Financial Crisis Prevention and Resolution Act1
Passed 18.02.2015
Chapter 1 General provisions
§ 1. Scope
(1) This Act regulates the application of crisis prevention measures and resolution tools and powers to credit institutions and investment firms if there is a risk that their financial situation may rapidly deteriorate or if it is likely that they are insolvent or may become insolvent in the future.
(2) The resolution proceedings shall be commenced in the public interest if the winding up and liquidation of a credit institution or investment firm under bankruptcy proceedings does not prevent damage to financial stability and does not avoid contagion to the financial system or real economy.
(3) The provisions of the Administrative Procedure Act apply to administrative proceedings prescribed in this Act without prejudice to the rules specific to this Act and the Financial Supervision Authority Act.
§ 2. Scope of application
(1) This Act applies to:
1) credit institutions established in Estonia, subsidiaries thereof that are financial institutions established in Estonia and branches established in a third country;
2) investment firms established in Estonia, subsidiaries thereof that are financial institutions established in Estonia and branches established in a third country;
3) financial holding companies, mixed financial holding companies and mixed-activity holding companies established in Estonia that are part of the same consolidation group as the credit institution specified in clause 1) of this subsection or the investment firm specified in clause 2) of this subsection.
(2) In addition to the provisions of clause (1) 3) of this section, for the purposes of this Act, being part of the same consolidation group as the credit institution or investment firm shall also mean a situation where an entity is subject to supervision on a consolidated basis in accordance with Articles 6 to 17 of Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1–337).
(3) For the purposes of this Act, a credit institution shall also be deemed to be an investment firm and it is subject to any and all provisions applied to credit institutions, unless otherwise provided for in this Act.
§ 3. Financial Supervision Authority as authority exercising supervisory and resolution functions
(1) For the purposes of this Act, the Financial Supervision Authority shall be a resolution authority, except for the purposes of Chapter 2 and Division 3 of Chapter 3 of this Act where the Financial Supervision Authority is deemed to be a supervisory authority.
(2) The Financial Supervision Authority as a resolution authority shall conduct resolution proceedings with regard to entities specified in § 2 of this Act pursuant to the provisions of this Act and other legislation.
(3) The Financial Supervision Authority shall be a resolution authority of a consolidation group if the parent undertaking of the consolidation group is registered in Estonia and the Financial Supervision Authority exercises financial supervision on a consolidated basis over the consolidation group. A resolution authority of the consolidation group (hereinafter resolution authority of the consolidation group) is competent to conduct resolution proceedings of the consolidation group.
(4) If a consolidation group entity has been registered in Estonia but it is not a parent undertaking of the consolidation group and if the entity is subject to financial supervision by the Financial Supervision Authority, the Financial Supervision Authority is competent to conduct resolution proceedings of the entity and, in such a case, the Financial Supervision Authority shall be the resolution authority of the consolidation group entity (hereinafter resolution authority of the subsidiary).
§ 4. General resolution objectives and adherence thereto
(1) The resolution objectives are:
1) to ensure the continuity of critical functions of a credit institution;
2) to prevent damage to financial stability to a significant extent and, in particular to avoid contagion to the whole financial system and payment and settlement systems;
3) to avoid or minimise the need to use extraordinary public financial support or other public funds;
4) to ensure sufficient protection of funds of depositors, investors and other clients.
(2) When applying the resolution tools and powers, the Financial Supervision Authority shall pursue the objectives specified in subsection (1) of this section and choose the resolution tool or power that best contributes to the achievement of the objectives specified in subsection (1) of this section with the lowest cost, considering the conditions of the specific crisis situation.
(3) All the objectives specified in subsection (1) of this section are of equal significance and, when applying a resolution tool and power, the Financial Supervision Authority shall find an optimum balance between the achievement of those objectives in a specific situation.
§ 5. Systemic crisis and critical functions
(1) For the purposes of this Act, a systemic crisis means a disruption in the financial system with the potential to have serious negative consequences for the internal market and the real economy and with the potential involvement of all types of financial intermediaries, markets and infrastructure.
(2) For the purposes of this Act, critical functions mean payment and settlement services provided by credit institutions and other services or operations the discontinuance or significant disruption in the continuous operation of which damages or may damage the functioning of the financial market, financial stability or the real economy or may have a negative effect on other participants in the financial system.
§ 6. Crisis prevention measures and resolution tools
(1) For the purposes of this Act, a crisis prevention measure means the power of the Financial Supervision Authority to:
1) require the removal of deficiencies or impediments in a recovery plan;
2) apply measures to remove impediments to resolvability;
3) apply an early intervention measure, including appoint a temporary administrator;
4) apply other supervisory measures provided for in the Credit Institutions Act.
(2) For the purposes of this Act, a resolution tool means the power of the Financial Supervision Authority to appoint a special manager or require the sale of shares and assets, set up a bridge institution, require asset separation, apply the bail-in tool or exercise other powers provided for in Chapters 4–7 of this Act.
(3) For the purposes of this Act, an early intervention measure means a supervisory measure that the Financial Supervision Authority may apply if the financial position of a credit institution is deteriorating and due to this the credit institution infringes or may infringe legislation, administrative acts applicable to the credit institution or internal rules of the credit institution.
§ 7. Resolution fund
For the purposes of this Act, a resolution fund means the Resolution Sectoral Fund provided for in the Guarantee Fund Act and the resolution financing arrangement of other states that are contracting parties to the EEA agreement (hereinafter EEA country) in accordance with Article 100 of Directive 2014/59/EU of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190–348).
§ 8. Extraordinary public financial support and emergency liquidity loan
(1) For the purposes of this Act, extraordinary public financial support means State aid in accordance with Article 107(1) TFEU, or any other form of financial assistance provided on account of the state budget funds in order to preserve or restore the viability, solvency or liquidity of a credit institution or an entity that is part of the same consolidation group as the credit institution.
(2) For the purposes of this Act, emergency liquidity loan means the provision of money of Eesti Pank to a solvent credit institution or an entity that is part of the same consolidation group as the credit institution that is facing temporary liquidity problems, without such an operation being part of monetary policy.
§ 9. Other definitions
Terms not defined in this Act shall be used within the meaning of Regulation (EU) No 575/2013 of the European Parliament and of the Council.
Chapter 2 Obligations of credit institutions and measures proposed to prevent crisis
Division 1 Recovery planning
§ 10. Preparation and submission of recovery plan of credit institution
(1) A credit institution shall prepare and submit to the Financial Supervision Authority a recovery plan providing for measures to be taken by the credit institution to restore its financial position following a significant deterioration thereof.
(2) An Estonian parent credit institution, parent financial holding company or parent mixed financial holding company of a consolidation group (hereinafter in this Chapter parent undertaking) is required to prepare and submit to the Financial Supervision Authority a recovery plan of the consolidation group headed by the parent undertaking as a whole.
(3) If a credit institution established in Estonia is a subsidiary of the consolidation group and the parent undertaking of the consolidation group has been established in the other EEA country, a separate recovery plan for a subsidiary need not be prepared, unless:
1) the credit institution is subject to direct supervision by the European Central Bank pursuant to Article 6(4) of Council Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63–89);
2) the value of assets of the credit institution exceeds 30 billion euros;
3) the ratio of assets of the credit institution over the gross domestic product of Estonia exceeds 20 per cent, unless the value of the assets is below 5 billion euros.
(4) If a parent undertaking has been established in the other EEA country, the Financial Supervision Authority may require a subsidiary that is a credit institution established in Estonia and that is part of a consolidation group to prepare a recovery plan.
(5) A recovery plan shall be submitted to the Financial Supervision Authority for review. Prior to the submission of the plan to the Financial Supervision Authority, it shall be approved by the management board and confirmed by the supervisory board of the credit institution or parent undertaking. The credit institution or parent undertaking shall be capable of demonstrating to the satisfaction of the Financial Supervision Authority that the recovery plan meets all the requirements provided for in this Act.
(6) A credit institution or parent undertaking shall review the recovery plan at least annually or after any changes to the legal status or organisational structure of the credit institution or consolidation group or an event or incident related to its business or its financial situation, which could have a material effect on the plan or necessitates a change in the plan. The Financial Supervision Authority may require that the plan be updated more frequently. The updated plan shall be submitted to the Financial Supervision Authority.
(7) The Financial Supervision Authority shall establish a term for preparing the first recovery plan.
§ 11. Requirements for recovery plan
(1) A recovery plan shall include:
1) a summary of the key elements of the plan and a summary of overall recovery capacity;
2) a summary of the material changes to the credit institution since the most recently filed recovery plan;
3) a communication and information disclosure plan outlining, inter alia, how the credit institution intends to manage any potentially negative market reactions;
4) actions regarding the options for obtaining additional capital and liquidity to ensure the viability of the credit institution and the maintenance and restoration of the financial position;
5) an estimation of the timeframe for executing each material aspect of the plan;
6) a detailed description of any material impediment to the effective and timely execution of the plan, including consideration of impact on clients and counterparties and other entities of the same consolidation group;
7) specification of critical functions;
8) a detailed description of the processes for determining the value and marketability of the core business lines and assets of the credit institution;
9) a detailed description of how recovery planning is linked to the corporate governance structure of the credit institution as well as the policies and procedures governing the approval of the plan and identification of the persons in the organisation responsible for preparing and implementing the plan;
10) arrangements and measures to conserve or restore the credit institution’s own funds;
11) arrangements and measures to ensure that the credit institution has adequate access to contingency funding sources, including potential liquidity sources, an assessment of available collateral and, where applicable, an assessment of the possibility to transfer liquidity across consolidation group entities or business lines, to ensure that the credit institution can continue to carry out its operations and meet its obligations as they fall due;
12) arrangements and measures to reduce risk and leverage;
13) arrangements and measures to restructure liabilities;
14) arrangements and measures to restructure business lines;
15) arrangements and measures necessary to maintain continuous access to financial markets infrastructures;
16) arrangements and measures necessary to maintain the continuous functioning of the credit institution’s operational processes, including infrastructure and IT services;
17) preliminary arrangements to facilitate the sale of assets or business lines in a timeframe appropriate for the restoration of financial soundness;
18) other management actions or strategies to restore financial soundness and the anticipated financial effect of those actions or strategies;
19) preparatory measures that the credit institution has taken or plans to take in order to facilitate the implementation of the recovery plan, including those necessary to enable the timely recapitalisation of the credit institution;
20) appropriate conditions and procedures to ensure the continuous monitoring of the financial position and timely implementation of recovery actions, including a framework of indicators established by the credit institution which identifies criteria for which appropriate actions referred to in the recovery plan may be taken; the indicators may be of a qualitative or quantitative nature relating to the credit institution’s financial position and shall be capable of being monitored easily;
21) a range of scenarios of different degree of seriousness analysed with macroeconomic and financial stress relevant to the credit institution’s specific conditions and prescribing, inter alia, system-wide events and stress specific to the credit institution and, where the credit institution is part of a consolidation group, to the consolidation group;
22) a wide range of recovery options and actions, considering the analysed scenarios specified in clause 21) of this subsection;
23) measures which could be taken by the credit institution where the conditions for early intervention provided for in § 36 of this Act are met;
24) an analysis of the options for applying for facilities of Eesti Pank, including the emergency liquidity loan, and identification of those assets which would be expected to qualify as collateral; the plan shall include conditions of how and when the credit institution can apply for such facilities.
(2) A consolidation group recovery plan shall include:
1) information on the consolidation group specified in subsection (1) of this section;
2) measures that may be required to be implemented with regard to a parent undertaking operating in the European Economic Area and each individual subsidiary and that aim to achieve the stabilisation of the consolidation group as a whole, or any credit institution of the consolidation group;
3) an analysis of the scenario provided for in clause (1) 21) of this section identifying whether there are obstacles to the implementation of recovery measures within the consolidation group, including at the level of individual entities covered by the plan, and whether there are substantial practical or legal impediments to the prompt transfer of own funds or the repayment of liabilities or assets within the consolidation group;
4) arrangements for intra-group financial support if the consolidation group has entered into an agreement for intra-group financial support in accordance with Division 3 of this Chapter;
5) arrangements to ensure the coordination and consistency of measures to be taken at the level of the parent undertaking and subsidiaries and, where applicable, at the level of significant branches, financial holding companies, mixed financial holding companies and mixed-activity holding companies.
(3) The recovery plan shall not prescribe the use of extraordinary public financial support to maintain or restore the financial position.
(4) The specific conditions for the contents and preparation of the recovery plan may be established by the minister responsible for the area by a regulation.
(5) The Financial Supervision Authority may require a credit institution to maintain detailed records of financial contracts to which the credit institution is a party. A credit institution shall submit such information at the request of the Financial Supervision Authority.
(6) The management board of a credit institution shall immediately notify the Financial Supervision Authority if the level of indicators specified in clause (1) 20) of this section has been met or exceeded.
(7) If the management board of a credit institution considers that it is reasonable in a specific situation and such a decision has been notified to the Financial Supervision Authority without a delay, a credit institution may:
1) take appropriate actions under the recovery plan even if the indicators specified in clause (1) 20) of this section have not been exceeded or met;
2) refrain from taking actions under the recovery plan.
§ 12. Assessment of and procedure for recovery plan
(1) The Financial Supervision Authority shall assess within six months of the submission of the full recovery plan the compliance thereof with the requirements provided for in this Act and with the following criteria:
1) the extent to which it is likely that the implementation of the arrangements proposed in the plan maintains or restores the viability of the functioning and financial position of the credit institution, taking into account the preparatory measures that the credit institution has taken or has planned to take;
2) the extent to which it is likely that the recovery plan and specific options within the plan can be implemented quickly and effectively in situations of economic or financial stress and avoiding to the maximum extent possible any significant negative effect on the financial system, including in scenarios which would lead other credit institutions and investment firms to implement recovery plans within the same period.
(2) When providing the assessment provided for in subsection (1) of this section, the Financial Supervision Authority shall take into consideration the appropriateness of the credit institution’s capital and funding structure to the level of complexity of the organisational structure and the risk profile of the credit institution.
(3) When providing the assessment provided for in subsection (1) of this section, the Financial Supervision Authority shall, if necessary, consult financial supervision authorities of the EEA countries where significant branches of the credit institution are located.
§ 13. Assessment of and procedure for recovery plan of consolidation group and subsidiary that is part of consolidation group
(1) If the Financial Supervision Authority exercises supervision on a consolidated basis, it shall transmit the consolidation group recovery plan submitted to it:
1) to financial supervision authorities of the EEA country that exercises supervision over the subsidiary of the consolidation group, and to the resolution authority of that country;
2) where necessary, to financial supervision authorities of the EEA country where a significant branch of the consolidation group is located;
3) where necessary, to financial supervision authorities of the third country where the subsidiary of the consolidation group has been established if the country applies confidentiality requirements equivalent to those provided for in § 51 of this Act.
(2) If the Financial Supervision Authority exercises supervision on a consolidated basis, it shall do everything within its power to reach a joint decision within four months of the date of transmission of the consolidation group recovery plan specified in subsection (1) of this section with a financial supervision authority of the other EEA country exercising supervision over the subsidiary of the consolidation group on the following matters:
1) whether the consolidation group recovery plan complies with the requirements provided for in this Act, including the extent to which it is likely that the implementation of the arrangements proposed in the plan maintains or restores the viability and financial position of the consolidation group, taking into account the preparatory measures that the consolidation group has taken or has planned to take, or the extent to which it is likely that the plan and specific options within the plan can be implemented quickly and effectively in situations of financial stress and avoiding to the maximum extent possible any significant negative effect on the financial system, including in scenarios which would lead other credit institutions and investment firms to implement recovery plans within the same period;
2) which measures provided for in § 14 of this Act shall be applied at the consolidation group level if there are material deficiencies in the consolidation group recovery plan;
3) whether a recovery plan on an individual basis is to be drawn up for credit institutions that are subsidiaries of the consolidation group.
(3) When providing the assessment specified in subsection 12 (1) of this Act, the Financial Supervision Authority shall take into consideration the appropriateness of the consolidation group’s capital and funding structure to the organisational structure and the risk profile of the consolidation group.
(4) If the Financial Supervision Authority exercises supervision on a consolidated basis and in the absence of the joint decision within the term specified in subsection (2) of this section, the Financial Supervision Authority shall, within six months of the date of submission of the full recovery plan, make its decision on the consolidation group recovery plan provided for in clause (2) 1) of this section and on measures specified in clause 2) of the same subsection that should be implemented at the level of the parent undertaking, taking into account the views and reservations of financial supervision authority of the other relevant EEA country where possible. The decision of the Financial Supervision Authority does not include measures that should be implemented at the level of the subsidiary in accordance with clause (2) 2) of this section. The Financial Supervision Authority shall notify the decision to the parent undertaking and other relevant financial supervision authorities. The provisions of the first sentence of this subsection do not preclude the adoption of a joint decision on the consolidation group recovery plan with the financial supervision authorities with which the Financial Supervision Authority has no disagreements.
(5) If the Financial Supervision Authority exercises supervision over a subsidiary that is part of a consolidation group and assesses that the subsidiary should draw up a recovery plan on an individual basis, the Financial Supervision Authority shall notify the financial supervision authority exercising supervision on a consolidated basis thereof and endeavour to reach a joint decision with it. In the absence of a joint decision within four months of the date of transmission of the recovery plan, the Financial Supervision Authority shall make a decision on whether a recovery plan on an individual basis is to be drawn up for the subsidiary or whether the measures to address the material deficiencies pursuant to clause (2) 2) of this section are to be applied at subsidiary level.
(6) The Financial Supervision Authority may address the European Banking Authority and request its assistance to the financial supervision authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010 of the European Parliament and of the Council establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12–47). In the absence of a joint decision, the Financial Supervision Authority may, prior to the end of the four-month period, also address the European Banking Authority in the case of disagreements in accordance with Article 19 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council. The European Banking Authority shall not be addressed after the end of the four-month period or after a joint decision has been reached.
(7) If the financial supervision authority of the other EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision within the period specified in subsection (2) of this section, the Financial Supervision Authority shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision of the European Banking Authority. In the absence of the decision of the European Banking Authority within one month of the date of notification of the financial supervision authority of the other EEA country, the Financial Supervision Authority shall take its decision.
(8) If the Financial Supervision Authority exercises supervision on a consolidated basis, in taking a joint decision provided for in subsection (2) of this section it shall consult, where necessary, the financial supervision authority of the EEA country where a significant branch is located and the financial supervision authority of a third country where the subsidiary of the consolidation group has been established if the country applies confidentiality requirements equivalent to those provided for in § 51 of this Act.
(9) The joint decision provided for in this section or the decisions taken by the Financial Supervision Authority in the absence of a joint decision shall be recognised as conclusive with regard to resolution authorities of other EEA countries.
