Opinion of the European Central Bank of 5 February 2020 on the Supervisory Board of Eesti Pank (CON/2020/7)
Date: 2020-02-05
Institutions: European Central Bank
Subjects: Estonia, appointment of staff, central bank, co-determination, institutional activity, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 5 February 2020 

on the Supervisory Board of Eesti Pank 

(CON/2020/7) 

Introduction and legal basis 

On  31  December  2019  the  European  Central  Bank  (ECB)  received  a  request  from  the  Finance 
Committee  of  the  Estonian  Parliament  for  an  opinion  on  a  draft  law  amending  the  Law  on  Eesti  Pank1 

(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 third indent of Article 2(1) of Council Decision 98/415/EC2, as 

the  draft  law  relates  to  Eesti  Pank.  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  revises  the  composition  of  the  Supervisory  Board  of  Eesti Pank  and  the  conditions 

and requirements applicable to its members.  

Role and composition of Supervisory Board of Eesti Pank under current law. 

1.2  Under  the  current  Law  on  Eesti  Pank,  the  Supervisory  Board  of  Eesti  Pank  exercises  oversight 
over  all  the  activities  of  Eesti  Pank3.  The  Law  on  Eesti  Pank  entrusts  the  following  tasks  to  the 
Supervisory Board4:  

1)  making proposals to the President of the Republic of Estonia concerning the appointment of 

the Governor of Eesti Pank; 

2) 

appointing  to  or  releasing  from  office  Eesti  Pank’s:  (i)  Deputy  Governors;  (ii)  heads  of 

autonomous  divisions  or  branch  offices;  and  (iii)  head  of  the  internal  audit  department, 

proposals for these decisions are to be made by the Governor of Eesti Pank; 

3) 

appointing  to  office  and  removing  from  office  members  of  the  Supervisory  Board  of  the 

Estonian  Financial  Supervision  Authority  (Finantsinspektsioon)  and  members  of  the  Fiscal 

Council (eelarvenõukogu), on a proposal from the Governor of Eesti Pank; 

1  

2  

3  
4  

Eesti Panga seaduse muutmise eelnõu SE 97 II. The draft law discussed in this opinion is based on the draft law as 
presented to the Estonian Parliament for a second reading.  
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). 
See Section 9(1) of the Law on Eesti Pank (Eesti Panga seadus RT I 1993, 28, 498, RT I, 19.03.2015, 39).  
See Sections 9(2), 11(1) 6), 31(1) and 31(3) of the Law on Eesti Pank.  

 
 
 
 
                                                 
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4) 

approving  Eesti  Pank’s  Statute,  the  Charter  of  the  Fiscal  Council,  the  charters  of  Eesti 

Pank’s  independent  divisions  and  branch  offices  and  the  constitutive  regulations  of  Eesti 

5) 

6) 

Pank’s internal audit department; 

overseeing the implementation of Eesti Pank’s budget; 

appointing  Eesti  Pank’s  internal  auditors  and  approving  the  work  schedule  of  the  internal 

audit; 

7) 

appointing  independent  auditors  of  Eesti  Pank,  as  recommended  by  the  ECB’s  Governing 

Council  and  approved  by  the  Council  of  the  European  Union,  to  monitor  Eesti  Pank’s 

activities  during  the  fiscal  year  and  to  attest to  the  truth  and  accuracy  of  the  annual  report 

prepared by Eesti Pank; 

8) 

approving Eesti Pank’s annual report on a proposal from the Governor of Eesti Pank; 

9)  making decisions, following the procedure laid down in Union legislation, on the design of the 

national  side  of  new  euro  coins  and  on  the  nominal  value  and  design  of  commemorative 

coins; 

10)  deciding,  on  a  proposal  from  the  Governor  of  Eesti  Pank,  on  the  establishment, 

reorganisation and liquidation of autonomous divisions of Eesti Pank; and 

11) 

reviewing  and  approving  written  proposals  and  other  documents  to  be  submitted  to  the 

Estonian Parliament in Eesti Pank’s name. 

