervision Authority. The requirements for the activities and remuneration of bank managers will also be mitigated.

According to a proposal made in the Bill, in the future, it would be possible to establish a bank in Estonia with an initial capital of one million euro, and the National Audit Office would receive the right to audit the activities of the Financial Supervision Authority.

Verbatim record of the sitting (in Estonian)

The video recording of the sitting will be available on the Riigikogu YouTube channel.
(Please note that the recording will be uploaded with a delay.)

Riigikogu Press Service
Epp-Mare Kukemelk
+372 631 6356; +372 515 3903
epp-mare.kukemelk@riigikogu.ee
Questions: press@riigikogu.ee

 

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