EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 18 March 2014 
on financial supervision, macro-prudentia l supervision and payment systems oversight 
(CON/2014/21) 
 
Introduction and legal basis 
On 20 February 2014, the European Central Bank (ECB) received a request from the Estonian Ministry of 
Finance for an opinion on a draft law amending the Law on credit institutions and other acts (hereinafter 
the ‘draft law’). The draft law also amends the Law on Eesti Pank, particularly relating to its role in 
respect of macro-prudential supervis ion and payment systems oversight. 
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 third, fi fth and sixth indents of Article 2(1) of Council 
Decision 98/415/EC1, as the draft relates to Eesti Pank, payment systems and rules applicable to financial 
institutions insofar as they materially influence th e 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  
1.1. The draft law transposes Directives 2013/36/EU
2 and 2011/61/EU3 and gives effect to the 
streamlining resulting from Regulation (EU) No 575/20134 and Recommendation ESRB/2011/35. It 
is also based on international agreements at G20 level6.  
1.2 The main changes introduced by the draft law are as follows. 
a) At micro level, it specifies the composition of own funds of credit institutions and 
investment funds and lays down stricter requi rements for Tier1 capital. It strengthens the 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
2  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit 
institutions and the prudential supervision of credit instit utions and investment firms, amending Directive 2002/87/EC 
and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p 338).  
3  Directive 2011/61/EU of the European Parliament and of  the Council of 8 June 2011 on Alternative Investment Fund 
Managers and amending Directives 2003/41/EC a nd 2009/65/EC and Regulations (EC) No 1060/2009 and 
(EU) No 1095/2010 (OJ L 174, 1.7.2011, p 1).  
4  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investme nt firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p 1).  
5  Recommendation of the European Systemic Risk Board of 22 December 2011 on the macro-prudential mandate of 
national authorities (ESRB/2011/ 3) (OJ C 41, 14.2.2012, p 1). 
6  http://www.bis.org/publ/bcbs220.pdf  
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2 requirements relating to liquidity and the management of liquidity risk, enhances the 
supervision of risk management , and lays down stricter publica tion requirements in order to 
strengthen market discipline. 
b) At macro level, it provides for the establishment of a macro-prudential supervision authority. 
It establishes buffers for credit institutions a nd investment firms, lays down provisioning 
requirements, and defines measures aimed at mitig ating macro-prudential and systemic risks.  
c) It sets a leverage ratio for credit institutions a nd investment firms in order to control sharp 
increases in leverage. 
d) It lays down requirements regarding the govern ance and reporting of alternative investment 
fund managers (AIFM). 
1.3  The draft law gives the Estonian Financial Supe rvision Authority (FSA) greater supervisory powers 
over credit institutions. These include the supervis ion of branches in other countries, and of 
financial holding companies and mixed financia l holding companies. The FSA will also have 
power to impose administrative penalties and make discretionary supervisory decisions within the 
limits imposed by the draft law. 
1.4  Under the draft law, Eesti Pank will be the competent authority in respect of macro-prudential 
supervision and payment systems oversight. Eesti Pank currently carries out some payment systems 
oversight tasks and the draft law provides a national legal basis for these tasks. 
 2. Financial and macro-prudential supervision 2.1 The draft law stipulates that the objective of macr o-prudential supervision is  to help safeguard the 
stability of the financial system as a whole, incl uding by strengthening its resilience and decreasing 
the build-up of systemic risks, thereby ensuri ng a sustainable contribution to economic growth. 
This precisely reflects Recommendation A of Recommendation ESRB/2011/3. 
2.2  The draft law confers the new tasks of contributing to the stability of the financial system and 
ensuring macro-prudential stability on Eesti Pank. 
2.3  The ECB supports the design of effective m acro-prudential policy frameworks within Member 
States, in line with the guiding principles laid down in Recommendation ESRB/2011/3. The ECB and the national central banks should play a leadi ng role in macro-prudential oversight, given their 
expertise and existing responsibilities in the area of financial stability
7. In this respect, in line with 
ESRB Recommendation 2011/3, it is important that there are appropriate legally enforceable 
mechanisms in place to facilitate cooperation be tween Eesti Pank and other national authorities 
whose actions have a material impact on financial stability8. Similar mechanisms should be set up 
                                                 