1.3 

In addition, under the current Law on Eesti Pank, regarding the distribution of Eesti Pank’s profits 

and  losses,  at  least  25  %  of  annual  profits  are  to  be  used  to  increase  the  base  capital  up  to  the 

amount determined by the Parliament. At least 25 % of annual profits are to be used to increase 

the  reserve  capital  when  the  Supervisory  Board  so  decides.  After  these  allocations,  part  of  the 

profits  may  be  used,  on  a  decision  from  the  Supervisory  Board,  to  create  or  increase  dedicated 
capital funds and funds for specific purposes as provided in Eesti Pank’s Statute5. 

1.4  Moreover,  the  Supervisory  Board  receives,  on  a  regular  basis,  information  from  the  Governor  of 

Eesti Pank concerning Estonia’s economy and monetary policy, the situation of the financial sector 
and  the  implementation  of  Eesti  Pank’s  budget6.  Meetings  of  the  Supervisory  Board  are  held  in 

camera,  unless  decided  otherwise  by  the  Chairman  of  the  Supervisory  Board.  Eesti  Pank’s 

Governor  and  Deputy  Governors  participate  in  meetings  of  the  Supervisory  Board  and  have  the 

right to speak. The Minister of the Republic of Estonia responsible for the area may participate in 
the meetings, subject to Article 130 of the Treaty7. The Governor of Eesti Pank is responsible for 
making arrangements to implement the resolutions of the Supervisory Board8. If the Governor does 

not  agree  with  a  Supervisory  Board  resolution,  he  or  she  reports  this  to  the  President  of  the 

Parliament within three working days and proposes to address an interpellation on the matter to the 

5  
6  
7  
8  

See Section 30(2), (3) and (4) of the Law on Eesti Pank.  
See Section 9(2¹) of the Law on Eesti Pank.  
See Section 9(5) of the Law on Eesti Pank.  
See Section 11(1) 2) of the Law on Eesti Pank.  

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Chairman of the Supervisory Board9. The Governor of Eesti Pank reports to the Supervisory Board 
about his or her work on a regular basis10.  

1.5  Under  the  current  Law  on  Eesti  Pank,  the  Supervisory  Board  comprises  the  Chairman,  who  is 

appointed  for  a  five-year  term  by  the Estonian  Parliament  (Riigikogu)  on  a  proposal  from  the 

President  of  the  Republic  of  Estonia,  and  seven  members  appointed  for  a  five-year  term  by 
the Estonian Parliament on a proposal from the Chairman of the Supervisory Board11.  

Changes to the Supervisory Board under the draft law. 

1.6  The draft law changes the composition of the Supervisory Board by providing that the Supervisory 

Board comprises the Chairman, representatives of each faction in the Estonian Parliament and four 
experts  in  the  field12.  The  draft  law  also  revises  the  procedure  for  appointing  Supervisory  Board 

members by providing that the members of the Supervisory Board are appointed by the Estonian 

Parliament  on  a  proposal  from  the  Parliament’s  Finance  Committee.  Under  the  draft  law  each 

faction  in  the  Parliament  is  to  nominate  its  representative,  who  must  be  a  member  of  the 

Parliament,  to  the  Finance  Committee  within  four  months  of  the  respective  faction  being  formed. 

The Chairman of the Supervisory Board is responsible for nominating the candidate experts in the 
field  to  the  Parliament’s  Finance  Committee  within  four  months  of  being  appointed13.  The 

procedure for appointing the Chairman of the Supervisory Board remains unchanged.  

