Opinion of the European Central Bank of 18 March 2014 on financial supervision, macro-prudential supervision and payment systems oversight (CON/2014/21)
Date: 2014-03-18
Institutions: European Central Bank
Subjects: Estonia, central bank, credit institution, financial stability, financial supervision, national law, payment system

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 18 March 2014 

on financial supervision, macro-prudential 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 supervision 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,  fifth  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  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  

1.1.  The  draft  law  transposes  Directives  2013/36/EU2  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  requirements  for  Tier1  capital.  It  strengthens  the 

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Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
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  institutions  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).  
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  and  2009/65/EC  and  Regulations  (EC)  No 1060/2009  and 
(EU) No 1095/2010 (OJ L 174, 1.7.2011, p 1).  
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p 1).  
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). 
http://www.bis.org/publ/bcbs220.pdf 

 
 
 
 
                                                 
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requirements  relating  to  liquidity  and  the  management  of  liquidity  risk,  enhances  the 

supervision of risk management, and lays down stricter publication 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  and  investment  firms,  lays  down  provisioning 

requirements, and defines measures aimed at mitigating macro-prudential and systemic risks.  

c) 

It sets a leverage ratio for credit institutions and investment firms in order to control sharp 

increases in leverage. 

d) 

It lays down requirements regarding the governance and reporting of alternative investment 

fund managers (AIFM). 

1.3   The draft law gives the Estonian Financial Supervision Authority (FSA) greater supervisory powers 

over  credit  institutions.  These  include  the  supervision  of  branches  in  other  countries,  and  of 

financial  holding  companies  and  mixed  financial  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 macro-prudential supervision is to help safeguard the 

stability of the financial system as a whole, including by strengthening its resilience and decreasing 

the  build-up  of  systemic  risks,  thereby  ensuring  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  macro-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 leading role in macro-prudential oversight, given their 
expertise and existing responsibilities in the area of financial stability7. 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  between  Eesti  Pank  and  other  national  authorities 
whose actions have a material impact on financial stability8. Similar mechanisms should be set up 

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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. 
The  information  exchange  between  the  FSA  and  Eesti  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 Agreement 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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in order to ensure appropriate cross-border cooperation and exchange of information 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 financial 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 resources9. 

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 conclusions 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 specified 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 tools and lower the risk of regulatory arbitrage.11 

3.2   The  draft  law  provides  for  the  calculation  of  countercyclical  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 Directive 2013/36/EU, power is delegated to the 

Commission  to  adopt  the  regulatory  technical  standards  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 account by Eesti Pank when 

defining the relevant national rules.  

World  Bank, the  International Monetary  Fund,  the  Organisation  for  Economic Cooperation  and  Development, etc.), as 
well  as  the  exchange  of  information  on  the  state  of,  and  risks  in,  the  financial  sector  (including  its  financial 
infrastructure). 
See paragraph 3.3 of Opinion CON/2014/17. 
Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union 
macro-prudential  oversight  of  the  financial  system  and  establishing  a  European  Systemic  Risk  Board  (OJ  L  331, 
15.12.2010, p. 1). 
See paragraph 3.2 of Opinion CON/2013/82. 

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4.  

  Oversight of payment systems 

4.1  The draft law sets out that the objective of the oversight 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 such oversight: (a) analyse the development and operation of payment 

systems; (b) provide guidance to payment system operators; (c) specify requirements for payment 

system operators and the operation and development of payment systems, 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’).  This  excludes  interference  with  the  Eurosystem’s 

oversight role by any Union or national body other than central banks acting within the framework 
of  the  Eurosystem12.  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 considered to be broadly defined in Estonian law to 

cover also settlement systems. In the light of the above, the ECB welcomes the aim of formalising 

Eesti  Pank’s  oversight  function  and  clarifying  and  enhancing  its  regulatory  powers  in  this  field. 

The Estonian law should clarify that Eesti Pank shall 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 

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See paragraph 2.1.2 of Opinion CON/2013/84. 
See paragraph 2.1.1 of Opinion CON/2013/84. 

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