(10) If the Financial Supervision Authority reaches a joint decision with a financial supervision authority of the other EEA country with regard to the matters specified in subsection (2) of this section, it shall not prevent the Financial Supervision Authority to require a subsidiary credit institution established in Estonia that is part of a consolidation group to draw up a separate recovery plan.
(11) If the Financial Supervision Authority exercises supervision on a consolidated basis, it shall transmit the final consolidation group recovery plan to financial supervision authorities specified in subsection (1) of this section.
§ 14. Removal of deficiencies in recovery plan
(1) Where the Financial Supervision Authority identifies material deficiencies in the recovery plan or material impediments to its implementation, the Financial Supervision Authority shall notify the credit institution or the parent undertaking that those deficiencies or impediments must be remedied within two months of the date of receipt of the notification.
(2) On application by the credit institution or parent undertaking, the Financial Supervision Authority may extend the term provided for in subsection (1) of this section by one month.
(3) If the credit institution or parent undertaking fails to submit a revised recovery plan within the term prescribed in subsection (1) or (2) of this section or if the Financial Supervision Authority determines that the revised plan does not remedy the deficiencies or impediments identified, the Financial Supervision Authority may provide a reasonable term during which the credit institution or parent undertaking shall remedy the deficiencies in the plan or potential impediments to its implementation.
(4) If the credit institution or parent undertaking fails to comply with the requirements of the Financial Supervision Authority within the terms provided for in this section or if the Financial Supervision Authority assesses that the actions proposed would not adequately address the deficiencies or impediments, the Financial Supervision Authority may issue a precept requiring the credit institution or parent undertaking to:
1) reduce its risks, including liquidity risk;
2) enable timely recapitalisation measures;
3) review its strategy and structure;
4) make changes to the funding strategy so as to improve the resilience of the core business lines and critical functions;
5) make changes to its governance structure.
§ 15. Preparation of recovery plan in simplified form
(1) A credit institution or parent undertaking may submit to the Financial Supervision Authority an application (hereinafter in this section application) for the preparation and submission of a simplified recovery plan. The credit institution or parent undertaking (hereinafter in this section applicant) may apply for:
1) a reduction in the contents of the recovery plan or consolidation group recovery plan required under this Act;
2) a reduction in the frequency for updating the recovery plan provided for in this Act.
(2) A credit institution specified in subsection 10 (3) of this Act cannot apply for the preparation of a simplified recovery plan.
(3) The application specified in subsection (1) of this section shall contain the reasoned assessment of the applicant on the impact that the insolvency of the credit institution or consolidation group and subsequent winding up and liquidation thereof under bankruptcy proceedings could have on financial markets, on other credit institutions and investment firms, on funding conditions, or on the wider economy.
(4) The assessment of the applicant provided for in subsection (3) of this section shall take account of the nature of the business of the credit institution or consolidation group, its shareholding structure, its legal form, its risk profile, the size and legal status of the credit institution or consolidation group, interconnectedness of the credit institution to other credit institutions or investment firms or to the financial system in general, the scope and the complexity of its activities, its membership of an institutional protection scheme or the cooperative mutual solidarity system as referred to in Article 113(7) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (hereinafter institutional protection scheme) and whether the credit institution provides any investment services.
(5) If, during the processing of the application, any changes are made in the documents and assessment specified in subsections (1) and (3) of this section, the applicant shall submit the updated documents or assessment to the Financial Supervision Authority immediately after making or becoming aware of the changes.
(6) If the applicant has failed to submit all the specified documents or the documents are incomplete or have not been prepared in accordance with the requirements or if the specified assessment is incomplete, the Financial Supervision Authority has the power to require the applicant to remove the deficiencies. The Financial Supervision Authority may refuse to review the application if the applicant has failed to remove the deficiencies within the prescribed term or has not submitted the documents required by the Financial Supervision Authority or the updated assessment by the end of the term. Upon refusal to review an application, the Financial Supervision Authority shall return the submitted documents.
(7) If the impact that the insolvency of a credit institution and subsequent winding up and liquidation thereof could have on financial markets, on other credit institutions and investment firms, on funding conditions, or on the wider economy cannot be adequately assessed on the basis of the documents or assessment submitted, the Financial Supervision Authority may require the submission of additional information and documents.
(8) The Financial Supervision Authority shall assess the documents and assessment submitted by the applicant and the impact that the insolvency of the credit institution and subsequent winding up and liquidation thereof could have on financial markets, on other credit institutions and investment firms, on funding conditions, or on the wider economy, and decide within two months of the submission of the application whether to grant an authorisation to draw up a simplified recovery plan. The Financial Supervision Authority shall determine in its decision to which extent the simplified requirements are to be applied to the credit institution or consolidation group. The Financial Supervision Authority may in its decision also change the term of drawing up the first recovery plan provided for in subsection 10 (7) of this Act. In its assessment the Financial Supervision Authority shall take into account the nature of the sources of funding of the credit institution or consolidation group, including mutually guaranteed funding or liabilities, and the degree to which consolidation group support would be credibly available.
(9) The Financial Supervision Authority does not grant an authorisation to draw up a simplified recovery plan to the credit institution or consolidation group whose insolvency and subsequent winding up and liquidation could have a significant impact on financial markets, on other credit institutions and investment firms, on funding conditions, or on the wider economy.
(10) If the Financial Supervision Authority assesses that the authorisation to draw up a simplified recovery plan is no longer justified, the Financial Supervision Authority may revoke the authorisation at any time and require the preparation of a full recovery plan. The Financial Supervision Authority shall provide a reasonable term for the preparation of a new recovery plan.
(11) The authorisation specified in subsection (8) of this section shall not affect the powers of the Financial Supervision Authority to take a crisis prevention measure or resolution tool.
(12) Where appropriate, the Financial Supervision Authority shall consult Eesti Pank before taking a decision specified in subsection (8) of this section.
(13) The Financial Supervision Authority shall notify the European Banking Authority of the grant of the authorisation to draw up a simplified recovery plan.
§ 16. Non-application of requirement for preparation of recovery plan
(1) A credit institution may submit to the Financial Supervision Authority an application for not preparing a recovery plan if:
1) the credit institution is directly affiliated to the parent undertaking of a consolidation group or an entity organising central financing in the consolidation group that is wholly or partially exempted from prudential requirements in accordance with Article 10 of Regulation (EU) No 575/2013 of the European Parliament and of the Council, or
2) the credit institution is a member of an institutional protection scheme.
(2) A credit institution shall demonstrate the satisfaction of the conditions provided for in subsection (1) of this section.
(3) If, during the processing of an application, the situation of the credit institution changes with regard to the conditions provided for in subsection (1) or (2) of this section, the credit institution shall immediately inform the Financial Supervision Authority thereof.
(4) The Financial Supervision Authority shall assess the satisfaction of the conditions specified in subsection (1) of this section and shall decide within two months of the date of submission of the application whether to grant an authorisation to the credit institution to not prepare a recovery plan.
5) If the Financial Supervision Authority grants the authorisation specified in subsection (4) of this section:
1) the recovery plan shall be prepared on a consolidated basis with regard to the entity organising central financing specified in clause (1) 1) of this section and the credit institutions affiliated to it within the meaning of Article 10 of Regulation (EU) No 575/2013 of the European Parliament and of the Council, or
2) the institutional protection scheme shall fulfil the requirements for the recovery plan in cooperation with each of its members who do not prepare the recovery plan.
(6) The Financial Supervision Authority shall notify the European Banking Authority of the authorisation granted under subsection (4) of this section.
Division 2 Minimum requirement for own funds and eligible liabilities
§ 17. Requirement for minimum level of own funds and eligible liabilities
(1) A credit institution shall meet at all times a requirement for a minimum level of own funds and eligible liabilities (hereinafter in this Division minimum requirement) provided for in this Act.
(2) The minimum requirement expresses the required percentage of the amount of own funds and eligible liabilities of the credit institution of the amount of the total liabilities and own funds of the credit institution. Total liabilities shall also include derivative liabilities that are fully covered by counterparty netting rights.
(3) The Financial Supervision Authority shall exempt credit institutions engaged in mortgage credit that finance themselves through the issue of covered bonds and that have no right to receive deposits from the obligation to meet a minimum requirement, as:
1) such credit institutions are subject to normal insolvency proceedings or the sale of shares and assets tool, the bridge institution tool or the asset separation tool provided for in this Act;
2) according to the proceedings specified in clause 1) of this subsection creditors of those credit institutions, including holders of covered bonds, will bear losses to meet the resolution objectives.
(4) Liabilities, including subordinated liabilities, that are not included in the Additional Tier 1 and Tier 2 capital, are considered eligible and they are included in the amount of own funds and eligible liabilities if all of the following conditions have been satisfied:
1) the liability expressed in a security or any other debt instrument is issued and fully paid up;
2) the debt instrument does not belong to the credit institution and the credit institution has not secured or guaranteed the debt instrument;
3) the purchase of the debt instrument was not funded directly or indirectly by the credit institution;
4) the liability has a remaining maturity of at least one year;
5) the liability does not arise from a derivative;
6) the liability does not arise from a deposit which is paid out in the first priority ranking in the bankruptcy proceedings in accordance with subsection 131 (1) of the Credit Institutions Act.
(5) Where the liability specified in clause (4) 4) of this section confers upon its owner a right to early reimbursement, the maturity of that liability shall be the first date where such a right arises.
(6) Where a liability is governed by the law of a third country, the Financial Supervision Authority may require the credit institution to confirm that any decision of the Financial Supervision Authority to write down or convert that liability would be applicable under the law of that third country, having regard to the terms of the contract governing the liability, international agreements and other relevant matters related to the implementation of the resolution tools. If the Financial Supervision Authority assesses that the law of a third country limits the possible application of writing down or converting the liability, the liability shall not be counted towards the minimum requirement.
(7) The Financial Supervision Authority shall determine the minimum requirement of each credit institution. In establishing the minimum requirement, the Financial Supervision Authority shall take into account the following:
1) the need that the credit institution can be rehabilitated by the application of the resolution tools, including the bail-in tool, in a way that meets the resolution objectives;
2) the need that the credit institution has sufficient eligible liabilities to apply the bail-in tool in a way that enables the losses to be absorbed and the required amount of the Common Equity Tier 1 capital of the credit institution to be restored in compliance with the requirements provided for in the Credit Institutions Act that have served as a basis for the grant of the authorisation to ensure the continuity of the activities of the credit institution and sufficient public confidence in the credit institution;
3) the need to ensure that, if the resolution plan prescribes the exclusion of certain eligible liabilities from bail-in under § 72 of this Act or if certain eligible liabilities may be transferred to a holder in full, the credit institution must have sufficient other eligible liabilities to ensure that losses could be absorbed and the required amount of the Common Equity Tier 1 capital of the credit institution could be restored in compliance with the requirements provided for in the Credit Institutions Act that have served as a basis for the grant of the authorisation to ensure the continuity of the activities of the credit institution;
4) the size, the business and funding model and the risk profile of the credit institution;
5) the potential extent to which the funds of the Deposit Guarantee Sectoral Fund of the Guarantee Fund can be used according to § 411 of the Guarantee Fund Act;
6) the potential effect of the insolvency of the credit institution on financial stability, including the interconnectedness with other participants in the financial system.
(8) Criteria under which the minimum requirement for own funds and eligible liabilities are determined may be additionally established by the minister responsible for the area by a regulation.
(9) The Financial Supervision Authority shall notify the European Banking Authority of the establishment of the minimum requirement and the possible replacement thereof with the bail-in agreement.
(10) For the purposes of this Act, a netting arrangement means an arrangement under which a number of claims or obligations can be converted into a single net claim, including close-out netting arrangements under which, on the occurrence of an enforcement event, the obligations of the parties are accelerated so as to become immediately due or are terminated, and in either case are converted into or replaced by a single net claim. A netting arrangement also includes ‘close-out netting provisions’ as defined in point (n)(i) of Article 2(1) of Directive 2002/47/EC of the European Parliament and of the Council on financial collateral arrangements (OJ L 168, 27.6.2002, p. 43–50) and ‘netting’ as defined in point (k) of Article 2 of Directive 98/26/EC of the European Parliament and of the Council on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45–50), as last amended by Directive 2010/78/EU (OJ L 331, 15.12.2010, p. 120–161).
(11) For the purposes of this Act, a mutual set-off arrangement means an arrangement under which two or more claims or obligations owed between the credit institution under resolution proceedings and a counterparty can be set off against each other.
§ 18. Application of minimum requirement to consolidation groups
(1) The Financial Supervision Authority may decide to apply the minimum requirement to another entity established in Estonia that is part of the same consolidation group as credit institutions.
(2) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall establish the minimum requirement for the consolidation group as a whole, taking into account the provisions of subsection 17 (7) of this Act and the matter whether subsidiaries of the consolidation group established in third countries can be rehabilitated separately according to the resolution plan.
(3) The Financial Supervision Authority shall do everything within its power to reach a joint decision in cooperation with the resolution authority of the other EEA country on the determination of the minimum requirement for own funds and eligible liabilities of the consolidation group.
(4) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall propose the joint decision to the resolution authority of the other relevant EEA country.
(5) The Financial Supervision Authority shall reach a joint decision with the resolution authority of the other relevant EEA country on the determination of the minimum requirement of the consolidation group within four months of the date of submission or receipt of the proposal specified in subsection (4) of this section.
(6) If the Financial Supervision Authority is the resolution authority of the consolidation group and in the absence of the joint decision with the resolution authority of the other relevant EEA country on the determination of the minimum requirement within four months, the Financial Supervision Authority shall make its own decision on the determination of the minimum requirement of the consolidation group, taking into account the assessments of resolution authorities of other EEA countries.
(7) If the resolution authority of the other EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision within the period specified in subsection (6) of this section, the Financial Supervision Authority shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision of the European Banking Authority on the determination of the minimum requirement. In the absence of the decision of the European Banking Authority within one month of the date of notification of the resolution authority of the other EEA country, the Financial Supervision Authority shall take its decision.
(8) If the Financial Supervision Authority is not the resolution authority of the consolidation group, it has the power to file a complaint against the decision of the resolution authority of the consolidation group on the determination of the minimum requirement with the European Banking Authority.
(9) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall submit the joint decision or the decision provided for in subsection (6) of this section along with the required reasons to the parent undertaking of the consolidation group.
(10) A joint decision specified in this section or a decision specified in subsection (6) of this section shall be reviewed and where relevant updated on a regular basis.
§ 19. Application of minimum requirement to subsidiary credit institution of consolidation group
(1) The Financial Supervision Authority shall establish the minimum requirement for a subsidiary credit institution of a consolidation group if the credit institution has been established in Estonia. In establishing the minimum requirement, the following shall be taken into account:
1) the criteria provided for in subsection 17 (7) of this Act, in particular the size, business and funding model and risk profile of the credit institution;
2) the minimum requirement established for a consolidation group under § 18 of this Act.
(2) The Financial Supervision Authority shall do everything within its power to reach a joint decision in cooperation with the resolution authority of the other EEA country on the determination of the minimum requirement for own funds and eligible liabilities of the subsidiary credit institution of the consolidation group.
(3) If the Financial Supervision Authority is the resolution authority of the subsidiary of the consolidation group, it shall propose the joint decision to the resolution authority of the consolidation group.
(4) The Financial Supervision Authority shall do everything within its power to reach a joint decision with the resolution authority of the other relevant EEA country on the determination of the minimum requirement of the subsidiary of the consolidation group within four months of the date of transmission or receipt of the proposal.
(5) If the Financial Supervision Authority is the resolution authority of the subsidiary of the consolidation group and in the absence of the joint decision with the resolution authority of the other EEA country on the determination of the minimum requirement within four months, the Financial Supervision Authority shall make its own decision on the determination of the minimum requirement.
(6) If the resolution authority of the other EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision within the period specified in subsection (5) of this section, the Financial Supervision Authority, if it is a resolution authority of the subsidiary of the consolidation group, shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision of the European Banking Authority on the determination of the minimum requirement. In the absence of the decision of the European Banking Authority within one month of the date of notification of the resolution authority of the other EEA country, the Financial Supervision Authority shall take its decision.
(7) If the Financial Supervision Authority is the resolution authority of the consolidation group, it has no power to file a complaint against the decision of the resolution authority of the other EEA country on the determination of the minimum requirement with the European Banking Authority if the minimum requirement established by the resolution authority of the other EEA country differs by one per cent or less from the amount of the minimum requirement of the consolidation group.
(8) If the Financial Supervision Authority is the resolution authority of the subsidiary of the consolidation group, it shall submit the joint decision or the decision specified in subsection (5) of this section along with the required reasons to the subsidiary.
(9) A joint decision specified in this section or a decision specified in subsection (5) of this section shall be reviewed and where relevant updated on a regular basis.
§ 20. Specifications for application of minimum requirement
(1) If the Financial Supervision Authority is the resolution authority of the consolidation group, it has the power not to apply the minimum requirement to a parent undertaking of the consolidation group of the credit institution in the following cases:
1) a parent credit institution of the European Union meets the minimum requirement specified in subsection 18 (2) of this Act on a consolidated basis;
2) a parent credit institution of the European Union is not subject to prudential requirements on an individual basis under Article 7(3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council.
(2) If the Financial Supervision Authority is the resolution authority of the subsidiary of the consolidation group, it has the power not to apply the minimum requirement to the credit institution in the following cases:
1) both the parent undertaking and the subsidiary of the consolidation group have obtained an authorisation in Estonia and both are subject to the supervision by the Financial Supervision Authority;
2) the subsidiary of the consolidation group is included in the supervision by the Financial Supervision Authority exercised over the same consolidation group;
3) the parent undertaking of the subsidiary of the consolidation group which is not the parent undertaking of the whole consolidation group meets the minimum requirement on a consolidated basis;
4) there is no current or foreseen practical or legal impediment to the transfer of capital instruments or repayment of liabilities to the subsidiary by its parent undertaking;
5) either the parent undertaking satisfies the Financial Supervision Authority as the financial supervision authority regarding the prudent management of the subsidiary and guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of no significance;
6) the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary;
7) the parent undertaking holds more than 50 per cent of the voting rights attached to shares in the capital of the subsidiary or has the right to appoint or remove a majority of the members of the management body of the subsidiary;
8) a subsidiary that is a credit institution established in Estonia is not subject to prudential requirements on an individual basis under Article 7(3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council.
§ 21. Replacement of compliance with minimum requirement with bail-in agreement
(1) A credit institution may, with the consent of the Financial Supervision Authority and resolution authority of the other relevant EEA country, meet the minimum requirement provided for in this Division partially at individual or consolidated level through entry into a bail-in agreement (hereinafter bail-in agreement).
(2) The bail-in agreement shall provide for the following conditions:
1) where the Financial Supervision Authority or a resolution authority of the other relevant EEA country decides to apply the bail-in tool, the liability or claim determined in the agreement shall be written down or converted to the extent required before other eligible liabilities are written down or converted;
2) in the normal liquidation or bankruptcy proceedings the liability or claim ranks below other eligible liabilities in the order of priority of claims and cannot be repaid or compensated for until other eligible liabilities to be written down have been settled.