1.7  The draft law also introduces a procedure for nominating candidate experts in the field should the 

Chairman  of the Supervisory Board fail to nominate candidates: (i) to the Estonian Parliament by 

the specified deadline and in a manner prescribed by the draft law; or (ii) that are supported by a 

majority  in  the  Parliament.  In  such  cases,  the  Parliament’s  Finance  Committee  may  propose 
candidate experts in the field to the new Supervisory Board.14  

1.8  The  draft  law  establishes  restrictions  whereby  the  Chairman  of  the  Supervisory  Board  may  be 

nominated  for  a  maximum  of  two  consecutive  terms  and  the  members  may  be  appointed  for  a 
maximum  of  two  consecutive  memberships  of  the  Supervisory  Board15.  The  draft  law  adds  a 

requirement  that  the  Chairman  of  the  Supervisory  Board  must,  among  other  things,  have  the 

knowledge and experience necessary for participating in and managing the work of the Supervisory 
Board16.  In  addition,  the  draft  law  specifies  that  the  members  of  the  Supervisory  Board  must, 

among other things, have the knowledge and experience necessary for participating in the work of 
the Supervisory Board17.  

1.9  The  draft  law  also  specifies  the  term  of  office  of  the  members  of  the  Supervisory  Board.  In 

particular, the  term of the  members of the  Supervisory  Board  who  are  experts  in the field begins 

when the decision appointing the experts in the field enters into force and ends when the term of 

9  
10  
11  
12  
13  
14  
15  
16  
17  

See Section 11(3) of the Law on Eesti Pank.  

See Section 11(4) of the Law on Eesti Pank.  
See Sections 6, 8(1) and 8(5) of the Law on Eesti Pank.  
See Section 1 of the draft law. 

See Sections 4 and 5 of the draft law.  
See Section 5 of the draft law. 
See Sections 2 and 8 of the draft law. 
See Section 3 of the draft law. 
See Section 6 of the draft law. 

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the  Chairman  of  the  Supervisory  Board  expires.  The  term  of  a  Supervisory  Board  member  who 

represents a parliamentary faction begins when the decision appointing him or her enters into force 
and ends when his or her membership of the Parliament terminates or is suspended18. To ensure 

continuity  of  the  work  of  the  Supervisory  Board,  the  draft  law  establishes  that  the  terms  of  the 
members  of  the  Supervisory  Board  remain  in  force  until  new  members  are  appointed19.  In  the 

period from the termination of the mandate of outgoing members of the Supervisory Board to the 

start of the mandate  of  the new  members  of  the Supervisory Board,  the Supervisory Board  must 

refrain, unless strictly necessary, from taking decisions on certain matters, such as proposing the 
appointment of a new Governor of Eesti Pank to the President of Estonia20. 

1.10  The  draft  law  also  provides  for  the  removal  from  office  of  members  of  the  Supervisory  Board.  In 

particular, the Estonian Parliament must remove the Chairperson or a member of the Supervisory 

Board  from  office  immediately  if:  (i)  he  or  she  is  convicted  in  a  criminal  matter;  (ii)  a  bankruptcy 

ruling has entered into force or a prohibition on carrying out a business or engaging in an economic 

activity applies with respect to him or her; (3) he or she does not meet the requirements provided 

for in the Law  on Eesti Pank, or if he or she has submitted false information regarding his or her 

compliance with such requirements; or (4) he or she has failed to perform the duties of a member 

of the Supervisory Board to a material extent, has damaged Eesti Pank’s interests, or there is any 

other  good  reason  why  the  member  of  the  Supervisory  Board  is  unsuitable  to  perform  his  or  her 

duties.  The  Parliament  may  also,  on  a  proposal  from  a  faction,  remove  the  representative  of  the 
faction from the Supervisory Board if the representative leaves the faction21. 

1.11  The draft law contains transitional provisions with respect to the current Chairman and members of 

the Supervisory Board22.    

2. 

