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Banking law: legislative update

28.11.2004

On June 16 2004 the Estonian Parliament (the Riigikogu) heard a motion to process a draft act purporting to amend the Credit Institutions Act 1999 and the Commercial Code 1995. The draft was prepared by the Central Bank, the Ministry of Finance and the Financial Supervision Authority. The draft has already passed its first parliamentary reading.

The purpose of the draft is to implement fully EU Directives 2000/12/EC and 2001/24/EC into the Credit Institutions Act. The most important amendments proposed by the draft concern:

• the founding of credit institutions;
• the acquisition of qualifying holdings in credit institutions;
• the prudential ratios with which credit institutions must comply;
• the supervision of credit institutions; and
• the reorganization and winding-up of credit institutions.

In addition, the draft proposes changes to the wording of the act.

The amendments concerning the founding of credit institutions are intended to bring the act into line with the principles of EU Directive 2000/12/EC.

Currently, the acquisition of a qualifying holding in a credit institution requires the advance permission of the Financial Supervision Authority. The draft proposes to amend the act in accordance with EU Directive 2000/12/EC, according to which it is necessary only to notify the competent authority about the acquisition, increase or transfer of a qualifying holding.

The amendments concerning prudential ratios are necessary in light of EU Directive 1993/6/EEC and Directive 2000/12/EC (eg, relating to instruments of the funds of credit institutions, or their gross/net funds), which have not yet been fully implemented in Estonia.

The amendments concerning the supervision of credit institutions introduce more detailed rules regarding supervisory acts.

In line with EU Directive 2001/24/EC, the draft proposes changes to the Credit Institutions Act in relation to the law applicable to the reorganization and winding-up of credit institutions, and the procedures for both.

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