(3) The replacement of the compliance with the minimum requirement with a bail-in agreement provided for in this section shall be taken into account in drawing up the resolution plan.
§ 22. Provision of bail-in power in agreements
(1) A credit institution or entity that is part of the same consolidation group as the credit institution is required to agree in the agreement to be entered into that the creditor or party to the agreement creating the liability recognises that:
1) the liability arising from the agreement may be subject to the write-down and conversion powers;
2) it agrees to be bound by any reduction, conversion or cancellation of the principal or outstanding amount due of the liability in resolution proceedings.
(2) The Financial Supervision Authority may require the credit institution or entity that is part of the same consolidation group as the credit institution to provide an independent legal opinion relating to the enforceability and validity of the agreement including a term concerning the write down and conversion powers.
3) The provisions of subsection (1) of this section shall not apply:
1) to deposits that are satisfied as claims in the first priority ranking in the bankruptcy proceedings in accordance with subsection 131 (1) of the Credit Institutions Act;
2) if the write down and conversion powers have been provided pursuant to the law of the third country or to an international agreement entered into with that third country;
3) to liabilities provided for in subsection 71 (1) of this Act.
(4) If a credit institution or entity that is part of the same consolidation group as the credit institution fails to meet the requirements provided for in this section, that failure shall not prevent the Financial Supervision Authority from applying the bail-in tool in relation to those liabilities.
Division 3 Intra-group financial support
§ 23. Consolidation group financial support agreement
(1) A consolidation group entity established in Estonia has the right to enter into a financial support agreement (hereinafter consolidation group financial support agreement) to provide financial support to any other consolidation group entity that meets the conditions for early intervention provided for in § 36 of this Act.
(2) The provisions of this Division do not apply to intra-group financial arrangements, including the operation of resolution funds and centralised funding arrangements provided that none of the parties to such funds or arrangements meets the conditions for early intervention.
(3) A consolidation group financial support agreement shall not be treated as a prerequisite to provide consolidation group financial support to any consolidation group entity that experiences financial difficulties if the credit institution or investment firm decides to do so, on a case-by-case basis, according to the consolidation group policies and if it does not represent a risk for the whole consolidation group.
(4) Any right, claim or action arising from the consolidation group financial support agreement may be exercised only by the parties to the agreement, but not by any third parties.
§ 24. Requirements for consolidation group financial support agreement
(1) The consolidation group financial support agreement may only be entered into if, at the time the agreement is entered into, in the opinion of the Financial Supervision Authority and financial supervision authorities of other relevant EEA countries, none of the parties to the proposed agreement meets the conditions for early intervention provided for in § 36 of this Act.
(2) The consolidation group financial support agreement may:
1) cover one or more subsidiaries of the consolidation group, and provide for financial support from the parent undertaking to subsidiaries, from subsidiaries to the parent undertaking, between subsidiaries of the consolidation group that are party to the agreement, or any combination of those entities;
2) provide for financial support in the form of a loan, the provision of guarantees, the provision of assets for use as collateral, or any combination of those forms of financial support, in one or more transactions, including between the beneficiary of the support and a third party.
(3) Where, in accordance with the terms of the consolidation group financial support agreement, a consolidation group entity agrees to provide financial support to another consolidation group entity, the agreement may include a reciprocal agreement by the consolidation group entity receiving the support to provide financial support to the entity providing the support.
(4) The consolidation group financial support agreement shall specify the principles for the calculation of the consideration or other compensation for any transaction made under it. Those principles shall include a requirement that the respective compensation shall be set at the time of the provision of financial support. The terms of the agreement, including the calculation of the compensation for the provision of financial support, shall comply with the following requirements:
1) a party must be acting freely in entering into the agreement;
2) in entering into the agreement and in determining the compensation for the agreement for the provision of financial support, each party must be acting in its own interests which may take account of any direct or any indirect benefit that may accrue to a party as a result of provision of the financial support;
3) each party providing financial support must have full disclosure of relevant information on any party receiving financial support prior to determination of the compensation for the agreement for the provision of financial support and prior to any decision to provide financial support;
4) the compensation for the agreement for the provision of financial support may take account of information in the possession of the party providing financial support based on it being in the same consolidation group as the party receiving financial support and which is not available to the market; and
5) the principles for the calculation of the compensation for the agreement for the provision of financial support are not obliged to take account of any anticipated temporary impact on market prices arising from events external to the consolidation group.
(5) Consolidation group entities established in Estonia shall make public whether or not they have entered into a consolidation group financial support agreement and make public a description of the general terms of any such agreement and the names of other consolidation group entities that are party to it and update that information at least annually. The publication is subject to Articles 431 to 434 of Regulation (EU) No 575/2013 of the European Parliament and of the Council.
§ 25. Procedure for authorisation of consolidation group financial support agreement
(1) The parent undertaking of the consolidation group shall submit to the Financial Supervision Authority as the authority exercising supervision on a consolidated basis an application for authorisation of any consolidation group financial support agreement proposed pursuant to § 24 of this Act. The application shall contain the text of the proposed agreement and identify the consolidation group entities that propose to be parties.
(2) The Financial Supervision Authority shall forward without delay the application submitted on the basis provided for in subsection (1) of this section to the financial supervision authority of the other EEA country where each subsidiary of a consolidation group that proposes to be a party to the agreement is located, with a view to reaching a joint decision on the authorisation of the agreement.
(3) Within four months of the date of receipt of the application specified in subsection (1) of this section, the Financial Supervision Authority shall do everything within its power to reach a joint decision with the financial supervision authorities specified in subsection (2) of this section on whether the terms of the proposed agreement are consistent with the conditions for financial support provided for in § 24 and subsection 27 (3) of this Act, taking into account the potential impact, including any fiscal consequences, of the execution of the agreement in all the EEA countries where the consolidation group operates. The Financial Supervision Authority shall forward the fully reasoned joint decision to the parent undertaking of the consolidation group.
(4) In making a decision under subsection (3) of this section, the Financial Supervision Authority may request assistance from the European Banking Authority in accordance with Article 19 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council.
(5) In the absence of a joint decision within the term provided for in subsection (3) of this section, the Financial Supervision Authority shall make its own decision. The decision of the Financial Supervision Authority shall be fully reasoned and shall take into account the views and reservations of the financial supervision authorities of other relevant EEA countries. The Financial Supervision Authority shall submit its decision to the parent undertaking of the consolidation group and the financial supervision authorities of other EEA countries.
(6) If the financial supervision authority of the other EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision within the period specified in subsection (3) of this section, the Financial Supervision Authority shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision of the European Banking Authority. In the absence of the decision of the European Banking Authority within one month of the date of submission of the notification, the Financial Supervision Authority shall take its decision.
(7) The Financial Supervision Authority shall, in accordance with the procedure specified in subsection (3), (5) or (6) of this section, grant the authorisation if the terms of the proposed agreement are consistent with the conditions for financial support provided for in § 24 of this Act, and prohibit the entry into the proposed agreement if it is inconsistent with the conditions for financial support provided for in § 24 of this Act.
§ 26. Approval of proposed agreement by shareholders
(1) When the Financial Supervision Authority has authorised the consolidation group financial support agreement, the parent undertaking of the consolidation group shall submit the proposed agreement for approval to the shareholders of every consolidation group entity that proposes to enter into the agreement.
(2) A consolidation group financial support agreement shall be valid in respect of a consolidation group entity only if its shareholders have authorised the management board or supervisory board of that consolidation group entity to make a decision that the consolidation group entity shall provide or receive financial support in accordance with the terms of the agreement and in accordance with the conditions provided for in this Division and that shareholder authorisation has not been revoked.
(3) The management board of the consolidation group entity that is party to an agreement shall report each year to the shareholders on the performance of the agreement, and on the implementation of any decision taken pursuant to the agreement.
§ 27. Conditions for consolidation group financial support
(1) The decision to provide consolidation group financial support in accordance with the agreement shall be taken by the management board of the consolidation group entity providing financial support. That decision shall be reasoned and shall indicate the objective of the proposed financial support and the compliance of the provision of the financial support with the conditions provided for in subsection (3) of this section.
(2) The decision to accept consolidation group financial support in accordance with the agreement shall be taken by the management board of the consolidation group entity receiving financial support.
(3) Financial support by a consolidation group entity established in Estonia that is party to the consolidation group financial support agreement authorised by the Financial Supervision Authority may only be provided if all the following conditions are met:
1) there is a reasonable prospect that the support provided significantly redresses the financial difficulties of the consolidation group entity receiving the support;
2) the provision of financial support has the objective of preserving or restoring the financial stability of the consolidation group as a whole or any of the entities of the consolidation group and is in the interests of the consolidation group entity providing the support;
3) the financial support is provided on terms of the financial support agreement and compensation for the agreement and in accordance with subsection 24 (4) of this Act;
4) there is a reasonable prospect, on the basis of the information available to the management board of the consolidation group entity providing financial support at the time when the decision to grant financial support is taken, that the consideration or any other form of compensation for the support will be paid and, if the support is given in the form of a loan, that the loan will be reimbursed by the consolidation group entity receiving the support;
5) the provision of the financial support does not jeopardise the liquidity or solvency of the consolidation group entity providing the support;
6) the provision of the financial support does not create a threat to financial stability, in particular in Estonia;
7) the consolidation group entity providing the support complies at the time the support is provided with the requirements of the Credit Institutions Act and other legislation relating to capital or liquidity, including with the additional capital and liquidity requirements established by the Financial Supervision Authority under subsections 104 (2) and (4) of the Credit Institutions Act, and the provision of the financial support shall not cause the consolidation group entity to infringe those requirements, unless authorised by the Financial Supervision Authority;
8) the consolidation group entity providing the support complies at the time when the support is provided with the requirements for concentration of exposures provided for in §§ 82, 822 and 84 of the Credit Institutions Act and with limits to large exposures provided for Regulation (EU) No 575/2013 of the European Parliament and of the Council, and the provision of the financial support shall not cause the consolidation group entity to infringe those requirements, unless authorised by the Financial Supervision Authority;
9) the provision of the financial support does not undermine the resolvability of the consolidation group entity providing the support.
(4) Before providing support and after the decision made pursuant to subsection (1) of this section, the management board of a consolidation group entity that has been established in Estonia and that intends to provide financial support shall notify:
1) the Financial Supervision Authority;
2) the financial supervision authority exercising supervision on a consolidated basis, unless this is the Financial Supervision Authority;
3) the financial supervision authority exercising supervision over the consolidation group entity receiving the financial support, unless this is the financial supervision authority specified in clause 2) of this subsection;
4) the European Banking Authority.
(5) The notification forwarded in accordance with subsection (4) of this section shall include the reasoned decision of the management board provided for in subsection (1) of this section and details of the proposed financial support, including a copy of the consolidation group financial support agreement.
(6) If the support is given in the form of a guarantee or any form of security, the condition provided for in clause (3) 4) of this section shall apply to the liability arising for the recipient of the support if the guarantee or the security is enforced.
(7) Within five business days from the date of receipt of a notification and complete information specified in subsections (4) and (5) of this section, the Financial Supervision Authority shall take a decision under which it agrees with the provision of financial support, or prohibits or restricts it if it assesses that the conditions for consolidation group financial support provided for in subsection (3) of this section have not been met.
(8) If the Financial Supervision Authority does not prohibit or restrict the financial support within the period indicated in subsection (7) of this section, or has agreed before the end of that period to that support, financial support may be provided in accordance with the terms submitted by the Financial Supervision Authority.
(9) The Financial Supervision Authority shall immediately inform the authorities specified in subsection (4) of the decision provided for in subsection (7) of this section, and, if the Financial Supervision Authority exercises supervision on a consolidated basis, it shall also inform the members of the supervisory college and of the resolution college.
(10) Where the Financial Supervision Authority exercises supervision on a consolidated basis or is responsible for the supervision of the consolidation group entity receiving support, it may within two days of the date of receipt of a notification on the decision to prohibit or restrict the financial support from the financial supervision authority of the other EEA country refer the matter to the European Banking Authority in accordance with Article 31 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council.
(11) If the financial supervision authority of the other EEA country restricts or prohibits financial support to the consolidation group entity established in Estonia and if pursuant to the provisions of clause 11 (2) 4) of this Act the consolidation group recovery plan prescribes intra-group financial support as a measure to be taken, the Financial Supervision Authority may request the financial supervision authority responsible for the supervision on a consolidated basis to initiate a reassessment of the consolidation group recovery plan pursuant to § 13 of this Act or, where a recovery plan is drawn up for the consolidation group entity on an individual basis, request the entity to submit a revised recovery plan.
Chapter 3 Resolution planning
Division 1 Resolution plan
§ 28. Preparation of resolution plan
(1) The Financial Supervision Authority shall prepare a resolution plan for each credit institution which shall provide for the options to apply the resolution tools or powers where the credit institution meets the conditions for the commencement of the resolution proceedings.
(2) Where necessary, the Financial Supervision Authority shall consult the financial supervision authorities of other EEA countries prior to the preparation of the resolution plan if significant branches of the credit institution are located in such EEA countries.
(3) If the Financial Supervision Authority is the resolution authority of the consolidation group and the parent undertaking of the consolidation group has been established in Estonia, the Financial Supervision Authority shall prepare and also maintain a resolution plan of the consolidation group. Consolidation group resolution plans shall include a plan for resolution proceedings of the consolidation group as a whole, either through resolution of the parent undertaking of the consolidation group or through break up of the consolidation group and resolution of the subsidiaries.
(4) If a credit institution established in Estonia is a subsidiary of the consolidation group and the parent undertaking of the consolidation group has been established in the other EEA country, a separate resolution plan for a subsidiary need not be prepared, unless:
1) the credit institution is subject to direct supervision by the European Central Bank pursuant to Article 6(4) of Council Regulation (EU) No 1024/2013;
2) the value of assets of the credit institution exceeds 30 billion euros;
3) the ratio of assets of the credit institution over the gross domestic product of Estonia exceeds 20 per cent, unless the value of the assets is below 5 billion euros.
(5) A credit institution or an entity that is part of the same consolidation group as the credit institution shall assist the Financial Supervision Authority, at the request of the latter, in preparing and updating the resolution plan and provide the Financial Supervision Authority with information necessary to prepare and implement the resolution plan. The Financial Supervision Authority may, inter alia, request the provision for the purposes of drawing up resolution plans the following information:
1) a detailed description of the credit institution’s organisational structure including a list of all legal persons that are part of the consolidation group;
2) identification of the direct holders and the percentage of rights, incl. rights related to voting rights, of each legal person;
3) the location, existence of authorisation, information on members of management associated with each legal person that is part of a consolidation group and jurisdiction applied to them;
4) a mapping of the credit institution’s critical functions and core business lines, including material asset holdings and liabilities relating to such functions and business lines, by reference to legal persons;
5) amounts of liabilities of the credit institution and entities that are part of the same consolidation group as the credit institution mapped by terms, securities and subordination, including a separate description of at least the amount of short-term and long-term, secured, unsecured and subordinated liabilities;
6) details of eligible liabilities of the credit institution;
7) information on the collateral pledged by the credit institution, the pledgee and the location of the collateral;
8) a description of the off balance sheet commitments of the credit institution;
9) the material hedges of the credit institution, including a mapping to legal persons;
10) identification of the major or most critical counterparties of the credit institution as well as an analysis of the impact of the insolvency of such counterparties in the credit institution’s financial situation;
11) each system on which the credit institution conducts a material number or value amount of trades, including a mapping to the credit institution’s legal persons, critical functions and core business lines;
12) each payment, clearing or settlement system of which the credit institution is directly or indirectly a member, including a mapping to the credit institution’s legal persons, critical functions and core business lines;
13) a detailed inventory and description of the key management information systems, including risk management, accounting and financial and reporting information systems used by the credit institution, and a mapping to the credit institution and legal persons that are part of the same consolidation group, critical functions and core business lines;
14) an identification of the owners of the systems specified in clause 13) of this subsection, service level agreements related thereto, and any software and systems or licenses, including a mapping to the credit institution or legal persons affiliated to the credit institution, critical functions and core business lines;
15) an identification of the legal persons that are part of the same consolidation group as the credit institution and other legal persons affiliated to the credit institution and the interconnections and interdependencies among those legal persons, including common or shared personnel, facilities and systems, capital, funding or liquidity arrangements, existing or contingent credit exposures, cross guarantee agreements, cross-collateral arrangements, cross-default provisions and cross-affiliate netting arrangements, risks transfers and back-to-back trading arrangements and service level agreements;
16) the financial supervision authority and resolution authority for each legal person specified in clause 15) of this subsection;
17) the member of the management board responsible for providing the information necessary to prepare the resolution plan of the credit institution as well as those responsible, if different, for critical functions and core business lines;
18) a description of the arrangements that the credit institution has in place to ensure that, in the event of resolution, the Financial Supervision Authority will have all the necessary information for applying the resolution tools and powers;
19) all the agreements entered into by the credit institution and legal persons affiliated to the credit institution with third parties the termination of which may be triggered by a decision to apply a resolution tool or power and an analysis whether the consequences of termination may affect the application of the resolution tool or power;
20) a description of possible liquidity sources for supporting resolution;
21) information on asset encumbrance, liquid assets, off-balance sheet activities, hedging strategies and booking practices.
(6) The Financial Supervision Authority shall review a resolution plan or a consolidation group resolution plan and, where appropriate, update it at least annually or after any material changes to the legal status or organisational structure of the credit institution or consolidation group, including of other legal persons that are part of the consolidation group, to its business or its financial position that could have a material impact on the effective application of the plan.
(7) A credit institution or parent undertaking of the consolidation group shall promptly notify the Financial Supervision Authority of any change referred to in subsection (6) of this section that may necessitate a revision or update of a resolution plan or consolidation group resolution plan.
(8) The obligation to draw up resolution plans or consolidation group resolution plans provided for in this section and the procedure for reaching a joint decision provided for in § 30 of this Act shall be suspended until the impediments to resolvability have been removed according to the assessment of the Financial Supervision Authority pursuant to the provisions of Division 2 of this Chapter or measures to remove them have been accepted by the Financial Supervision Authority.