Observations 

Institutional independence 

2.1  Pursuant to Article 130 of the Treaty, when exercising the powers and carrying out the tasks and 

duties conferred on it by the Treaty and the Statute of the European System of Central Banks and 

of  the  European  Central  Bank  (hereinafter  the  ‘Statute  of  the  ESCB’),  neither  a  national  central 

bank  (NCB),  nor  any  member  of  its  decision-making  bodies,  may  seek  or  take  instructions  from, 

inter alia, any government of a Member State ‘or from any other body’, which includes a statutory 

body  such  as  the  Supervisory  Board.  The  ECB  understands  that  the  Governor  of  Eesti  Pank  is 
exclusively  responsible  for  the  performance  of  ESCB-related  tasks23,  and  therefore  qualifies  as  a 

decision-making body of Eesti Pank within the meaning of Article 130 of the Treaty. The ECB notes 

that  the  Law  on  Eesti  Pank  emphasises  that  the  Governor  of  Eesti  Pank  is  independent  in  the 

18  
19  
20  
21  
22  
23  

See Section 7 of the draft law.  

See Section 10 of the draft law.  
See Section 8 of the draft law.  
See Section 11 of the draft law.  
See Section 12 of the draft law.  
See Section 11(1)(1) of the Law on Eesti Pank. 

4 

 
                                                 
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performance  of  his  or  her  functions24.  Furthermore,  the  ECB  understands  that  the  Supervisory 

Board  does  not  intervene  in  the  performance  of  ESCB-related  tasks,  nor  in  the  decisions 

concerning those tasks, and that it therefore cannot be considered to be a decision-making body 

within the meaning of Article 130 of the Treaty. Therefore, having regard both to the structure of the 

Supervisory Board, as a constituent part of Eesti Pank, and to its tasks, the Supervisory Board may 

not seek to influence the Governor of Eesti Pank, in his or her capacity as Eesti Pank’s decision-
making body responsible for the performance of Eesti Pank’s ESCB-related tasks25. 

2.2  Regarding  the  exchange  of  information  with,  and  reporting  to,  the  Supervisory  Board  by  the 

Governor  of  Eesti  Pank,  the  ECB  notes  that  dialogue  between  an  NCB  and  third  parties,  even 

when based on statutory obligations to provide information and exchange views, is compatible with 

central  bank  independence  provided  that:  (i)  this  does  not  result  in  interference  with  the 

independence  of  the  members  of  the  NCB’s  decision-making  bodies;  (ii)  the  special  status  of 

Governors  in  their  capacity  as  members  of  the  ECB’s  decision-making  bodies  is  fully  respected; 
and (iii) confidentiality requirements resulting from the Statute of the ESCB are observed26. 

Financial independence 

2.3  Even if an NCB is fully independent from a functional, institutional and personal point of view, as 

guaranteed  by  the  NCB’s  statutes,  its  overall  independence  would  be  jeopardised  if  it  could  not 

autonomously  avail  itself  of  sufficient  financial  resources  to  fulfil  its  mandate  and  perform  the 
ESCB-related tasks required of it under the Treaty and the Statute of the ESCB27. 

2.4  Regarding the Supervisory Board’s competence to oversee the implementation of and to comment 
on  Eesti  Pank’s  budget28,  the  ECB  has  noted  that  a  third  party  having  the  power  to  influence  an 

NCB’s  budget  is  incompatible  with  financial  independence  unless  the  law  provides  a  safeguard 

clause so that such a power is without prejudice to the financial means necessary for carrying out 
the  NCB’s  ESCB-related  tasks29.  This  requirement  is  satisfied  as  the  budget  of  Eesti  Pank  is 

approved by the Governor of Eesti Pank, who, as already noted, is exclusively responsible for the 
performance  of  Eesti  Pank’s  ESCB-related  tasks30.  The  Supervisory  Board’s  role  is  advisory  in 

nature and it has no capacity to approve or veto Eesti Pank’s budget.  