7  See paragraph 2.1 of Opinion CON/2013/30, paragraph 2. 1 of Opinion CON/2013/45 and paragraph 4.2 of Opinion 
CON/2013/82. All ECB opinions are published on the ECB’s website at  www.ecb.europa.eu. 
8  The information exchange between the FSA and Eest i Pank takes place under the Cooperation Agreement of 
21 December 2007, the objective of which is the stability of the Estonian financial system and the regulation of financial 
services and financial markets. This Agr eement provides for cooperation in areas such as the establishment of a safety net 
in the financial sector and the exchange of information with  Union institutions and other international organisations (the 
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3 in order to ensure appropriate cross-border coope ration and exchange of in formation between Eesti 
Pank and other national or Union authorities, particularly the European Systemic Risk Board (ESRB). It is also important that there is a clear legal basis for Eesti Pank to make public and private statements on systemic risks. 
2.4  From an operational and financ ial point of view, the allocation of new tasks to a national central 
bank (NCB) should not affect its ability to carry out its existing tasks. Financial independence, 
which is an element of the principle of central bank independence referred to  in Article 130 of the 
Treaty, requires that an NCB must have sufficient means to carry out its national tasks as well as its 
European System of Central Banks or Eurosystem -related tasks. Such financial independence is 
assessed in terms of whether any third party is able to exercise either direct or indirect influence 
over an NCB task and whether the NCB is able to  fulfil its mandate, both operationally in terms of 
manpower, and financially in terms of  appropriate financial resources
9. 
2.5  In respect of financial supervision, the ECB notes the broader competence of the FSA under the 
draft law. 
2.6 This opinion is without prejudice to the conclu sions of the ESRB’s follow-up decision, which will 
be prepared pursuant to Article 17 of Regulation (EU) No 1092/2010 of the European Parliament 
and of the Council10. 
 3.  Transposition of Directive 2013/36/EU as regards buffers 3.1  The draft law provides for all the buffers speci fied in Directive 2013/36/EU, including those that 
are optional. It is important for both the ECB and national competent authorities or designated authorities to have the broadest possible range of macro-prudential tools at their disposal. 
Therefore, the ECB welcomes the implementation of all risk buffers, which will ensure the 
consistency of the available macro-prudential t ools and lower the risk of regulatory arbitrage.
11 
3.2  The draft law provides for the calculation of co untercyclical buffers for credit institutions on the 
basis of the total risk exposure calculated pursuant to Article 92(3) of Regulation (EU) No 575/2013 and the weighted average of countercyclical buffers calculated pursuant to the rules established by Eesti Pank. Under Article 140 of Di rective 2013/36/EU, power is delegated to the 
Commission to adopt the regulatory technical standa rds referred to in that article in accordance 
with Articles 10 to 14 of Regulation (EU) No  1093/2010. The methodology for the calculation of 
the weighted average of countercyclical buffers should be taken into acc ount by Eesti Pank when 
defining the relevant national rules.  
                                                                                                                                                             
World Bank, the International Monetary Fund, the Organisation for Economic C ooperation and Developm ent, etc.), as 
well as the exchange of information on the state of, and risks in, the financial sect or (including its financial 
infrastructure). 
9  See paragraph 3.3 of Opinion CON/2014/17. 
10  Regulation (EU) No 1092/2010 of the European Parliament a nd of the Council of 24 November 2010 on European Union 
macro-prudential oversight of the fina ncial system and establishing a Europe an Systemic Risk Board (OJ L 331, 
15.12.2010, p. 1). 
11  See paragraph 3.2 of Opinion CON/2013/82.  
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4  
4.   Oversight of payment systems  
4.1 The draft law sets out that the objective of the over sight of payment systems is to contribute to the 
development of payment systems and to their sound operation. Eesti Pank will carry out the 
following tasks in respect of su ch oversight: (a) analyse the deve lopment and operation of payment 
systems; (b) provide guidance to payment system  operators; (c) specify requirements for payment 
system operators and the operati on and development of payment syst ems, when so required by law; 
(d) approve operational rules and principles of payment systems, when so required by law. 
4.2 The oversight of payment and clearing systems is a Eurosystem task to be conducted in line with 
the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter, the ‘Statute of the ESCB’). Th is excludes interference with the Eurosystem’s 
oversight role by any Union or national body othe r than central banks acting within the framework 
of the Eurosystem
12. Furthermore, the aims of such oversight are to maintain systemic stability, 
promote efficiency and safeguard the transmission channel for monetary policy13. The ECB 
understands that the term ‘payment systems’ is cons idered to be broadly defined in Estonian law to 
cover also settlement systems. In the light of th e above, the ECB welcomes the aim of formalising 
Eesti Pank’s oversight function and clarifying and e nhancing its regulatory powers in this field. 
The Estonian law should clarify that Eesti Pank sh all take all necessary measures to apply the rules 
laid down by the Eurosystem with a view to ensuring efficient and sound payment and clearing 
systems in line with Article 127 of the Treaty, and Articles 3 and 22 of the Statute of the ESCB, as 
well as to ensure efficient and sound settlement systems.  
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 18 March 2014. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
 
                                                 
12  See paragraph 2.1.2 of Opinion CON/2013/84. 
13  See paragraph 2.1.1 of Opinion CON/2013/84.