§ 29. Requirements for resolution plan
(1) The resolution plan shall include the following information, quantified whenever appropriate and possible:
1) a summary of the key elements of the plan;
2) a summary of the material changes to the credit institution that have occurred after the latest resolution information was filed;
3) a detailed description of the different resolution strategies that could be applied according to the different possible scenarios and the applicable timescales;
4) a description of the processes for determining the value and marketability of the critical functions, core business lines and assets of the credit institution;
5) a demonstration of how critical functions and core business lines could be legally and economically separated, to the extent necessary, from other functions so as to ensure continuity upon the insolvency of the credit institution;
6) an estimation of the timeframe for executing each material aspect of the plan;
7) a description of interdependencies of consolidation group entities;
8) a description of essential operations and systems for maintaining the viability of the credit institution;
9) an explanation of options for financing the resolution, taking into account the provisions of subsection (3) of this section;
10) a detailed description of the assessment of resolvability carried out in accordance with Division 2 of this Chapter and a description of measures to remove impediments to resolvability identified as a result of the assessment;
11) a detailed description of the arrangements for ensuring that the information submitted by the credit institution at the request of the Financial Supervision Authority is up to date and at the disposal of the Financial Supervision Authority to perform the resolution functions;
12) a description of options for preserving access to payment and settlement services and other infrastructures, and an assessment of the portability of client claims or liabilities;
13) an analysis of the impact of the plan on the employees of the credit institution, including an assessment of any associated costs, and a description of envisaged procedures to consult staff during the resolution process, prescribing consultation with employees’ representative of the credit institution, where applicable;
14) a plan for communicating with the media and the public;
15) the minimum requirement for own funds and eligible liabilities required pursuant to Division 2 of Chapter 2 of this Act and a deadline to meet the minimum requirement if it is applied;
16) where applicable, the minimum requirement met by own funds and entry into bail-in agreements pursuant to Division 2 of Chapter 2 of this Act, and a deadline to meet the requirement, where applicable;
17) where available, an opinion expressed by the credit institution in relation to the resolution plan;
18) an analysis of how and when a credit institution may apply, in the conditions addressed by the plan, for the facilities of Eesti Pank, except facilities provided for in subsection (3) of this section, and identify those assets which would be expected to qualify as collateral.
(2) The consolidation group resolution plan shall:
1) provide the information provided for in subsection (1) of this section on the consolidation group and, where applicable, on subsidiaries of the consolidation group;
2) set out the resolution tools and powers to implement scenarios specified in subsection (4) of this section that can be applied to any consolidation group entities, including to entities established in third countries if the requirements provided for in Division 2 of Chapter 9 of this Act have been met;
3) analyse the extent to which the resolution tools and powers could be applied in a coordinated way to consolidation group entities located in the European Union, including tools and powers to facilitate the sale to a third party of the consolidation group as a whole, or separate activities that are delivered by different consolidation group entities or particular consolidation group entities;
4) identify any potential impediments to a coordinated resolution, and where a consolidation group includes entities incorporated in third countries, identify arrangements for cooperation and coordination with the relevant authorities of those third countries and the implications for resolution proceedings within the European Union;
5) specify measures to facilitate consolidation group resolution proceedings, including the legal and economic separation of particular functions or activities of the consolidation group;
6) identify how the consolidation group resolution tools or powers could be financed, taking into account the provisions of subsection (3) of this section, and, where the funds of the Guarantee Fund or of the resolution fund of the other EEA country would be required, set out principles for sharing responsibility for that financing between EEA countries;
7) set out any additional actions which the Financial Supervision Authority intends to take in relation to the resolution of the consolidation group;
8) describe in detail any material impediments to resolvability and, where necessary and proportionate, outline relevant actions for how those impediments could be addressed according to the provisions of § 34 of this Act.
(3) The principles for sharing responsibility for financing specified in clause (2) 6) of this section shall be set out on the basis of balanced and equitable criteria, taking into account, in particular the provisions of § 7321 of the Guarantee Fund Act and the impact on financial stability in all EEA countries concerned.
(4) The resolution plan or consolidation group resolution plan shall not assume the use of any emergency liquidity assistance of Eesti Pank or such liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms, or the use of any extraordinary public financial support, except the use of facilities of the resolution fund.
(5) In preparing the resolution plan or consolidation group resolution plan relevant scenarios, including that the event of insolvency may be idiosyncratic to a credit institution or consolidation group or may involve broader financial instability, shall be taken into consideration.
(6) Information specified in clause (1) 1) of this section shall be disclosed to the credit institution or parent undertaking of the consolidation group.
(7) The Financial Supervision Authority shall transmit the consolidation group resolution plan and any changes thereto to the resolution authorities of other relevant EEA countries.
(8) The consolidation group resolution plan shall not have a disproportionate impact on any EEA country.
§ 30. Procedure for preparation of consolidation group resolution plan
(1) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall, together with the resolution authorities of such EEA countries where the subsidiaries of the consolidation group are located and after consulting the financial supervision authorities and resolution authorities of other EEA countries insofar as significant branches of the consolidation group are located in such EEA countries and as is relevant to the significant branches, prepare the consolidation group resolution plan. Where necessary, the Financial Supervision Authority may involve in the preparation of the consolidation group resolution plan resolution authorities of the third countries in which any consolidation group entities or significant branches are located, taking into account the confidentiality requirements provided for in § 51 of this Act.
(2) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall, adhering to the confidentiality requirements, transmit the information received from the parent undertaking of the consolidation group required to prepare the resolution plan of the consolidation group entity to the relevant resolution authority and financial supervision authority specified in subsection (1) of this section.
(3) The Financial Supervision Authority shall provide the European Banking Authority with information that is relevant to the role of the European Banking Authority in relation to the planning of the resolution proceedings of the consolidation group.
(4) The Financial Supervision Authority shall not be obliged to transmit information relating to subsidiaries located in a third country without the consent of the relevant third-country financial supervision authority or resolution authority.
(5) The Financial Supervision Authority shall do everything within its power to reach a joint decision with resolution authorities of other relevant EEA countries on the consolidation group resolution plan within four months of the date of the transmission of the information specified in the subsection (2) of this section or of the date of the receipt of the corresponding information from the resolution authority of the consolidation group.
(6) The Financial Supervision Authority may address the European Banking Authority and request its assistance to the resolution authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010 of the European Parliament and of the Council. In the absence of a joint decision prior to the end of the four-month period, the Financial Supervision Authority may also address the European Banking Authority in the case of disagreements in accordance with Article 19 of the same Regulation. The European Banking Authority shall not be addressed after the end of the period provided for in subsection (5) of this section or after a joint decision has been reached.
(7) If the Financial Supervision Authority is the resolution authority of the consolidation group and in the absence of a joint decision within the period specified in subsection (5) of this section, the Financial Supervision Authority shall make its own decision on the consolidation group resolution plan, taking into account the views and reservations of the resolution authorities of other relevant EEA countries. The Financial Supervision Authority shall notify the decision to the parent undertaking and resolution authorities of other relevant EEA countries. The provisions of the first sentence of this subsection do not preclude the adoption of a joint decision on the consolidation group resolution plan with the resolution authorities with which the Financial Supervision Authority has no disagreements.
(8) If the subsidiary that is part of a consolidation group has been established in Estonia and in the absence of a joint decision within the period specified in subsection (5) of this section, the Financial Supervision Authority shall make the decision under which a separate resolution plan of the subsidiary is drawn up and maintained. The Financial Supervision Authority shall take into account the views and reservations of the resolution authorities of other relevant EEA countries and set out the reasons for disagreement with the proposed consolidation group resolution plan in its decision. The Financial Supervision Authority shall notify its decision to the other members of the resolution college.
(9) If the resolution authority of the other EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision within the period specified in subsection (5) of this section, the Financial Supervision Authority shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision of the European Banking Authority, unless the resolution authority of the other relevant EEA country assesses that the subject matter under disagreement may have an impact on the state budget of the country or lead to budget commitments. In the absence of the decision of the European Banking Authority within one month of the date of notification of the resolution authority of the other EEA country, the Financial Supervision Authority shall take its decision.
(10) The joint decision provided for in this section or the decisions taken by the Financial Supervision Authority in the absence of a joint decision shall be recognised as conclusive with regard to resolution authorities of other EEA countries.
(11) Where a resolution authority of the other EEA country notifies the Financial Supervision Authority that the joint decision taken pursuant to subsections (7) and (9) of this section has an impact on the state budget of the country or may lead to budget commitments, the Financial Supervision Authority as the resolution authority of the consolidation group shall initiate a reassessment of the consolidation group resolution plan, including, inter alia, the minimum requirement for own funds and eligible liabilities.
§ 31. Preparation of resolution plan in simplified form
(1) The Financial Supervision Authority may take a decision to prepare the resolution plan in a simplified form (hereinafter simplified resolution plan), taking into account the impact that the insolvency of a credit institution or consolidation group and subsequent winding up and liquidation thereof under bankruptcy proceedings could have on financial markets, on other credit institutions and investment firms, on funding conditions, or on the wider economy.
(2) In taking the decision specified in subsection (1) of this section, the Financial Supervision Authority shall take account of the nature of business of the credit institution or consolidation group, its shareholding structure, its legal form, its risk profile, size and legal status, interconnectedness of the credit institution to other credit institutions or investment firms or to the financial system in general, the scope and the complexity of its activities, its membership of an institutional protection scheme and whether the credit institution provides any investment services.
(3) In preparing the simplified resolution plan:
1) the requirements for the contents of a resolution plan specified in § 29 of this Act may be reduced or partially not applied;
2) the requirement for updating the resolution plan provided for in subsection 28 (6) of this Act may be partially not applied;
3) the level of detail for the assessment of resolvability specified in Division 2 of this Chapter may be lowered.
(4) The Financial Supervision Authority may at any time prepare the full resolution plan.
(5) The preparation of the simplified resolution plan shall not affect the powers of the Financial Supervision Authority to take a crisis prevention measure or a crisis management measure.
(6) If necessary, the Financial Supervision Authority shall consult Eesti Pank before taking a decision specified in subsection (1) of this section.
(7) The Financial Supervision Authority shall notify the European Banking Authority of the decision specified in subsection (1) of this section.
(8) A simplified resolution plan may not be prepared for credit institutions specified in subsection 28 (4) of this Act.
§ 32. Failure to prepare resolution plan
(1) The Financial Supervision Authority may take a decision to not prepare the resolution plan if the credit institution is directly affiliated to the parent undertaking of a consolidation group or an entity organising central financing in the consolidation group and it is wholly or partially exempted from prudential requirements in accordance with Article 10 of Regulation (EU) No 575/2013 of the European Parliament and of the Council.
(2) If the Financial Supervision Authority does not prepare the resolution plan pursuant to the provisions of subsection (1) of this section, it shall prepare the resolution plan on a consolidated basis with regard to the central entity specified in subsection (1) of this section and credit institutions affiliated to it within the meaning of Article 10 of Regulation (EU) No 575/2013 of the European Parliament and of the Council.
(3) The Financial Supervision Authority shall notify the European Banking Authority of the decision specified in subsection (1) of this section.
Division 2 Resolvability
§ 33. Assessment of resolvability for credit institutions and consolidation groups
(1) If the credit institution is not part of a consolidation group, where necessary, the Financial Supervision Authority, after it has consulted the resolution authorities of the EEA countries in which significant branches are located, assesses the extent to which a credit institution is resolvable without the assumption of the receipt of any emergency liquidity assistance of Eesti Pank or such liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms, or the receipt of any extraordinary public support, except the receipt of facilities of the resolution fund, in the resolution proceedings.
(2) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall, together with the resolution authorities of such EEA countries where the subsidiaries of the consolidation group are located, assess the resolvability of the consolidation group in accordance with the provisions of subsection (1) of this section, and consult the resolution authorities of other EEA countries in which significant branches are located insofar as is relevant to the branches, and the financial supervision authorities of such EEA countries. The assessment of resolvability of the consolidation group shall be adopted as a part of the procedure of the resolution college provided for in Chapter 9 of this Act.
(3) The Financial Supervision Authority shall assess resolvability at the same time as preparing and updating of the resolution plan of a credit institution or consolidation group.
(4) In drawing up the assessment of resolvability of a credit institution or consolidation group, as a minimum, the following matters shall be considered;
1) the ability of the credit institution to map core business lines and critical functions to legal persons;
2) the alignment of legal and organisational structures of the credit institution or consolidation group with core business lines and critical functions;
3) the existence of valid arrangements to provide for essential staff, functioning of infrastructure, funding, liquidity and capital in the credit institution or consolidation group to support and maintain the core business lines and the critical functions;
4) full enforceability of the service agreements that the credit institution maintains in the event of resolution proceedings of the credit institution;
5) the adequacy of the governance structure of the credit institution for managing and ensuring compliance with the credit institution’s internal policies with respect to its service agreements;
6) the existence of the process in the credit institution for transitioning the services provided under service agreements to third parties in the event of the separation of critical functions or of core business lines;
7) effective contingency plans and measures to ensure continuity in access to payment and settlement systems;
8) the adequacy of the management information systems to ensure that the Financial Supervision Authority is able to gather accurate and complete information regarding the core business lines and critical functions so as to facilitate rapid decision making;
9) the capacity of the management information systems to provide the information essential for the effective resolution of the credit institution at all times;
10) the extent to which the credit institution has tested its management information systems under stress scenarios as defined by the Financial Supervision Authority;
11) the ability of the credit institution to ensure the continuity of its management information systems both for the affected credit institution and the new credit institution in the case that the critical functions and core business lines are separated from the rest of the functions and business lines;
12) adequate processes of the credit institution required to provide the Financial Supervision Authority with the information necessary to identify depositors and the amounts covered pursuant to the Guarantee Fund Act;
13) where the consolidation group uses intra-group guarantees, the description that those guarantees are provided at market conditions and the extent to which the risk management systems concerning those guarantees are robust;
14) where the consolidation group engages in back-to-back transactions, the description of the extent to which those transactions are performed at market conditions and the risk management systems concerning those transactions practices are robust;
15) the extent to which the use of intra-group guarantees or back-to-back booking transactions increases contagion across the consolidation group;
16) the extent to which the legal structure of the consolidation group inhibits the application of the resolution tools and powers as a result of the number of consolidation group entities, the complexity of the consolidation group structure or the difficulty in aligning business lines to consolidation group entities;
17) the amount and type of eligible liabilities of the credit institution;
18) where the assessment involves a mixed-activity holding company, whether the resolution of credit institutions, investment firms or financial institutions of the consolidation group could have a negative impact on the non-financial part of the consolidation group;
19) the existence and robustness of service level agreements;
20) whether third-country authorities have the resolution tools and powers necessary to support resolution tools and powers by the Financial Supervision Authority, and the scope for coordinated action between the Financial Supervision Authority and third-country authorities;
21) the feasibility of using resolution tools and powers in such a way which meets the resolution objectives, given the tools and powers available and the credit institution’s structure;
22) whether the consolidation group structure allows the Financial Supervision Authority to conduct resolution proceedings of or wind up the whole consolidation group or one or more consolidation group entities without causing a significant direct or indirect adverse effect on the financial system, market confidence or the economy and with a view to maximising the value of the consolidation group as a whole;
23) the arrangements and means through which resolution could be facilitated in the cases of consolidation groups that have subsidiaries established in different countries;
24) the credibility of using resolution tools and powers in such a way which meets the resolution objectives, given possible impacts on creditors, counterparties, clients and employees and possible tools and powers that third-country authorities may take;
25) the extent to which the impact of the credit institution’s resolution on the financial system and on the financial market’s confidence can be adequately evaluated;
26) whether the resolution proceedings of the credit institution have a significant direct or indirect adverse effect on the financial system, market confidence or the economy;
27) how contagion to other credit institutions or investment firms or to the financial markets could be contained through the application of the resolution tools and powers;
28) whether the resolution proceedings of the credit institution could have a significant effect on the operation of payment and settlement systems.
(5) A credit institution or consolidation group shall be deemed to be resolvable if the Financial Supervision Authority is satisfied that:
1) it is possible and feasible to wind up and liquidate the credit institution pursuant to the procedure provided for in Chapter 11 of the Credit Institutions Act and in the Bankruptcy Act or it is possible and feasible to wind up and liquidate the consolidation group entities pursuant to the procedure prescribed in the normal insolvency proceedings of other EEA countries, or
2) it is possible to apply resolution tools or powers to the credit institution or consolidation group in the resolution proceedings which ensure the continuity of critical functions carried out by the credit institution and avoid to the maximum extent possible any significant negative effects on the financial system, including in circumstances of broader financial instability or system-wide events, of Estonia, other EEA countries or the European Union.
(6) The Financial Supervision Authority shall promptly notify the European Banking Authority whenever it assesses that the credit institution or consolidation group is not resolvable.
(7) The assessment of resolvability of the consolidation group shall be taken into consideration in the decisions of the resolution college provided for in Chapter 9 of this Act.
§ 34. Addressing and removing impediments to resolvability
(1) If in the assessment of resolvability carried out for a credit institution it is determined that there are substantive impediments to the resolution proceedings of that credit institution, the Financial Supervision Authority shall notify thereof in writing the credit institution and the resolution authorities of the EEA countries in which significant branches of the credit institution are located.
(2) Within four months of the date of receipt of a notification specified in subsection (1) of this section, the credit institution shall propose to the Financial Supervision Authority possible measures to address or remove the substantive impediments identified in the notification. The Financial Supervision Authority shall assess whether the proposed measures reduce or remove the impediments in question.
(3) Where the Financial Supervision Authority assesses that the measures proposed by a credit institution do not effectively reduce or remove the impediments identified, it shall require the credit institution to take other measures that may achieve the resolvability. In its assessment the Financial Supervision Authority shall take into account the threat to financial stability of those impediments to resolvability and the effect of the measures on the business of the credit institution, its stability and its ability to contribute to the economy.
(4) Pursuant to the provisions of subsection (3) of this section, the Financial Supervision Authority may:
1) impose specific or regular additional information requirements on the credit institution;
2) require the credit institution to divest specific assets;
3) require the credit institution to limit or cease any existing or proposed activities;
4) require the credit institution to limit its maximum individual and aggregate exposures;
5) restrict or prevent the development of new or existing activities or sale of new or existing products;
6) require changes to legal or organisational structures of the credit institution or any consolidation group entity, either directly or indirectly under its control, so as to reduce complexity in order to ensure that critical functions may be legally and operationally separated from other functions through the application of the resolution tools or powers;
7) require a credit institution or a parent undertaking to set up a parent financial holding company in Estonia or elsewhere in the European Union;
8) require a credit institution and entity that is part of the same consolidation group as the credit institution to issue eligible liabilities to meet the requirements provided for in Division 2 of Chapter 2 of this Act;
9) require a credit institution or entity that is part of the same consolidation group as the credit institution to take other steps to meet the minimum requirement for own funds and eligible liabilities specified in Division 2 of Chapter 2 of this Act, including in particular to attempt to renegotiate any eligible liability, additional Tier 1 instrument or Tier 2 instrument it has issued, with a view to ensuring that any decision of the Financial Supervision Authority to write down or convert that liability or instrument would be effected under the law of the EEA country governing that liability or instrument;
10) where a credit institution is the subsidiary of a mixed-activity holding company, require that the mixed-activity holding company set up a separate financial holding company to control the credit institution, if necessary in order to facilitate the resolution proceedings of the credit institution or to avoid an adverse effect arising from the application of the resolution tools and powers provided for in this Act on the non-financial part of the consolidation group;
11) require the credit institution to revise any intragroup financing agreements or review the absence thereof, or draw up service agreements, whether intra-group or with third parties, to cover the provision of critical functions.