2.5  Regarding  the  Supervisory  Board’s  competence  to  approve  Eesti  Pank’s  annual  report,  which 
includes the annual accounts31, the ECB has noted that the annual accounts should be adopted by 

the NCB’s decision-making bodies, assisted by independent accountants, and may be subject to ex 
post  approval  by  third  parties  (e.g.,  the  government  or  the  parliament)32.  This  requirement  is 

materially  satisfied  by  an  arrangement  whereby  the  annual  accounts  are  drafted  by  Eesti  Pank’s 

24  
25  

26  
27  
28  
29  
30  
31  
32  

See Section 10(3) of the Law on Eesti Pank.  
See  paragraph  6  of  Opinion  CON/2002/16  and  paragraph  2.3  of  Opinion  CON/2019/12.  All  ECB  opinions  are 
published on the ECB’s website at www.ecb.europa.eu. 
See the ECB Convergence Report (May 2018), p. 22. 
See the ECB Convergence Report (May 2018), p. 25. 

See Section 9(1)(6) of the Law on Eesti Pank and Section 19(4) of the Charter of Eesti Pank.  
See the ECB Convergence Report (May 2018), p. 26. 
See Section 11(1)(7) of the Law on Eesti Pank.  
See Section 9(2)(8) of the Law on Eesti Pank. 
See the ECB Convergence Report (May 2018), p. 27. 

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Executive  Board33,  comprising  the  Governor  and  two  Deputy  Governors34,  and  then  submitted  to 

the  Supervisory  Board  for  approval.  In  this  respect,  it  is  noted  that  the  Deputy  Governors  are 

independent  in  the  performance  of  their  functions,  are  appointed  by  the  Supervisory  Board  on  a 

proposal from the Governor of Eesti Pank for a term of five years, and may only be removed from 
office on the grounds specified in Article 14.2 of the Statute of the ESCB35. In addition, as noted in 

paragraph 2.4, the Governor of Eesti Pank is exclusively responsible for the performance of Eesti 

Pank’s ESCB-related tasks. 

2.6  Regarding the Supervisory Board’s competence with respect to the allocation of profits, an NCB’s 

statutes  may  prescribe  how  its  profits  are  to  be  allocated.  In  the  absence  of  such  provisions, 

decisions  on  the  allocation  of  profits  should  be  taken  by  the  NCB’s  decision-making  bodies  on 

professional grounds, and should not be subject to the discretion of third parties unless there is an 

express safeguard clause stating that this is without prejudice to the financial means necessary for 

carrying  out  the  NCB’s  ESCB-related  tasks  as  well  as  national  tasks.  As  regards  financial 

provisions or buffers, NCBs must be free to independently create financial provisions to safeguard 

the real value of their capital and assets. Member States may also not hamper NCBs from building 
up their reserve capital to a level which is necessary for a member of the ESCB to fulfil its tasks36. 

As noted above, the Governor of Eesti Pank is exclusively responsible for the performance of Eesti 

Pank’s ESCB-related tasks. It would be useful to clarify the Governor’s responsibility in this respect 

by explicitly specifying that the Supervisory Board’s competences regarding the distribution of Eesti 

Pank’s  profits  and  losses  are  without  prejudice  to  the  financial  means  necessary  for  carrying  out 

Eesti Pank’s ESCB-related and national tasks.  

2.7  Regarding the Supervisory Board’s competence in staffing matters, in particular so far as concerns 

the  appointment  and  removal  of  the  heads  of  Eesti Pank’s  autonomous  divisions,  branch  offices, 

the head of the internal audit department and internal auditors, the ECB has noted that the Member 

States  may  not  impair  an  NCB’s  ability  to  employ  and  retain  the  qualified  staff  necessary  for  the 

NCB  to  perform  independently  the  tasks  conferred  on  it  by  the  Treaty  and  the  Statute  of  the 
ESCB37.  In  this  respect the ECB notes that there  are  several statutory  safeguards. As previously 

noted,  the  Governor  of  Eesti Pank  is  exclusively  responsible  for  the  performance  of  Eesti  Pank’s 

ESCB-related tasks. The ECB understands that this also encompasses staffing matters and would 

allow the Governor to fulfil Eesti Pank’s ESCB-related tasks independently also in cases where the 

Supervisory Board declines to appoint relevant personnel under the Law on Eesti Pank. 

