EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 26 April 2010  
on additional financial stability measures in Estonia 
(CON/2010/35) 
 
Introduction and legal basis  
On 23 March 2010 the European Central Bank (ECB) recei ved a request from the Ministry of Finance for 
an opinion on the draft law amending the Law on the financial supervision authority, the Law on credit 
institutions and the Law on the guarantee fund (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth indent  of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to the rules app licable to financial institutions insofar as 
they materially influence the stability of financial institutions and markets. In  accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion. 
 1.  Purpose of the draft law 
The draft law is aimed at fostering the necessary tool s for handling a financial crisis and mainly regulates 
issues within the competence of the Financial Supe rvisory Authority (FSA) and the State. Estonia 
adopted the first measures to secure the stability and functioning of the Estonian financial system in 
March 2009
2. The draft law further increases the efficiency and effectiveness of financial supervision, 
also in the event of a financial crisis. The draft law allows for a faster exchange of information and makes 
it possible for the State to acquire shares of a credit in stitution in the public interest for fair compensation 
(expropriation), if this is necessary to safeguard fi nancial stability. Under the current law, a credit 
institution may not be divided and the legal form ma y not be changed; however, the draft law establishes 
a regime for the division of a credit institution, i.e. the transfer of assets and liabilities to one or more 
existing or newly created companies, if this is n ecessary to guarantee its financial soundness. Under the 
draft law, the FSA will be responsible for superv ising the division of credit institutions, adopting 
proposals to impose structural chang es to a credit institution’s organisati onal structure, requesting specific 
rehabilitation measures for a credit institution and granting temporary exemptions from prudential 
requirements. The draft law also introduces change s to the guarantee fund, resulting mainly from the 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  See Opinion CON/2009/18. All ECB opinions are publis hed on the ECB’s websit e at www.ecb.europa.eu. 
2 enhanced requirements under Directive 94/19/EC of the European Parliament and of the Council of 
30 May 1994 on deposit-guarantee schemes3. 
 2. General observations  2.1 The ECB welcomes measures that strengthen the powers of competent authorities to intervene 
when the stability of either individual credit ins titutions or the financial system as a whole is 
jeopardised
4. The financial crisis has shown the import ance of an efficient resolution regime and 
has triggered reflections both at internationa l and European level on how to enhance the 
instruments at the disposal of competent authorities in a crisis situation. In this context, the ECB 
welcomes the draft law’s measures to enhance the ca pability of a competent authority to respond in 
a timely and effective manner in the case of a solvent credit institution in distress5. Another 
important aspect is enhanced information shari ng and cooperation between competent authorities6. 
2.2 The ECB has assessed measures re lated to the creation of ‘bad banks’, ‘good ba nks’ and ‘bridge 
banks’ and pointed out that such measures are welc ome and are in line with current policies both at 
European and international levels for establishing a sound crisis resolution framework to intervene 
when financial institutions have a systemic impact on the financial system7. Such resolution 
framework is important in order to achieve the obj ective of ensuring the continuity of systemically 
important operations; this has been highlighted by the Eurosystem when replying to the initial ideas 
expressed by the Commission on a Union framewo rk for crisis management and resolution8. The 
possibility to use a bridge bank is recognised as pa rt of the trend towards enhanced convergence of 
national legal schemes for crisis management and resolution devel oping at both international and 
European level. In this context, the Estonian le gal framework for crisis management and resolution 
may need to be further adapted taking into account  future regulatory initiatives at Union level that 
aim to enhance the coordination of resolution a nd insolvency proceedings involving cross-border 
credit institutions. 
2.3 Additional supervisory tools may be needed to handle a crisis involving cross-border credit 
institutions. The greater interdependencies among fi nancial systems require appropriate action to 
address the possible systemic impact of failing cross-border credit institutions9. Therefore, 
supervisory tools should be effective in order to  manage problems arising from such a crisis. The 
ECB emphasises the need for the mutual recogn ition of crisis management and resolution 
proceedings and measures. Nationa l supervisory authorities should work closely with relevant 
home and host resolution authorities to resolv e cross-border situations effectively. 
                                                 
3  OJ L 135, 31.5.1994, p. 5. 
4  See for example paragraph 2 of Opinion CON/ 2009/65 and paragraph 3.2 of Opinion CON/2009/10. 
5  See also paragraph 2.3.2 of Opinion CON/2010/12. 
6  Paragraph 2.17 of Opinion CON/2010/10. 
7 Paragraph 3.1.1 of Opinion CON/2010/7. 
8  See the Eurosystem’s reply to the public consultati on of the Commission Communication on ‘An EU framework for 
cross-border crisis management in th e banking sector’ of 4 February 2010. 
9  Idem . 
3 2.4 The draft law allows a credit institution to be di vided. The FSA will have the right to carry out on-
site inspections of the acquiring company and ma y refuse to authorise the transfer of assets and 
liabilities if the acquiring company is not subject to fi nancial supervision. In this context, the option 
to divide credit institutions may be mainly usef ul under normal market conditions; it may take too 
much time to implement this solution in a crisis s ituation. However, these provisions are of general 
application and are not limited to financial crises.  
2.5 The draft law provides for the expropriation of  credit institutions’ shar es as a new measure to 
safeguard the stability of the financial system. The ECB welcomes the involvement of Eesti Pank 
and the FSA in this procedure. The proceedings l eading to expropriation must be in line with the 
European Convention for the Protection of Human Rights and Fundamental Freedoms10 and 
decisions of the European Court of Human Rights11, and so comply with the principle that nobody 
may be deprived of their property except in the publ ic interest and in accordance with the law. The 
ECB assumes that expropriation measures will only be taken in exceptional circumstances where, 
in compliance with the principle of proportionality,  the seriousness of the measure is commensurate 
with the threat to financial stability12.  
2.6 Finally, the ECB reiterates that the financial support measures should not be applied to insolvent 
credit institutions and the pricing conditions should be risk-based and market-oriented13. As a 
general remark and in line with previous opinions14, the ECB reiterates the importance of ensuring 
that the regulatory practice under the proposed a rrangements will be conducted in full compliance 
with the relevant Union law provisions, including single market principles and financial services legislation, as well as competition and State aid rules
15. Moreover, remedies to handle financial 
crises should be temporary in nature16. 
                                                 
10 European Convention for the Protection of Human Rights a nd Fundamental Freedoms, as am ended by Proctocol No 11, 
Rome, 4 November 1950. 
11  7 November 2002, Olczak  v Poland , No 30417/96 and 1 April 2004, Camberrow MMS AD  v Bulgaria,  No 50357/99. 
12  Paragraph 3.1.3 of Opinion CON/2010/7. 
13 Paragraph 3.2.1 of Opinion CON/2009/93 and paragraph 3. 4.2 of Opinion CON/2009/18. See also the Recommendations 
of the Governing Council of the European Central Bank on th e pricing of recapitalisations , 20 November 2008, available 
on the ECB’s website at www.ecb.europa.eu.  
14  See, for example, paragraph 3.4 of Opinion CON/2008/80. 
15  See the ‘Communication from the Commission – The application of State aid rules to measures taken in relation to 
financial institutions in the context of the current gl obal financial crisis’ of 13 October 2008, available on the 
Commission’s website at www.ec.europa.eu. 
16  Declaration of 12 October 2008 on a concerted European actio n plan of the euro area count ries, available on the French 
Presidency’s website at www.ue2008.fr. See al so point 3.1.1 of Opinion CON/2009/18.  
4 This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 26 April 2010. 
[signed] 
  
The President of the ECB 
Jean-Claude TRICHET