(5) The Financial Supervision Authority shall notify the credit institution of the assessment specified in subsection (3) of this section and demonstrate the deficiencies of the measures proposed by the credit institution and the appropriateness of alternative measures in removing the impediments to resolution proceedings. The credit institution shall submit within one month of the date of receipt of the assessment of the Financial Supervision Authority a plan to comply with the alternative measures.
(6) Before notifying the credit institution of its assessment, the Financial Supervision Authority shall consult, if appropriate, Eesti Pank and shall evaluate the potential effect of those measures on the credit institution, on the internal market for financial services, on the financial stability in other EEA countries and the European Union as a whole.
§ 35. Addressing and removing impediments to resolvability in case of consolidation group
(1) If the Financial Supervision Authority is the resolution authority of the consolidation group and it is determined that there are substantive impediments to the resolution proceedings of that consolidation group on the basis of the assessment specified in § 34 of this Act, the Financial Supervision Authority shall take all reasonable steps to reach a joint decision with resolution authorities of the EEA countries in which subsidiaries of the consolidation group are located on the application of measures provided for in subsection 34 (4) of this Act in relation to all credit institutions that are part of the consolidation group. Prior to taking a joint decision, the Financial Supervision Authority shall consult the supervisory college of the consolidation group and the resolution authorities of the EEA countries in which significant branches are located insofar as is relevant to the significant branch.
(2) The Financial Supervision Authority, in cooperation with the European Banking Authority in accordance with Article 25(1) of Regulation (EU) No 1093/2010 of the European Parliament and of the Council and after consulting the financial supervision authorities, shall prepare a report that analyses the substantive impediments to the effective application of the resolution tools and powers in relation to the consolidation group. The report shall consider the impact on the credit institution’s business model and recommend any proportionate and targeted measures that are decided to be applied pursuant to subsection (1) of this section or that, in the view of the Financial Supervision Authority, are necessary or appropriate to remove those impediments.
(3) The Financial Supervision Authority shall forward the report prepared pursuant to subsection (2) of this section to the parent undertaking of the consolidation group and resolution authorities of the EEA countries in which subsidiaries that are part of the consolidation group and significant branches are located.
(4) Within four months of the date of receipt of the report specified in subsection (3) of this section, the parent undertaking of the consolidation group may submit observations and propose to the Financial Supervision Authority alternative measures to remedy the impediments identified in the report. The Financial Supervision Authority shall communicate any measure proposed by the parent undertaking to the European Banking Authority and the resolution authorities of the EEA countries in which subsidiaries that are part of the consolidation group and significant branches are located insofar as is relevant to the significant branch.
(5) Within four months of submission of any observations by the parent undertaking specified in subsection (4) of this section or at the expiry of the four-month period provided for in subsection (4), whichever the earlier, the Financial Supervision Authority shall do everything within its power to reach a joint decision within the resolution college with resolution authorities of the EEA countries in which subsidiaries of the consolidation group are located regarding the proposal of the parent undertaking made under subsection (4) of this section and the measures required by the resolution authorities in order to address or remove the impediments. Prior to reaching a joint decision, the Financial Supervision Authority shall consult the resolution authorities of the EEA countries in which significant branches are located and financial supervision authorities.
(6) In taking a joint decision the potential impact of the measures in all the EEA countries where the consolidation group operates shall be taken into account. The joint decision shall be fully reasoned and shall be provided by the Financial Supervision Authority to the parent undertaking of the consolidation group.
(7) The Financial Supervision Authority may address the European Banking Authority and request its assistance to the resolution authorities in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1093/2010 of the European Parliament and of the Council. In the absence of a joint decision on measures specified in clauses 34 (4) 6), 7) and 10) of this Act prior to the end of the four-month period, the Financial Supervision Authority may address the European Banking Authority to settle disagreements in accordance with Article 19 of the same Regulation. The European Banking Authority shall not be addressed within the terms provided for in subsection (5) of this section or after a joint decision has been reached.
(8) If the Financial Supervision Authority is the resolution authority of the consolidation group and in the absence of a joint decision within the periods provided for in subsection (5) of this section, the Financial Supervision Authority shall make its own decision on the appropriate measures provided for in subsection 34 (4) of this Act to be taken at the consolidation group level. The decision of the Financial Supervision Authority shall be fully reasoned and shall take into account the views and reservations of other relevant resolution authorities. The decision shall be provided to the parent undertaking of the consolidation group by the Financial Supervision Authority.
(9) In the absence of a joint decision within the periods provided for in subsection (5) of this section, the Financial Supervision Authority shall, where the subsidiary of the consolidation group is located in Estonia, make its own decision on the appropriate measures provided for in subsection 34 (4) of this Act to be taken in relation to the subsidiary.
(10) If the resolution authority of the other EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision in accordance with the provisions of subsection (7) of this section within the period specified in subsection (5) of this section, the Financial Supervision Authority shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision received. In the absence of the decision of the European Banking Authority within one month of the date of the receipt of the notification, the Financial Supervision Authority shall take its decision.
(11) The joint decision provided for in this section and the decisions taken by the Financial Supervision Authority in the absence of a joint decision shall be recognised as conclusive with regard to resolution authorities of other EEA countries.
Division 3 Early intervention
§ 36. Early intervention measures
(1) Where a credit institution infringes or is likely in the near future to infringe the requirements of Regulation (EU) No 575/2013 of the European Parliament and of the Council, or Articles 3 to 7, 14 to 17, and 24 to 26 of Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments and amending Regulation (EU) No 648/2012 (Text with EEA relevance) (OJ L 173, 12.6.2014, p. 84–148), or the requirements provided for in the Credit Institutions Act or Securities Market Act, due to a rapid deterioration of the financial situation of the credit institution in connection with deteriorating liquidity or increasing leverage ratio, conditions for credit risk or limits to large exposures, the Financial Supervision Authority may take early intervention measures.
(2) The reasons for a rapid deterioration of the financial situation of the credit institutions specified in subsection (1) of this section is assessed on the basis of previously determined triggers, which may include a situation where the difference between the credit institution’s level of own funds and the minimum required level of own funds is less than 1.5 per cent.
(3) The provisions of this section do not prevent the Financial Supervision Authority from applying measures provided for in § 104 of the Credit Institutions Act or other supervisory measures, inter alia, from establishing a moratorium on the credit institution.
(4) The Financial Supervision Authority may as an early intervention measure, by issuing a precept, within a reasonable term require:
1) the management board of the credit institution to implement the arrangements or measures set out in the recovery plan or to update such a recovery plan by a specific term when the circumstances that led to the early intervention are different from the assumptions set out in the initial recovery plan, and implement the arrangements or measures set out in the updated plan to ensure that the situation specified in subsection (1) of this section is prevented;
2) the management board of the credit institution to examine the situation, identify measures to solve any problems identified and draw up an action programme to overcome those problems and a timetable for its implementation;
3) the management board of the credit institution to promptly convene a general meeting of shareholders of the credit institution, set the firm agenda or include an issue on the agenda;
4) the management board of the credit institution to draw up a plan for negotiation on restructuring of debt, taking into account the recovery plan, where applicable;
5) changes to the credit institution’s business strategy, legal or organisational structures;
6) the provision of the necessary information, including performance of on-site inspections, and all the information to the Financial Supervision Authority necessary in order to update the resolution plan and prepare for the possible resolution proceedings of the credit institution and for valuation of the assets and liabilities of the credit institution.
(5) If the management board of the credit institution fails to convene a general meeting of shareholders in accordance with the provisions of clause (4) 3) of this section, the Financial Supervision Authority may convene the general meeting and set the agenda of the meeting.
(6) If the Financial Supervision Authority determines that the assumptions specified in subsections (1) and (2) of this section have been met, the Financial Supervision Authority may require the credit institution to contact potential acquirers in order to prepare for the resolution proceedings subject to the conditions provided for in subsection 59 (4) of this Act, taking into account the confidentiality requirements provided for in § 51 of this Act.
(7) Where there is a significant deterioration in the financial situation of a credit institution or where there are infringements of law, of administrative acts or of internal rules of the credit institution and measures specified in subsections (3)–(6) of this section are not sufficient, the Financial Supervision Authority may remove one or all of the members of the management board or supervisory board of the credit institution. A new member may only be appointed to replace a member removed from the management board or supervisory board with the consent of the Financial Supervision Authority. In such a case, the Financial Supervision Authority may decide that the appointment of a new member is not subject to the provisions of §§ 48, 56 and 57 of the Credit Institutions Act concerning managers of the credit institution.
§ 37. Temporary administrator
(1) Where the Financial Supervision Authority assesses that the removal of a member of the management board or supervisory board of the credit institution under subsection 36 (7) of this Act has not produced the desired results to remedy the situation of the credit institution, the Financial Supervision Authority may appoint one or more temporary administrators to the credit institution.
(2) Any temporary administrator may be appointed to work with the management board and supervisory board. If a temporary administrator is appointed to work with the management board, the Financial Supervision Authority shall further specify the mutual functions, powers and duties of the temporary administrator and the management board and supervisory board, inter alia, any requirements for the management body of the credit institution to consult or to obtain the consent of the temporary administrator prior to taking specific decisions or actions.
(3) The Financial Supervision Authority shall determine the powers, role and functions of the temporary administrator at the time of the appointment of the temporary administrator, specifying the limits set to the temporary administrator.
(4) A temporary administrator may exercise some or all of the powers of a member of the management board under the articles of association of the credit institution and under law, including the administrative functions of the management body. The functions of the temporary administrator may include ascertaining the financial position of the credit institution, managing the business or part of the business of the credit institution with a view to preserving or restoring the financial position of the credit institution and taking measures to restore the sound and prudent management of the business of the credit institution.
(5) A temporary administrator shall have the knowledge, skills, experience, impeccable professional and business reputation and education necessary to manage a credit institution and a temporary administrator shall avoid any conflict of interests and may not enter into transactions causing a conflict of interests. The provisions of subsection 112 (6) and subsections 113 (1), (2) and (5)–(7) of the Credit Institutions Act concerning the moratorium administrator shall apply to the appointment and activities of the temporary administrator.
(6) The Financial Supervision Authority may impose an obligation on the temporary administrator to obtain the consent of the Financial Supervision Authority prior to the exercise of some of the powers, including the disposal of the assets of the credit institution, or the performance of other acts.
(7) A temporary administrator is required to draw up reports on the financial position of the credit institution and on the acts performed in the course of its appointment, at intervals set by the Financial Supervision Authority and at the end of his or her mandate.
(8) A temporary administrator shall be appointed for up to one year. That period may be exceptionally renewed if the assumptions for appointing the temporary administrator continue to be met, and when taking such a decision the Financial Supervision Authority shall justify it to shareholders.
(9) A temporary administrator may convene a general meeting of the shareholders of the credit institution and set the agenda of the general meeting only with the consent of the Financial Supervision Authority.
(10) The appointment of a temporary administrator shall not prejudice the rights of the shareholders of the credit institution in accordance with the Commercial Code. The provisions of § 2892 of the Commercial Code shall not apply to claims arising from the activities of a temporary administrator.
(11) A temporary administrator shall receive remuneration corresponding to his or her functions and qualifications from the funds of the credit institution under resolution proceedings. The Financial Supervision Authority shall determine the amount of the remuneration of the temporary administrator.
(12) A temporary administrator shall only be liable for the damage wrongfully caused through violation of the obligations of the temporary administrator. The limitation period for a claim filed against a temporary administrator is three years of the date of termination of the activities of the temporary administrator.
(13) The Financial Supervision Authority may remove a temporary administrator at any time and for any reason. The Financial Supervision Authority may also vary the terms of appointment of a temporary administrator at any time.
(14) The powers and duties arising from a contract entered into with a temporary administrator shall terminate pursuant to the contract. The provisions of the Law of Obligations Act concerning cancellation of an authorisation agreement apply to cancellation of the contract of a temporary administrator.
§ 38. Coordination of application of early intervention measures in relation to consolidation group
(1) Where the conditions for the early intervention have been met in accordance with this Division and where the Financial Supervision Authority exercises supervision on a consolidated basis, it shall notify the European Banking Authority of the intention to apply early intervention measures or to appoint a temporary administrator and consult the other financial supervision authorities within the supervisory college.
(2) Where the Financial Supervision Authority exercises supervision over a subsidiary that is part of the consolidation group, it shall notify the European Banking Authority of the intention to apply the respective measures or to appoint a temporary administrator and consult the financial supervision authority exercising supervision on a consolidated basis.
(3) Following that consultation the Financial Supervision Authority shall decide whether and when to apply early intervention measures. The Financial Supervision Authority shall notify the decision to the other financial supervision authorities within the supervisory college and the European Banking Authority.
(4) Where the financial supervision authority of the other EEA country has notified the Financial Supervision Authority of the proposed early intervention measures or the appointment of a temporary administrator and where the Financial Supervision Authority exercises supervision on a consolidation basis, it may within three days of the date of receipt of the corresponding notification from the financial supervision authority of the other EEA country forward its assessment to the financial supervision authority on the impact of the application of the measures on the consolidation group or on consolidation group entities.
(5) Where the financial supervision authority of the other EEA country exercising supervision on a consolidated basis has provided its assessment to the Financial Supervision Authority in accordance with the provisions of subsection (4) of this section, the Financial Supervision Authority shall give due consideration to the assessment in taking its decision.
(6) Where early intervention measures are intended to be applied or a temporary administrator is intended to be appointed to several entities that are part of the same consolidation group, the Financial Supervision Authority shall consider together with the other relevant financial supervision authorities prior to the application of the respective measures whether it is more appropriate to appoint the same temporary administrator for all the consolidation group entities or to harmonise the proposed early intervention measures in order to facilitate the restoration of the financial position of the credit institution or consolidation group. The Financial Supervision Authority shall do everything within its power to reach a joint decision with financial supervision authorities of other relevant EEA countries within five days from the date of submission of the notification specified in subsection (1) of this section.
(7) If the Financial Supervision Authority exercises supervision on a consolidated basis, it shall draw up a joint decision that shall be reasoned and provide it to the parent undertaking of the consolidation group.
(8) The Financial Supervision Authority may submit a request to the European Banking Authority in accordance with Article 31 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council to receive assistance in reaching the agreement specified in subsection (6) of this section.
(9) In the absence of a joint decision within the period specified in subsection (6) of this section, the Financial Supervision Authority, if it exercises supervision on a consolidated basis or supervision over the subsidiary that is part of the consolidation group, takes an individual decision on the appointment of a temporary administrator or on the application of any other early intervention measure.
(10) The decision of the Financial Supervision Authority provided for in subsection (3) or (9) of this section shall be fully reasoned and shall take into account the views and reservations of the other relevant financial supervision authorities. The decision shall be provided by the Financial Supervision Authority to the parent undertaking or to the subsidiary of the consolidation group.
(11) In the absence of a joint decision or where the Financial Supervision Authority does not agree with the proposal of the financial supervision authority of the other EEA country within the supervisory college to apply the early intervention measure provided for in clause 36 (4) 1), 4) or 5) of this Act, before the end of the period provided for in subsection (6) of this section the Financial Supervision Authority may address the European Banking Authority. The European Banking Authority shall not be addressed after the end of the period provided for in subsection (6) of this section or after a joint decision has been reached.
(12) If the financial supervision authority of the other relevant EEA country has notified the European Banking Authority of disagreements on the achievement of a joint decision in accordance with the provisions of subsection (11) of this section, the Financial Supervision Authority shall defer its decision and await the decision of the European Banking Authority and shall take its decision in accordance with the decision of European Banking Authority. In the absence of the decision by the European Banking Authority within three days of the date of receipt of the notification, the Financial Supervision Authority shall take its decision.
Chapter 4 Resolution proceedings
Division 1 General requirements for resolution proceedings
§ 39. Conditions for commencement of resolution proceedings
(1) The Financial Supervision Authority may apply resolution tools or powers to a credit institution only if all of the following conditions are met:
1) the Financial Supervision Authority assesses that based on the information received in the course of the supervision it is likely that the credit institution has become or may become insolvent in the future;
2) having regard to the time criterion and other relevant circumstances, no other tool or power, including private sector measures and supervisory action, would prevent the insolvency of the credit institution within a reasonable timeframe;
3) a resolution tool or power is necessary in the public interest.
(2) The insolvency of a credit institution is likely to occur in one or more of the following circumstances:
1) the credit institution infringes or will, in the near future, obviously infringe the requirements serving as a basis for the grant of the authorisation, in particular because the credit institution has incurred or is likely to incur losses that will significantly decrease its own funds;
2) the assets of the credit institution are or will, in the near future, obviously be less than its liabilities;
3) the credit institution is or will, in the near future, obviously be unable to pay its liabilities as they fall due;
4) the credit institution applies for extraordinary public financial support.
(3) That specified in clause (2) 4) of this section does not refer to a situation where State guarantee is requested in connection with:
1) liquidity loan granted by Eesti Pank;
2) debt obligations issued by a new credit institution;
3) increase in the share capital or acquisition of capital instruments at market conditions, where none of the conditions specified in clauses (2) 1)–3) of this section and clause 56 (1) 5) of this Act are present at the time the extraordinary public financial support is granted.
(4) The application of a resolution tool or power shall be treated as in the public interest under clause (1) 3) of this section if it contributes to the achievement of and is proportionate to one or more of the resolution objectives and winding up and liquidation of the credit institution under bankruptcy proceedings would not meet those resolution objectives.
(5) The Financial Supervision Authority may apply resolution tools or powers to a subsidiary financial institution of the credit institution only if all of the conditions provided for in subsection (1) of this section are met with regard to both the financial institution and with regard to the parent undertaking subject to supervision on a consolidated basis.
(6) The Financial Supervision Authority may apply resolution tools or powers to a financial holding company, mixed financial holding company and mixed-activity holding company only if all of the conditions provided for in subsection (1) of this section are met with regard to both the financial holding company, mixed financial holding company or mixed-activity holding company and with regard to the subsidiary credit institution thereof. Where the credit institution has been established in a third country, the competent authority of that country must have determined that the resolution objectives have been met under the law of that country.
(7) Where the mixed-activity holding company has a direct or indirect holding in the subsidiary credit institution through a financial holding company as an intermediary, the Financial Supervision Authority shall apply resolution tools or powers for the purposes of consolidation group resolution to the financial holding company, and shall not apply resolution tools or powers to the mixed-activity holding company.