2.8 

In  relation  to  the  internal  audit  function,  regardless  of  the  right  of  the  Supervisory  Board  to 
nominate  the  internal  auditors  and  the  head  of  the  audit  department38,  candidates  are  proposed 

either  by  the  Governor  of  Eesti  Pank,  who  proposes  the  candidates  for  the  head  of  the  internal 

audit  function,  or  by  the  Head  of  the  internal  audit  function  him  or  herself  with  regard  to  internal 

33  
34  
35  
36  
37  
38  

See Section 7(1)(4) of the Charter of Eesti Pank. 

See Section 13(1) of the Law on Eesti Pank.  
See Sections 10(2¹), 10(3) and 12(2) of the Law on Eesti Pank. 
See the ECB Convergence Report (May 2018), pp. 27-28. 
See the ECB Convergence Report (May 2018), p. 28. 
See Sections 9(1)(4) and 9(1)(7) of the Law on Eesti Pank. 

6 

                                                 
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auditors39. Similarly, the Governor would propose the candidates for the heads of the autonomous 
divisions40.  The  ECB  understands  this  to  mean  that  the  Supervisory  Board  may  not  select  the 

relevant person(s) itself and may  only  approve  or  reject a  candidate. Together  with the  exclusive 

responsibility  of  the  Governor  of  Eesti  Pank  for  the  performance  of  Eesti  Pank’s  ESCB  related 

tasks,  these  safeguards  sufficiently  ensure  Eesti  Pank’s  ability  to  employ  and  retain  the  qualified 

staff necessary for Eesti Pank to perform independently the tasks conferred on it by the Treaty and 

the Statute of the ESCB.  

Legal certainty  

2.9 

In the interest of legal certainty, the national legislator may wish to review the text of the draft law to 

ensure that the terminology used and processes provided for are sufficiently clear and could not be 

misinterpreted or lead to any ambiguity.  

2.10  First,  the  draft  law  provides  that  the  Finance  Committee  of  the  Parliament  may  propose  for  the 

parliamentary approval the candidates to the Supervisory Board who are experts in the field , if the 

Chairman  of  the  Supervisory  Board  does  not  propose  such  candidates  or  the  Chairman’s 
candidates  fail  to  obtain  the  Estonian  Parliament’s  approval41.  However,  the  draft  law  does  not 

provide  for  a  similar  process  if  the  parliamentary  factions  either  fail  to  nominate  their 

representatives or if these candidates are rejected. The ECB understands this to mean that in such 

cases a faction would not have a representative on the Supervisory Board. It might, nevertheless, 

be helpful to clarify this point, for the sake of legal certainty.  

2.11  Second, the draft law provides that in the event that the mandate of a member of the Supervisory 

Board  terminates,  the  mandate  of  such  member  is  nevertheless  automatically  extended  until  the 
entry into force of a decision appointing a new member to replace the incumbent42. The draft law 

includes grounds for removing a member of the Supervisory Board from office when he or she is 

not  suitable,  e.g.  in  cases  where  a  member  is  convicted  in  a  criminal  matter  or  a  prohibition  on 
business has been  applied43.  The draft  law should make  it clear, for the avoidance of any doubt, 

that in such cases the term of office of the outgoing member does not extend until the appointment 

of a new member. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 5 February 2020. 

[signed] 

The President of the ECB 

Christine LAGARDE 

39  

40  
41  
42  
43  

See Section 11(1)(6) of the Law on Eesti Pank and Section 5.3 of the Charter of the Internal Audit Department of 
Eesti Pank.  
See Section 11(1)(6) of the Law on Eesti Pank. 
See Section 5 of the draft law.  
See Section 10 of the draft law.  
See Section 11 of the draft law. 

7