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Estonia Strengthens Banking Regulations Compliance to Boost Financial Stability

Tallinn, Estonia - In a bid to ensure the stability of its financial system, Estonia has taken significant steps by implementing European Union and domestic legislation to strengthen banking regulations compliance.

EU Legislation Plays Key Role in Payments and Securities Settlements

The European Union’s legal framework plays a crucial role in governing payments and securities settlements in Estonia. Directly applicable EU standards are not replicated in national law, but member states must transpose directives into their domestic legislation while regulations apply directly.

To reduce the risks of payments and securities settlements, the EU has adopted a directive on settlement finality, which ensures that payment orders entered in payment and securities settlement systems are enforceable and cannot be revoked if a participant becomes insolvent. A harmonized legal framework and standards for main payment services and instruments have been established to create an integrated market for payments.

National Legislation Covers Unregulated Areas

Estonian law covers areas not regulated by EU legislation, with key acts such as:

  • Credit Institutions Act: Regulates credit institutions, including their establishment, operation, and supervision.
  • Law of Obligations Act: Covers general obligations and contracts, including payment obligations.
  • Payment Institutions and E-money Institutions Act: Regulates payment institutions and e-money institutions, including their licensing, operations, and supervision.
  • Decree of the Governor of Eesti Pank on conditions for the acceptance of payment orders: Specifies the requirements for accepting payment orders.

Implementation of EU Regulations

Estonia has also implemented European Union regulations on:

  • OTC Derivatives: Regulates over-the-counter (OTC) derivatives, including their trading, clearing, and settlement.
  • Financial Collateral Arrangements: Covers financial collateral arrangements, including the use of securities as collateral.
  • Improving Securities Settlement in the EU: Enhances the efficiency and security of securities settlement systems.

Transposition of EU Directives

Estonia has transposed EU directives into national law, including those related to:

  • Payment Services: Regulates payment services, including payment institutions, e-money institutions, and payment service providers.
  • Markets in Financial Instruments: Covers markets for financial instruments, including securities, derivatives, and other financial products.
  • Interchange Fees for Card-Based Payment Transactions: Regulates interchange fees for card-based payment transactions.

Securities Market Regulation

Estonia’s securities market is regulated by the following acts:

  • Securities Market Act: Ensures harmonized conditions for trading, clearing, and settlement of securities.
  • Securities Register Maintenance Act: Covers the maintenance of securities registers, including the registration of securities holders.

Boosting Confidence and Stability

The strengthened regulations are expected to boost confidence in Estonia’s financial system and contribute to the country’s economic stability.