(8) Where the financial holding company, mixed financial holding company and mixed-activity holding company does not meet the conditions for the commencement of the resolution proceedings provided for in subsection (1) of this section, the Financial Supervision Authority may still apply resolution tools or powers when the subsidiary credit institution thereof complies with the provisions of subsections (1), (2) and (4) of this section and their financial position threatens the credit institution or the consolidation group as a whole.
(9) When assessing in accordance with the provisions of subsection (6) or (8) of this section whether the resolution objectives are met in respect of the subsidiary credit institution of the financial holding company, mixed financial holding company and mixed-activity holding company, the Financial Supervision Authority may agree with the resolution authority of the foreign country where the relevant financial holding company, mixed financial holding company or mixed-activity holding company has been established that they disregard any options for intra-group capital or loss transfers, including the possible write down or conversion of capital instruments.
§ 40. General principles governing resolution proceedings
(1) The Financial Supervision Authority shall apply the resolution tools or powers in accordance with the following principles:
1) the shareholders of the credit institution under resolution proceedings bear first losses;
2) creditors of the credit institution under resolution proceedings bear losses after the shareholders in accordance with the order of priority of their claims under bankruptcy proceedings, save as provided otherwise in this Act;
3) members of the management board and supervisory board of the credit institution under resolution proceedings are removed and replaced, except in the case when the retention of all or some of the members of the management board or supervisory board is considered to be necessary for the better achievement of the resolution objectives;
4) members of the management board and supervisory board of the credit institution under resolution proceedings shall provide all assistance for the achievement of the resolution objectives;
5) natural and legal persons are responsible for causing the insolvency of the credit institution; if the insolvency was caused by a grave error in management, the temporary administrator is required to file a claim for compensation for damage against the person liable for the error unless such claim has been filed already;
6) except where otherwise provided for in this Act, creditors of the same class are treated in an equitable manner;
7) no creditor shall incur greater losses than would have been incurred if the credit institution or subsidiary financial institution thereof or the financial holding company, mixed financial holding company or mixed-activity holding company had been wound up and liquidated under bankruptcy proceedings and in accordance with the provisions of § 80 of this Act;
8) covered deposits and deposits subject to compensation are fully protected;
9) resolution tools or powers are applied in accordance with the safeguards provided for in this Act.
(2) Where a credit institution is part of a consolidation group, the Financial Supervision Authority shall apply resolution tools and powers in a way that minimises the negative impact on other consolidation group entities and on the consolidation group as a whole and minimises the effects on financial stability in Estonia and other EEA countries, in particular, in the countries where other consolidation group entities operate. When applying the resolution tools or powers, the Financial Supervision Authority shall also take into account the State aid legislation of the European Union.
(3) Where resolution tools specified in clauses 55 (1) 1)–3) of this Act are applied to a credit institution or entity that is part of the same consolidation group as the credit institution, provisions of subsections 112 (1) and (3) of the Employment Contracts Act are not applied to employees of the credit institution or entity that is part of the same consolidation group as the credit institution.
(4) When applying the resolution tools or powers, the Financial Supervision Authority shall inform and consult employee representatives of the relevant entity, where appropriate. The Financial Supervision Authority shall apply resolution tools and exercise resolution powers without prejudice to the representation of employees in management bodies of companies.
Division 2 Powers and obligations of Financial Supervision Authority in resolution proceedings
§ 41. Decision on commencement of resolution proceedings
(1) The Financial Supervision Authority may take a decision to commence resolution proceedings if a credit institution or an entity that is part of the same consolidation group as the credit institution meets the conditions for the commencement of the resolution proceedings. The provisional valuation of the financial situation of the a credit institution or an entity that is part of the same consolidation group as the credit institution carried out by the Financial Supervision Inspection or a valuation carried out by an independent expert in accordance with the provisions of Chapter 5 of this Act shall serve as a basis for the decision on the commencement of the resolution proceedings.
(2) The decision of the Financial Supervision Authority on the commencement of the resolution proceedings shall be reasoned and prescribe the following:
1) resolution tools and powers that are intended to be applied;
2) the date of the commencement of the resolution proceedings and the time of the commencement of the application of resolution tools and powers;
3) the appointment of a special manager, where appropriate;
4) the procedure for valuation of the financial situation provided for in Chapter 5 of this Act if the decision specified in subsection (1) of this section is based on the results of the provisional valuation of the financial situation carried out by the Financial Supervision Authority;
5) conditions for the commencement of the resolution proceedings in accordance with § 39 of this Act;
6) the procedure for the continuity of critical functions in accordance with § 46 of this Act;
7) the filing of a petition specified in clause 18 (2) 9) of the Financial Supervision Authority Act, where appropriate;
8) other relevant important information.
(3) The Financial Supervision Authority shall not decide on the commencement of the resolution proceedings and the additional application of a resolution tool or power specified in § 55 of this Act in the resolution proceedings without hearing the position of Eesti Pank.
(4) Where resolution tools or powers need to be applied in respect of assets located in a third country or shares, other instruments of ownership, proprietary rights or obligations governed by the law of a third country and it is likely that the decision of the Financial Supervision Authority cannot be enforced due to objective circumstances, the Financial Supervision Authority may adopt the decision on the commencement of the resolution proceedings with a secondary condition.
(5) The decision of the Financial Supervision Authority on the commencement of the resolution proceedings shall be valid from the publication thereof pursuant to the procedure prescribed in subsection 50 (2) of this Act and it shall be immediately enforceable. The enforcement of the decision cannot be suspended or postponed, and the manner or procedure for the application of resolution tools or powers and the organisation of the operation of critical functions cannot be changed.
§ 42. Authority of Financial Supervision Authority in resolution proceedings
(1) The Financial Supervision Authority has the power to take decisions on the administration and disposal of shares, assets and liabilities of the a credit institution under resolution proceedings or an entity that is part of the same consolidation group as the credit institution, inter alia, to require, by a precept:
1) the write down or cancellation of shares or other capital instruments;
2) the transfer or sale of shares or all of the assets, rights and liabilities;
3) the application of a bail-in tool;
4) the amendment or alteration of the maturity of debt instruments and other eligible liabilities issued or the amendment of the amount of interest payable under such instruments and other eligible liabilities or the amendment of the maturity of liabilities on which the interest becomes payable, including the suspension of payment for a temporary period, except for secured liabilities;
5) the termination of derivatives contracts to implement § 76 of this Act;
6) the revocation of the subscription rights to acquire additional shares or other instruments of ownership;
7) the issue of new shares or other capital instruments.
(2) In applying the bail-in tool provided for in clause (1) 3) of this section, the Financial Supervision Authority has the power to require that:
1) the principal amount of or outstanding amount due in respect of eligible liabilities of the credit institution under resolution proceedings be reduced up to zero;
2) the debt instruments issued by the credit institution under resolution proceedings, except for secured liabilities, be cancelled;
3) the eligible liabilities of the credit institution under resolution proceedings be converted into ordinary shares or other instruments of ownership of that credit institution or entity that is part of the same consolidation group as the credit institution or a bridge institution to which assets, rights or liabilities of the credit institution under resolution proceedings are transferred.
(3) The Financial Supervision Authority has the power to assess the acquirer of a qualifying holding without applying time-limits of proceedings provided for in § 301 of the Credit Institutions Act.
(4) Where necessary, the Financial Supervision Authority shall have the power to require competent operators of regulated securities markets to do the following on the regulated securities market:
1) to suspend or terminate trading or listing of shares or other instruments of ownership or debt instruments;
2) to list or admit to trading new shares or other instruments of ownership;
3) to relist or readmit any debt instruments which have been written down, without the requirement for the issuing of a prospectus pursuant to Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64–89).
(5) The Financial Supervision Authority shall immediately notify the commercial register, registrar of the Estonian Central Register of Securities and other relevant registers of the decision on the commencement of the resolution proceedings and, where appropriate, submit petitions for entry on the basis of the decision on the application of a resolution tool.
(6) No legal provisions stipulating the requirement to obtain a prior approval or consent of a shareholder or creditor or any other third party for a transaction or act or legal provisions concerning the obligation to submit or register a prior notice or prospectus or other similar information or document shall apply to the resolution proceedings.
§ 43. Consequences of decision on commencement of resolution proceedings
(1) Unless otherwise provided in the decision on the commencement of the resolution proceedings, the power to administer and dispose of the assets of the credit institution under resolution proceedings shall transfer to a special manager and the following shall be suspended:
1) the voting rights of shareholders of the credit institution or of holders of other instruments of ownership;
2) the authority of all or some of the members of the management bodies of the credit institution, unless a member of the management body has been removed by a decision on the commencement of the resolution proceedings;
3) the calculation of a fine for delay or a contractual penalty which increases in time on claims against the credit institution.
(2) Unless otherwise provided by the Financial Supervision Authority in the decision on the commencement of the resolution proceedings, the following obligations and rights pursuant to any contract to which a credit institution under resolution proceedings is a party shall be suspended in Estonia from the publication of a notice specified in § 50 of this Act until midnight at the end of the business day following the publication of the notice:
1) any payment or delivery obligations of the credit institution, and the payment or delivery obligations of the other party to that contract;
2) security interests of secured creditors;
3) termination rights of any party to a contract, provided that the payment and delivery obligations and the provision of collateral continue to be performed.
(3) The provisions of subsection (2) of this section shall not apply to:
1) contracts entered into with payment and settlement systems and operators thereof in accordance with Directive 98/26/EC of the European Parliament and of the Council, or contracts entered into with central counterparties and central banks;
2) deposits subject to compensation and covered deposits;
3) claims arising from investments guaranteed under Chapter 4 of the Guarantee Fund Act.
(4) Clause (2) 3) of this section also applies to the power to terminate the contract of any party to a contract with a subsidiary of a credit institution under resolution proceedings where the obligations under that contract are guaranteed or are otherwise supported by the credit institution under resolution proceedings and the termination right is based solely on the insolvency or financial position of the credit institution under resolution proceedings.
(5) A person subject to the provisions of clause (2) 3) of this section may exercise a termination right under a contract before the end of the period specified in subsection (2) of this section if that person receives a notice from the Financial Supervision Authority that the rights and liabilities covered by the contract shall not be transferred to another entity or subject to write down or conversion on the application of the bail-in tool.
(6) The Financial Supervision Authority may apply to a court for the suspension of the compulsory enforcement or of any court proceedings with respect to the assets of a credit institution under resolution proceedings if this is necessary for the efficient application of resolution tools and powers.
(7) The measures for securing an action which were applied before deciding on the appointment of a special manager remain valid if a special manager is appointed unless the court decides otherwise.
(8) The specific procedure for the suspension of contracts entered into by a credit institution under resolution proceedings may be established by the minister responsible for the area by a regulation.
§ 44. Performance of contractual obligations
(1) The fact of taking a crisis prevention measure or a crisis management measure or making a decision on the commencement of the resolution proceedings shall not under a contract entered into by a credit institution be deemed to be an enforcement event within the meaning of Directive 2002/47/EC of the European Parliament and of the Council or insolvency proceedings within the meaning of Directive 98/26/EC of the European Parliament and of the Council. The provisions of §§ 3143 and 3192 of the Law of Property Act shall not apply to the resolution proceedings.
(2) The provisions of subsection (1) of this section also apply to such contract entered into by a subsidiary of a credit institution, the obligations under which are guaranteed or otherwise supported by the parent undertaking or by any consolidation group entity, or entered into by any entity of a consolidation group which includes cross-default provisions.
(3) Where the obligations under the contract, including payment and delivery obligations, and provision of collateral, continue to be performed by a credit institution under resolution proceedings, a decision on the application of a crisis prevention measure or the commencement of the resolution proceedings or the occurrence of any event directly linked to the application thereof shall not serve as a basis for:
1) exercising any termination, suspension, modification or set-off or close out netting rights, including in relation to a contract entered into by a subsidiary, the obligations under which are guaranteed or otherwise supported by a consolidation group entity and which includes cross-default provisions;
2) obtaining possession, exercising control or enforcing any security over or affect in any other manner any property of the credit institution or the entity that is part of the same consolidation group as the credit institution in relation to a contract which includes cross-default provisions.
(4) The Financial Supervision Authority shall have the power to prohibit, by a precept, the following under a security arrangement entered into by the credit institution under resolution proceedings:
1) the transfer of assets which form a security unless that liability and benefit of the security are also transferred;
2) the transfer of a secured liability unless the benefit of the security is also transferred;
3) the transfer of the benefit of the security unless the secured liability is also transferred;
4) the modification or termination of a security arrangement through the use of ancillary powers if the effect of that modification or termination is that the liability ceases to be secured.
(5) The provisions of subsection (4) of this section also apply to covered bonds and structured finance arrangements, including to securitisations and instruments used for hedging purposes which form an integral part of the cover pool and which are secured in a way similar to the covered bonds.
(6) Where necessary in order to ensure availability of the covered deposits, the Financial Supervision Authority may require the transfer of covered deposits which are part of financial collateral arrangements, security arrangements specified in subsection (4) or (5) of this section without transferring other assets, rights or liabilities that are part of the same arrangement, and the Financial Supervision Authority may also require the transfer, modification or termination of those assets, rights or liabilities without transferring the covered deposits.
§ 45. Other restrictions on resolution proceedings
(1) A court refuses, by a ruling, to accept a bankruptcy petition if:
1) the petition has been filed by an insolvent credit institution as a debtor;
2) the bankruptcy petition of the creditor is based on a claim to which a decision of the Financial Supervision Authority on the application of a resolution tool or power applies.
(2) Where a court has accepted a bankruptcy petition specified in subsection (1) of this section prior to the application of a resolution tool or power, the court shall postpone making a decision on the commencement of the bankruptcy proceedings until the termination of the application of a resolution tool or power.
§ 46. Continuity of critical functions
(1) Where relevant, the Financial Supervision Authority shall have the power to provide for the arrangements for the continuity of critical functions of a credit institution under resolution proceedings necessary to ensure the exercise of the rights and performance of the liabilities arising from contracts entered into by the credit institution under resolution proceedings relating to any financial instrument, right, asset or liability that has been transferred.
(2) To ensure the continuity of critical functions of a credit institution under resolution proceedings, the Financial Supervision Authority shall have the power to take, inter alia, the following measures:
1) to require a credit institution under resolution proceedings or an entity that is part of the same consolidation group as the credit institution to provide any services or facilities, except funds, that are necessary to enable an acquirer to operate effectively the business transferred to it;
2) to enforce any services and facilities specified in clause 1) of this subsection of a resolution authority of the other relevant EEA country in respect of a consolidation group entity established in Estonia.
(3) The services and facilities specified in subsection (2) of this section shall be provided on the following terms:
1) where the services and facilities were provided under an agreement to the credit institution under resolution proceedings immediately before the resolution tool or power was applied and for the duration of that agreement, on the same terms;
2) where there is no agreement or where the agreement has expired, on reasonable terms.
§ 47. Appointment, powers and duties of special manager
(1) Taking into account the provisions of subsection 41 (3) of this Act, the Financial Supervision Authority may appoint a special manager or special managers by a decision on the commencement of the resolution proceedings, unless the Financial Supervision Authority has appointed a special manager in connection with the removal of members of the management body.
(2) A special manager shall have the power to represent, manage and monitor the credit institution under resolution proceedings. The special manager shall have all the powers of the shareholders and the management bodies of the credit institution.
(3) A special manager shall have the knowledge, skills, experience, education, professional qualifications and the impeccable business reputation necessary to manage a credit institution.
(4) A special manager shall have the duty to act in the best possible manner to ensure resolution and apply resolution tools or powers according to the decision of the Financial Supervision Authority.
(5) The Financial Supervision Authority shall determine the authority of a special manager, whereby the Financial Supervision Authority may require that the enforcement of decisions made by the special manager is subject to the prior consent of the Financial Supervision Authority.
(6) The Financial Supervision Authority shall promptly send an application concerning the appointment of a special manager for the purpose of making a relevant entry to the commercial register of the location of the credit institution and to the equivalent known register in the EEA country where the branch of such credit institution has been established, adding the name, personal identification code and contact information of the special manager.
(7) A special manager shall, inter alia, have the power to:
1) suspend enforcement of resolutions of the management board or supervisory board of the credit institution;
2) administer the assets of the credit institution located or registered in Estonia or a foreign country, including effect the transfer of shares or other instruments of ownership or assets, rights or liabilities to an acquirer;
3) change the shareholding structure of the credit institution;
4) increase the share capital of the credit institution, including submit a petition to the commercial register to enter the increase in the share capital in the commercial register along with documents specified in subsection 343 (1) of the Commercial Code;
5) draw up a business reorganisation plan of the credit institution;
6) effect the exchange of necessary information with the acquirer of shares or other instruments of ownership or assets, rights and liabilities, or the provision of other relevant assistance.
(8) A special manager shall be appointed for up to one year. The Financial Supervision Authority may renew that period, on an exceptional basis, if the conditions for appointment of a special manager continue to be met.
(9) The Financial Supervision Authority may remove the special manager at any time and appoint a new special manager. If the credit institution is part of a consolidation group, the Financial Supervision Authority shall consider with the resolution authorities of the other EEA country whether it is more appropriate to appoint the same special manager for the whole group.
(10) The powers and duties arising from a contract entered into with a special manager shall terminate pursuant to the contract. The provisions of the Law of Obligations Act concerning cancellation of an authorisation agreement apply to cancellation of the contract of a special manager.
(11) A special manager shall only be liable for the damage wrongfully caused to the credit institution or its shareholder or creditor through violation of the obligations of the special manager. The limitation period for a claim for compensation for damage arising from failure to perform the duties of a special manager is three years of the date when the victim became aware of the damage and the circumstances on which the liability of the special manager is based, but not more than three years of the termination of authority of the special manager.
(12) A special manager shall submit to the Financial Supervision Authority, within 30 days of appointment, a written report on the financial situation of the credit institution and acts performed by the special manager (hereinafter in this section activity report).
(13) The form of the activity report may be established by the minister responsible for the area by a regulation.
(14) A special manager is required to submit activity reports at the request of the Financial Supervision Authority, but not less frequently than once a month.
§ 48. Business reorganisation plan of credit institution
(1) The management board of a credit institution under resolution proceedings or an entity that is part of the same consolidation group as the credit institution or, where appropriate, a special manager who has been appointed as the person liable for management in accordance with the provisions of § 47 of this Act (hereinafter in this section management board) shall within one month after making the decision on the application of the bail-in tool draw up and forward to the Financial Supervision Authority a business reorganisation plan (hereinafter business reorganisation plan) of the credit institution that complies with the State aid rules of the European Union.
(2) When the bail-in tool has been applied in accordance with the provisions of clause 56 (1) 1) of this Act to more than two entities that are part of the same consolidation group, the parent undertaking of the consolidation group shall prepare the business reorganisation plan covering all of the entities in the group and shall submit it to the resolution authority of the consolidation group.
(3) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall submit the business reorganisation plan to resolution authorities of other relevant EEA countries and the European Banking Authority.
(4) In exceptional circumstances, the Financial Supervision Authority may extend the period provided for in subsection (1) of this section up to two months if it is necessary for achieving the resolution objectives. Where pursuant to the business reorganisation plan the European Commission needs to be notified of the State aid of the European Union, the Financial Supervision Authority may also extend the period provided for in subsection (1) of this section up to two months or until the deadline laid down by the State aid rules of the European Union, whichever occurs earlier.
(5) A business reorganisation plan shall describe measures necessary to restore the viability of the credit institution or entity that is part of the same consolidation group as the credit institution or to restore partial business activities within a reasonable timescale. The measures shall be based on actual assumptions and take into account the economic environment and the environment affecting the financial market where the credit institution or entity that is part of the same consolidation group as the credit institution will operate.
(6) In addition to the provisions of subsection (5) of this section, the business reorganisation plan shall include at least the following:
1) a detailed diagnosis of reasons that caused the insolvency or likely insolvency of the credit institution or entity that is part of the same consolidation group as the credit institution;
2) a timetable for the implementation of the necessary measures;
3) the impact of the plan on the employees of the credit institution or entity that is part of the same consolidation group as the credit institution.
(7) In drawing up the business reorganisation plan, the current state and future prospects of the financial markets shall, inter alia, be taken account of and the plan shall reflect best-case and worst-case assumptions, including a combination of events allowing the identification of the credit institution’s main vulnerabilities. Assumptions shall be compared with appropriate sector-wide base values or benchmarks.
(8) Measures aiming to restore the viability may include:
1) changes to the internal operational systems and infrastructure within the credit institution;
2) the development of existing activities that can be made competitive;
3) the sale of assets or of business lines;
4) the reorganisation of the activities of the credit institution or entity that is part of the same consolidation group as the credit institution, including the withdrawal from loss-making activities.
(9) Within one month of the date of submission of the business reorganisation plan, the Financial Supervision Authority shall assess the likelihood that the plan, if implemented, will restore the viability of the credit institution or entity that is part of the same consolidation group as the credit institution.
(10) If the Financial Supervision Authority is satisfied that the plan achieves the long-term viability of the credit institution or entity that is part of the same consolidation group as the credit institution specified in subsection (9) of this section, the Financial Supervision Authority shall submit the business reorganisation plan to a court for approval. If the plan is approved, the provisions of the Code of Civil Procedure concerning the proceedings on petition apply.
(11) If the Financial Supervision Authority is not satisfied that the business reorganisation plan achieves the long-term viability of the credit institution or entity that is part of the same consolidation group as the credit institution specified in subsection (9) of this section, the Financial Supervision Authority shall notify the management board of the credit institution or entity that is part of the same consolidation group as the credit institution of its concerns and require the amendment of the plan in a way that addresses those concerns.
(12) The management board of the credit institution or entity that is part of the same consolidation group as the credit institution shall submit within two weeks from the date of receipt of the assessment specified in subsection (11) of this section an amended business reorganisation plan to the Financial Supervision Authority for approval. The Financial Supervision Authority shall assess the amended plan and shall notify the management board within one week from the date of receipt of the plan whether it is satisfied that the plan, as amended, addresses the concerns notified or whether further amendment is required.
(13) The management board shall implement the business reorganisation plan as approved by the Financial Supervision Authority, and shall submit a report to the Financial Supervision Authority at least every six months on progress in the implementation of the business reorganisation plan.
(14) If, in the opinion of the Financial Supervision Authority, it is necessary to amend the business reorganisation plan to achieve the aim provided for in subsection (9) of this section, the management board shall revise the plan and shall submit the revised plan to the Financial Supervision Authority for assessment.
Division 3 Notification requirements
§ 49. Notification of potential insolvency
(1) The management board of a credit institution or entity that is part of the same consolidation group as the credit institution shall notify the Financial Supervision Authority where the credit institution or entity that is part of the same consolidation group as the credit institution is insolvent or likely to become insolvent for the purposes of subsection 39 (2) of this Act.
(2) Where the Financial Supervision Authority assesses that the conditions for applying resolution tools and powers in accordance with clauses 39 (1) 1) and 2) of this Act are met, the Financial Supervision Authority shall notify the following authorities thereof without delay:
1) the financial supervision authorities exercising supervision over the credit institution under resolution proceedings or entity that is part of the same consolidation group as the credit institution, including the financial supervision authorities of the Member States where the branch of the credit institution is located;
2) Eesti Pank;
3) the Ministry of Finance;
4) the Guarantee Fund;
5) where appropriate, the resolution authority of the consolidation group;
6) the European Systemic Risk Board.
(3) A notification of the Financial Supervision Authority whether or not to apply resolution tools or powers in relation to a credit institution or a relevant entity and which resolution tools or powers need to be applied shall contain the following:
1) the reasons, including the determination that the credit institution meets the conditions for the commencement of the resolution proceedings;
2) the resolution tools or powers that the Financial Supervision Authority intends to apply, including, where appropriate, the determination on potential winding up and liquidation of the credit institution under bankruptcy proceedings.
§ 50. Notification of decision on commencement of resolution proceedings
(1) The Financial Supervision Authority shall notify the following authorities without delay of the decision on the commencement of the resolution proceedings containing information on the resolution tools or powers to be applied and terms for application thereof:
1) the credit institution under resolution proceedings;
2) the financial supervision authorities exercising supervision over the credit institution under resolution proceedings or entity that is part of the same consolidation group as the credit institution, including the financial supervision authorities of the Member States where the branch of the credit institution is located;
3) Eesti Pank;
4) the Ministry of Finance;
5) the Guarantee Fund;
6) where appropriate, the resolution authority of the consolidation group;
7) the European Systemic Risk Board;
8) the European Commission;
9) the European Central Bank;
10) the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority;
11) where the credit institution under resolution proceedings is an institution as defined in Article 2(b) of Directive 98/26/EC of the European Parliament and of the Council, the operators of payment or settlement systems.
(2) The notification shall contain information on the resolution tools or powers to be applied and terms for application thereof.
(3) The Financial Supervision Authority shall publish the notification of the adoption of the decision on the commencement of the resolution proceedings specified in § 41 of this Act and information on the consequences and the effects of the resolution tools or powers on clients on its website. The Financial Supervision Authority shall ensure the publication of this information on the website of the European Banking Authority and on the website of the credit institution under resolution proceedings.
(4) Subsection (3) of this section shall apply to each resolution tool or power additionally applied in the resolution proceedings.
(5) The Financial Supervision Authority shall also publish the notification of the commencement of the resolution proceedings and potential consequences and effects of the application of resolution tools or powers on clients in the official publication Ametlikud Teadaanded and in other media.
(6) Where the shares, other instruments of ownership or debt instruments of the credit institution under resolution proceedings are admitted to trading on a regulated securities market, the information on the commencement of the resolution proceedings shall be published in media used for the disclosure of information in accordance with Article 21(1) of Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38–57).
(7) If the shares, other instruments of ownership or debt instruments of the credit institution under resolution proceedings are not admitted to trading on a regulated securities market, the Financial Supervision Authority shall ensure that the notification of the commencement of the resolution proceedings is sent to the known shareholders and creditors of the credit institution under resolution proceedings whose information is available to the Financial Supervision Authority through the registers or databases.
§ 51. Confidentiality requirements
(1) Documents, information and explanations (hereinafter in this section information) obtained in the course of the application of early intervention measures, resolution proceedings or other activities provided for in this Act shall be kept confidential. This information may not be communicated to any third parties, unless:
1) it is necessary to perform the obligations provided for in this Act or to apply early intervention measures or resolution tools or powers;
2) the information is submitted or forwarded in the form such that individual data on the credit institution or entity that is part of the same consolidation group as the credit institution cannot be identified, or
3) the credit institution or entity that is part of the same consolidation group as the credit institution has granted a prior consent to forward the information.
(2) The provisions of this section shall not prevent the Financial Supervision Authority from forwarding this information to the Ministry of Finance, Eesti Pank, the Guarantee Fund, temporary administrator, special manager, moratorium administrator, trustee in bankruptcy, auditors, potential acquirers of shares of the credit institution under resolution proceedings, resolution authorities of other EEA countries, central banks, ministries, resolution funds and the European Banking Authority or third-country resolution authorities.
Chapter 5 Valuation of financial situation
§ 52. Objective and conditions of valuation of financial situation
(1) Before applying a resolution tool or exercising the power to write down or convert capital instruments, the valuation of the financial situation (hereinafter in this section valuation) of a credit institution, its subsidiary financial institution or financial holding company, mixed financial holding company or mixed-activity holding company that is part of the same consolidation group shall be carried out.
(2) The objective of the valuation shall be to determine the value of the assets and liabilities of the credit institution or entity specified in subsection (1) of this section that is part of the same consolidation group as the credit institution that meets the conditions for resolution provided for in § 39 of this Act. The Financial Supervision Authority shall appoint an independent expert to valuate the financial situation.
(3) The valuation shall be carried out to decide:
1) whether the conditions for resolution proceedings or the conditions for the write down or conversion of capital instruments are met;
2) on the application of the most appropriate resolution tool or power;
3) when the power to write down or convert capital instruments is applied, on the extent of the cancellation or dilution of shares and the extent of the write down or conversion of capital instruments;
4) when the bail-in tool is applied, on the extent of the write down or conversion of eligible liabilities;
5) when the bridge institution tool or asset separation tool is applied, on the transfer of assets, rights, liabilities or shares or on any consideration to be paid to shareholders;
6) when the sale of shares and assets tool is applied, on the transfer of assets, rights, liabilities or shares and on the determination of market conditions under § 59 of this Act;
7) on the full recognition of any losses at the moment the resolution tool or power is applied.
(4) The valuation shall be based on prudent assumptions, including it shall take into account the potential liquidation of the credit institution and the extent of any losses. The valuation shall not take into consideration any potential extraordinary public financial support, emergency liquidity loan or any other extraordinary support by Eesti Pank.
(5) The valuation shall take account of reasonable expenses incurred in the course of the resolution proceedings.
(6) The valuation report shall be supplemented by the following information:
1) the updated annual accounts of the credit institution or any other entity specified in subsection (1) of this section;
2) an analysis and an estimate of the accounting value of the assets;
3) where appropriate, an analysis and an estimate of the market value of the assets and liabilities;
4) the list of on balance sheet and off balance sheet liabilities shown in the books and records with an indication of the respective priority levels;
5) the subdivision of the creditors in classes in accordance with their priority levels and an estimate of the treatment that each class of shareholders and creditors would have been expected to receive if the credit institution or any other entity specified in subsection (1) of this section were wound up and liquidated under bankruptcy proceedings.
(7) The valuation shall be an integral part of the decision of the Financial Supervision Authority to apply resolution tools or powers, including the decision to exercise the write down or conversion power of capital instruments. The valuation itself shall not be subject to a separate right of appeal.
§ 53. Provisional and ex-post valuation of financial situation
(1) The Financial Supervision Authority shall carry out a provisional valuation of the financial situation (hereinafter provisional valuation) of a credit institution or an entity specified in subsection 52 (1) of this Act if:
1) a valuation by an independent expert is not possible, or
2) it is not possible to gather all the information specified in subsection 52 (6) of this Act due to the lack of time.
(2) The provisional valuation shall take into account any losses with appropriate justification.
(3) The results of a provisional valuation shall be a valid basis for taking a decision on the commencement of the resolution proceedings as well as for appointing a special manager or exercising the power to write down or convert capital instruments.
(4) A valuation that does not comply with all the requirements provided for in § 52 of this Act shall be considered to be provisional until an independent person has carried out a valuation that is compliant with all the requirements provided for in § 52 of this Act (hereinafter ex-post definitive valuation). The ex-post definitive valuation shall be carried out within a reasonable timeframe. The ex-post definitive valuation may be carried out either separately from the valuation required by shareholders and creditors provided for in § 54 of this Act or simultaneously with and by the same independent person as that valuation, but shall be distinct from it.
(5) The purposes of the ex-post definitive valuation shall be:
1) to ensure that any losses on the assets of the credit institution or any other entity specified in subsection 52 (1) of this Act are fully recognised in the books of accounts of this entity;
2) to inform a decision to write back creditors’ claims or to increase the consideration in accordance with subsection (6) of this section.
(6) In the event that the ex-post definitive valuation’s estimate of the net asset value of the credit institution or any other entity specified in subsection 52 (1) of this Act is higher than the provisional valuation’s estimate of the net asset value, the Financial Supervision Authority may:
1) exercise its power to increase the value of the claims and instruments of creditors or shareholders which have been previously written down in the course of the application of the bail-in tool;
2) instruct a bridge institution or asset management vehicle to make a further payment of consideration in respect of the assets, rights and liabilities or shares of the credit institution under resolution proceedings to the creditors or to the shareholders under § 80 of this Act.
§ 54. Additional valuation
(1) The shareholders or creditors of the credit institution under resolutions proceedings, including the Guarantee Fund, may require from the Financial Supervision Inspection that an additional valuation be carried out by an independent expert to determine to which extent the actual de facto treatment that shareholders or creditors have received under the decision on the commencement of the resolution proceedings differs from the situation where a court ruling on the declaration of bankruptcy would have been made on the date of taking the decision on the commencement of the resolution proceedings.
(2) The additional valuation shall assume that on the date of taking the decision on the commencement of the resolution proceedings a court ruling on the declaration of bankruptcy was made and the resolution tools or powers had not been effected.
(3) The additional valuation shall not take into account any potential extraordinary public financial support, emergency liquidity loan or any other financial support by Eesti Pank.
Chapter 6 Resolution tools and powers
Division 1 General provisions
§ 55. General principles of resolution tools and powers
(1) The Financial Supervision Authority may apply the following resolution tools:
1) the sale of shares and net assets (hereinafter shares and assets) tool;
2) the bridge institution tool;
3) the asset separation tool;
4) the bail-in tool.
(2) Where the application of any tool specified in subsection (1) of this section results in losses being borne by creditors or their claims being converted, the Financial Supervision Authority shall exercise the power to write down and convert capital instruments in accordance with the provisions of Division 2 of this Chapter together with or immediately before the application of the resolution tool.
(3) Where a credit institution meets the conditions for the commencement of the resolution proceedings and the Financial Supervision Authority decides to commence the resolution proceedings in relation to the credit institution, the Financial Supervision Authority shall apply the write down or conversion of capital instruments in accordance with the provisions of Division 2 of this Chapter.
(4) The Financial Supervision Authority may apply the resolution tools together or individually, except the asset separation tool that may only be applied together with another resolution tool.
(5) Where only the resolution tool specified in clause (1) 1) or 2) of this section is used, and it is used to sell a part of the assets, rights or liabilities of the credit institution under resolution proceedings, its subsidiary financial institution or financial holding company, mixed financial holding company or mixed-activity holding company that is part of the same consolidation group, the entity from which the assets, rights or liabilities have been transferred shall be wound up and liquidated under bankruptcy proceedings. Such winding up and liquidation of that entity shall be done within a reasonable timeframe, having regard to any need to provide services pursuant to the provisions of § 46 of this Act and any other reason showing that the continuation of the activities of the entity within a certain timeframe contributes to the achievement of the resolution objectives.
(6) The Financial Supervision Authority, the Ministry of Finance or the Guarantee Fund may recover any reasonable expenses properly incurred in connection with the use of the resolution tools or powers or provision of extraordinary public financial support in the following way:
1) the subtraction of the relevant expenses from the amount of compensations to be paid;
2) the recovery of the expenses from the credit institution under resolution proceedings, or
3) the subtraction of the relevant expenses from any proceeds generated as a result of the termination of the operation of the bridge institution or the asset management vehicle.
(7) The Financial Supervision Authority may establish a moratorium, make a proposal for the expropriation of shares of the credit institution or apply other resolution tools and powers not specified in subsections (1) and (2) of this section, provided that the following conditions have been met:
1) this does not pose obstacles to effective resolution proceedings of a consolidation group prescribed in this Act;
2) they are consistent with the resolution objectives and the general principles governing resolution proceedings specified in §§ 4 and 40 of this Act.
(8) Extraordinary public financial support may be applied in accordance with the provisions of § 79 of this Act in the occurrence of indications of a systemic financial crisis and when the following conditions are met:
1) a contribution to loss absorption or recapitalisation equal to an amount not less than 8 per cent of total liabilities and own funds has been made by the shareholders and creditors of the credit institution through write down or conversion of liabilities or capital instruments or otherwise;
2) it shall be conditional on prior final approval under the State aid rules of the European Union.
(9) The provisions of §§ 110–116 of the Bankruptcy Act shall not apply to the resolution tools or powers used by the Financial Supervision Authority.
(10) The provisions of §§ 246, 249, 292, 294, 298, 339–342, subsection 343 (1), §§ 345, 349, 352, 354, 356 and 361 of the Commercial Code shall not apply to the use of resolution tools or powers.
(11) The provisions of the Commercial Code concerning the rights of shareholders in the event of a merger or division, including the provisions of §§ 418–427 concerning the merger of a public limited company and of §§ 4331–4339 of the Commercial Code concerning a cross-border merger shall not apply to the use of resolution tools or powers.
(12) Where a transfer of shares, other instruments of ownership, other rights or liabilities includes assets that are located in the other EEA country or rights or liabilities under the law of the other EEA country, the transfer has effect in or under the law of that other EEA country.
Division 2 Write down and conversion of capital instruments
§ 56. Write down and conversion of capital instruments
(1) The Financial Supervision Authority may require the write down or conversion of capital instruments of a credit institution or entity that is part of the same consolidation group as the credit institution into shares or other instruments of ownership when at least one of the following circumstances applies:
1) where conditions for the commencement of the resolution proceedings have been met and the general principles governing resolution proceedings have been complied with pursuant to the provisions of §§ 39 and 40 of this Act;
2) the Financial Supervision Authority has determined that without the write down or conversion of capital instruments the credit institution or entity that is part of the same consolidation group as the credit institution will no longer be viable;
3) the capital instruments have been issued by a subsidiary of the consolidation group and those capital instruments are recognised for the purposes of meeting own funds requirements on an individual and on a consolidated basis and the Financial Supervision Authority and the competent authority of the EEA country exercising financial supervision on a consolidated basis have made a joint determination in accordance with Chapter 9 of this Act that without the write down or conversion of the capital instruments the consolidation group will no longer be viable;
4) the capital instruments have been issued by the parent undertaking of the consolidation group and those capital instruments are recognised for the purposes of meeting own funds requirements of the parent undertaking on an individual and on a consolidated basis, and the competent authority of the EEA country exercising financial supervision on a consolidated basis has made a determination that without the write down or conversion of the capital instruments the consolidation group will no longer be viable;
5) extraordinary public financial support is required by the credit institution or the entity that is part of the same consolidation group as the credit institution.
(2) In writing down or converting capital instruments, a credit institution or an entity that is part of the same consolidation group as the credit institution or the whole consolidation group shall be deemed to be no longer viable only if the credit institution, entity or consolidation group is insolvent or its insolvency is likely and no private sector measures or supervisory action would prevent the insolvency of the credit institution within a reasonable timeframe.
(3) Capital instruments issued by a subsidiary that is part of a consolidation group and equally ranked capital instruments issued by the parent undertaking shall be written down or converted on the same terms.
(4) When the Financial Supervision Authority has made a determination specified in clause (1) 3), 4) or 5) of this section in the case of a credit institution or of a consolidation group with cross-border activity, in taking its decision the Financial Supervision Authority shall take into account the potential impact of the resolution proceedings in all the EEA countries where the credit institution or the consolidation group operates.
(5) Where the Financial Supervision Authority exercises the power to write down or convert capital instruments, it shall promptly notify the Ministry of Finance thereof.
(6) The Financial Supervision Authority shall exercise the power to write down or convert capital instruments where:
1) the capital instruments have been issued by a credit institution authorised in Estonia or established in Estonia or an entity that is part of the same consolidation group as the credit institution and those capital instruments are recognised for the purposes of meeting own funds requirements of the credit institution in accordance with Article 92 of Regulation (EU) No 575/2013 of the European Parliament and of the Council on an individual basis;
2) the capital instruments have been issued by a credit institution that is subject to the financial supervision on a consolidated basis by the Financial Supervision Authority.
(7) Before the Financial Supervision Authority exercises the power to write down or convert capital instruments and where it has determined that the conditions specified in clauses (1) 2)–5) of this section are met, it shall transmit a notification along with reasons to resolution authorities and financial supervision authorities of other relevant EEA countries associated with the consolidation group.
§ 57. Exercise of power to write down or convert capital instruments
(1) The information on the level required to absorb losses in order to recapitalise the credit institution or the entity that is part of the same consolidation group as the credit institution set out in the valuation of the financial situation carried out in accordance with Chapter 5 of this Act shall form the basis for exercising the power to write down or convert capital instruments.
(2) When writing down or converting capital instruments, one or both of the following actions are taken in respect of shares and other instruments of ownership:
1) existing shares or other instruments of ownership are cancelled or transferred to bailed-in creditors;
2) the estimated value of shares and other instruments of ownership is substantially reduced if the credit institution under resolution proceedings has a positive value of net assets.
(3) The provisions of subsection (2) of this section apply where the shares or other instruments of ownership were issued or conferred:
1) pursuant to conversion of debt instruments to shares or other instruments of ownership in accordance with contractual terms of the original debt instruments on the occurrence of an event that preceded the valuation of financial situation specified in § 52 of this Act;
2) pursuant to the conversion of capital instruments to Common Equity Tier 1 instruments.
(4) The write down or conversion of capital instruments is applied in resolution proceedings in accordance with the priority of claims under bankruptcy proceedings of a credit institution in the following order:
1) Common Equity Tier 1 items are reduced first in proportion to the losses and one or both of the actions specified in subsection (2) of this section are taken to the extent of their capacity;
2) the principal amount of Additional Tier 1 instruments is written down or converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives or to the extent of the capacity of the capital instruments, whichever is lower;
3) the principal amount of Tier 2 instruments is written down or converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives or to the extent of the capacity of the capital instruments, whichever is lower.
(5) Where the principal amount of a capital instrument is written down, the reduction of that principal amount shall be permanent and the holder thereof shall have no claims in connection with that amount of the instrument, which has been written down, unless no compensation is paid to any holder of the instruments in accordance with subsection (7) of this section or due to any liability already accrued or damages that may arise as a result of writing down the instruments.
(6) Capital instruments may only be converted where the following conditions are met:
1) those Common Equity Tier 1 instruments are issued by the credit institution or the entity that is part of the same consolidation group as the credit institution, with the agreement of the Financial Supervision Authority or, where applicable, of the resolution authority of the other EEA country;
2) those Common Equity Tier 1 instruments are issued prior to any issuance of shares or other instruments of ownership by that credit institution or that entity that is part of the same consolidation group as the credit institution for the purposes of provision of contributions to own funds by the State or a government entity;
3) those Common Equity Tier 1 instruments are transferred without delay following the exercise of the conversion power;
4) the conversion rate that determines the number of Common Equity Tier 1 instruments that are provided in respect of each capital instrument complies with the principles provided for in § 75 of this Act and any relevant guidelines of the European Banking Authority.
(7) In order to effect a conversion of capital instruments, the Financial Supervision Authority may require a credit institution or entity that is part of the same consolidation group as the credit institution to issue Common Equity Tier 1 instruments to the holders of the capital instruments.
(8) For the purposes of the provision of Common Equity Tier 1 instruments in accordance with subsection (6) of this section, the Financial Supervision Authority may require a credit institution or entity that is part of the same consolidation group as the credit institution to obtain the prior consent of the Financial Supervision Authority to issue the relevant number of Common Equity Tier 1 instruments.
§ 58. Exercise of power to write down or convert capital instruments on consolidated basis
(1) Where the Financial Supervision Authority has received a notification from the resolution authority or any other competent authority of the other EEA country concerning the write down or conversion of capital instruments in respect of a consolidation group or entities thereof, the Financial Supervision Authority, after consulting those authorities, shall assess the following matters:
1) whether an alternative measure to the write down or conversion of capital instruments is available, and if such an alternative measure is available, whether it can feasibly be applied;
2) whether there is a prospect that the application of an alternative measure would address, in an adequate timeframe, the circumstances that would otherwise require a determination provided for in subsection 56 (1) of this Act to be made.
(2) Alternative measures specified in subsection (1) of this section mean early intervention measures, measures provided for in § 104 of the Credit Institutions Act or a transfer of funds or capital from the parent undertaking of the consolidation group.
(3) Where the Financial Supervision Authority, after consulting the resolution authority or any other competent authority of the other EEA country, considers that at least one alternative measure is available, it can feasibly be applied and it would deliver the outcome specified in clause (1) 2) of this section, the Financial Supervision Authority shall ensure that the measure is applied.
(4) Where the Financial Supervision Authority considers that no alternative measures are available that would deliver the outcome provided for in clause (1) 2) of this section, the Financial Supervision Authority shall decide whether the determination provided for in subsection 56 (1) of this Act under consideration is appropriate.
(5) Where the Financial Supervision Authority decides to make a determination under clause 56 (1) 3) of this Act, it shall immediately notify the resolution authorities or any other competent authorities of the EEA countries in which the affected subsidiaries of the consolidation group are located. The Financial Supervision Authority as the resolution authority of the consolidation group shall agree on the determination with the resolution authorities of other EEA countries in the form of a joint decision. In the absence of a joint decision no determination shall be made.
(6) Where the Financial Supervision Authority is the resolution authority of the subsidiary, it shall implement a decision to write down or convert capital instruments made in accordance with this section at the earliest opportunity.
Division 3 Sale of assets and shares
§ 59. Bases and conditions for sale
(1) The Financial Supervision Authority shall issue a precept to the credit institution under resolution proceedings for the sale of all or any assets, rights and liabilities (hereinafter in Divisions 3, 4 and 5 assets) of the credit institution or all or any shares issued by the credit institution to the potential purchaser without the prior consent of the shareholders or the third party that is not a bridge institution.
(2) The Financial Supervision Authority shall determine which conditions apply to the sale of the assets and shares, taking into account the principle of the sale at market conditions. Assets and pools of assets may be sold separately. The assets shall be sold at an auction, unless otherwise decided by the Financial Supervision Authority. The assets may be sold without organising an auction with the consent of the Financial Supervision Authority if the sale of assets in this manner is more profitable.
(3) Upon the sale of assets and shares, the Financial Supervision Authority shall require the credit institution to transfer the assets and shares to the acquirer. The Financial Supervision Authority may exercise the power of the sale of assets and shares more than once.
(4) The sale of the assets or shares of the credit institution may be effected under the following conditions:
1) it shall not unduly favour or discriminate between potential acquirers;
2) it shall be free from any conflict of interest;
3) it shall not confer any unfair advantage on a potential acquirer;
4) it shall take account of the need to effect a rapid resolution tool;
5) the sale is effected in the manner that is most profitable;
6) the sale is transparent.
(5) The provisions of subsection (2) of this section shall not apply where the Financial Supervision Authority determines that the sale at market conditions would undermine one or more of the resolution objectives and in particular if:
1) there would be a material threat to financial stability arising from the insolvency of the credit institution under resolution proceedings;
2) the compliance with the market conditions during the sale would undermine the effectiveness of the application of the sale of assets and shares tool.
(5) The Financial Supervision Authority may, with the consent of the acquirer, also apply the sale of assets and shares tool with the condition of the obligation to sell back where the assets or shares or other instruments of ownership transferred to the acquirer are given back to the credit institution under resolution proceedings or to their original owners, and the credit institution under resolution proceedings or original owners shall be obliged to take back any such assets or shares or other instruments of ownership.
(6) The provisions of Chapter 8 of this Act shall apply to transfers between the credit institution under resolution proceedings or the original owners of shares and the bridge institution.
(7) Where the Financial Supervision Authority applies the sale of assets and shares tool partially and not all the assets or shares are transferred to another entity, such transfer may not affect the operation of payment and settlement systems covered by Directive 98/26/EC of the European Parliament and of the Council.
§ 60. Powers and liability of acquirer
(1) Where the assets or shares of the credit institution under resolution proceedings have been acquired by a transfer, the acquirer thereof shall have the authorisation, where appropriate, provided for in legislation to continue the business.
(2) The acquirer may be a member of payment and settlement systems and a participant in a regulated securities market and may continue to have access to them, provided that it meets conditions for participation in such systems and market. The operators may not deny access to the payment and settlement systems or the regulated securities market on the ground that the acquirer does not possess a credit rating, or the credit rating of the bridge institution as an acquirer is not commensurate to the levels required to be become a member or participant.
(3) Where the acquirer does not meet the membership or participation conditions for a relevant payment or settlement system or regulated securities market, the acquirer may, with the consent of the Financial Supervision Authority, be a member of the system or participant in the market for up to 24 months on a temporary basis without holding the access authorisation.
(4) Shareholders or creditors of the credit institution under resolution proceedings and third parties whose assets are not transferred to an acquirer shall not have any rights over or in relation to the assets transferred to the acquirer.
(5) The Financial Supervision Authority may issue a precept to the acquirer to transfer the assets and shares back to the credit institution or original shareholders. After the transfer of assets and shares, the credit institution or original shareholders shall be deemed to be the owners. The credit institution and original shareholders shall be obliged to take back any such assets and shares.
§ 61. Assessment of acquisition of qualifying holding
(1) Where a transfer of shares results in the acquisition of or increase in a qualifying holding in a credit institution, the Financial Supervision Authority as the supervisory authority shall also consider the achievement of the resolution objectives in assessing the holding provided for in §§ 29–33 of the Credit Institutions Act.
(2) If the Financial Supervision Authority as the supervisory authority has not completed the assessment of the holding by the date of transfer of shares:
1) the shares are transferred to the acquirer;
2) during the assessment period of the holding and during any period of sale of assets, the acquirer’s voting rights attached to such shares shall be suspended and vested solely in the Financial Supervision Authority.
(3) During the assessment period of the holding and during any period of sale of assets provided for in subsection (2) of this section, the Financial Supervision Authority has the power not to apply the requirements for acquisitions or sales of qualifying holdings provided for in §§ 29–33 of the Credit Institutions Act.
(4) Upon completion of the assessment of the holding by the Financial Supervision Authority as the supervisory authority, the Financial Supervision Authority shall notify the acquirer in writing of the decision on the acquisition of the holding or on the prohibition of the acquisition pursuant to the provisions of § 31 of the Credit Institutions Act.
(5) If the Financial Supervision Authority as the supervisory authority takes a decision on the acquisition of the holding, the acquirer may exercise the voting rights attached to the acquired shares as of the date of becoming aware of the decision.
(6) If the Financial Supervision Authority as the supervisory authority takes a decision on the prohibition of the acquisition of the holding:
1) the provisions of clause (2) 2) of this section shall apply to the exercise of the voting rights;
2) the Financial Supervision Authority may require the acquirer to retransfer the shares within a certain period, taking into account the current market conditions;
3) the provisions of subsection (3) of this section shall not apply.
Division 4 Bridge institution
§ 62. Establishment of bridge institution
(1) To ensure at least the continuity of critical functions or provision of services, the Ministry of Finance shall establish, on the proposal of the Financial Supervision Authority, a public limited company or acquire the shares of a public limited company (hereinafter bridge institution) with a view to take over all or any shares or assets of the credit institution under resolution proceedings.
(2) The bridge institution shall be a credit institution or investment firm and it is subject to the provisions of the Credit Institutions Act or Securities Market Act, including the provisions concerning the application for authorisation. In extraordinary circumstances, the Financial Supervision Authority may take a decision under which the provisions of the Credit Institutions Act or Securities Market Act, in particular concerning the application for authorisation, the compliance with the capital or liquidity requirements or the acquisition of the qualifying holding, are not observed on a temporary basis, but no longer than for six months, in establishing the bridge institution.
(3) The provisions of Divisions 1 and 3 of Chapter 6, except for § 88, of the State Assets Act shall not apply to the exercise of founder’s rights, management and supervision of the bridge institution.
§ 63. Transfer of shares and assets
(1) The Financial Supervision Authority shall require the credit institution under resolution proceedings to transfer the shares or assets of the credit institution to a bridge institution.
(2) The Financial Supervision Authority may exercise the power provided for in subsection (1) of this section on more than one occasion.
(3) The shares or assets may be transferred without the consent of the shareholders of the credit institution under resolution proceedings or the third party that is not a bridge institution for a fair compensation. The provisions of Chapter 291 of the Commercial Code shall not apply to the takeover of shares for a monetary compensation.
(4) The provisions of Chapter 8 of this Act shall apply to transfers between the credit institution under resolution proceedings or the original owners of shares and the bridge institution.
(5) When transferring the shares or assets, it shall be ensured that the total value of liabilities transferred to the bridge institution does not exceed the total value of the assets transferred from the credit institution under resolution proceedings.
§ 64. Transfer of shares
(1) The Ministry of Finance shall immediately notify the registrar of the Estonian Central Register of Securities of the transfer of shares of the credit institution under resolution proceedings. On the basis of the notice, the registrar of the Estonian Central Register of Securities shall enter a temporarily restrictive entry on the shares or on the accounts related to the shares of the credit institution. The account remains frozen on the basis provided for in subsection 17 (3) of the Estonian Central Register of Securities Act.
(2) The registrar of the Estonian Central Register of Securities shall transfer the shares specified in subsection (1) of this section to the securities account indicated by the Ministry of Finance.
(3) The registrar of the Estonian Central Register of Securities shall delete the third-party rights with regard to the shares specified in subsection (1) of this section before the transfer of the shares to the Ministry of Finance.
§ 65. Management of bridge institution
(1) The provisions of § 88 of the State Assets Act shall apply to the management of a bridge institution.
(2) The Financial Supervision Authority shall make a proposal to the minister responsible for the area for the appointment of its representative or representatives the members of the supervisory board and management board of the bridge institution.
3) The Ministry of Finance shall coordinate the following with the Financial Supervision Authority:
1) the functions and remuneration of the members of the supervisory board and management board of the bridge institution;
2) the strategic plan and risk profile of the bridge institution.
(4) Shareholders or creditors of the credit institution under resolution proceedings and other third parties whose assets are not transferred to a bridge institution shall not have any rights in relation to the assets transferred. This is without prejudice to Chapter 8 of this Act.
(5) The members of the supervisory board or management board of the bridge institution shall have no liability to shareholders or creditors of the credit institution under resolution proceedings for acts and omissions in the discharge of their duties unless the act or omission implies gross negligence or intent which would have affected rights of such shareholders or creditors.
(6) The bridge institution shall be managed with a view to sell shares or assets of the bridge institution or credit institution under resolution proceedings to a third party within a reasonable timeframe or within the term provided for in subsection 68 (4) or (5) of this Act.
§ 66. Conditions for continuing operation of bridge institution and access to payment systems
(1) A bridge institution may continue to provide the services to the same extent as provided by the credit institution under resolution proceedings and to exercise any such right that was exercised by the credit institution in respect of the assets transferred.
(2) The bridge institution may be a member of payment and settlement systems and a participant in a regulated securities market and may continue to have an access to them, provided that it meets conditions for membership and participation. The operators may not deny access to the payment and settlement systems or the regulated securities market on the ground that the bridge institution does not possess a credit rating, or the credit rating of the bridge institution is not commensurate to the levels required to become a member or participant.
(3) A bridge institution shall be a member of the Guarantee Fund and it shall pay contributions pursuant to the provisions of the Guarantee Fund Act.
(4) Where the bridge institution does not meet the participation or membership conditions for the systems specified in subsection (2) of this section, the bridge institution may, with the consent of the Financial Supervision Authority, be a member of the system or participant in the market for up to 24 months.
(5) On the proposal of the Financial Supervision Authority, the bridge institution may be released from the payment of contributions to the Guarantee Fund within 24 months of becoming a member of the Guarantee Fund.
§ 67. Transfer of shares and assets back
(1) The Financial Supervision Authority may make a proposal to the Ministry of Finance to transfer the shares or assets back to original shareholders or a third party. After the transfer of the shares and assets, original shareholders shall be deemed to be the owners.
(2) In transferring shares and assets back, one of the following conditions shall be met:
1) the possibility that the shares or assets might be transferred back is specified in the transfer agreement;
2) the shares or assets do not in fact fall within the shares or assets or do not meet the conditions for transfer of such shares or assets specified in the transfer agreement.
§ 68. Termination of operation of bridge institution
(1) The operation of the bridge institution shall be terminated:
1) if the bridge institution merges on the basis of subsection 65 (2) or (3) of the Credit Institutions Act;
2) if the bridge institution ceases to meet the requirements provided for in § 46 of this Act;
3) if the bridge institution’s assets are sold to a third party;
4) if the objective set in the articles of association of the bridge institution has been achieved;
5) by a court ruling on compulsory winding-up of the bridge institution.
(2) The provisions of Chapter 6 of the Credit Institutions Act shall apply to the merger of the bridge institution.
(3) The decision provided for in clauses (1) 2) and 4) of this section is taken by the Ministry of Finance on the proposal of the Financial Supervision Authority.
(4) If the operation of the bridge institution is not terminated in any of the cases provided for in clauses (1) 1)–4) of this section, the compulsory winding-up of the bridge institution shall be commenced on the application of the Financial Supervision Authority within two years of the date when the last transfer of shares or assets was made to the bridge institution from the credit institution under resolution proceedings.
(5) In exceptional circumstances, the Financial Supervision Authority may extend the period specified in subsection (4) of this section where this:
1) supports the outcomes specified in subsection (1) of this section;
2) ensures the availability of essential banking or financial services.
(6) Any decision made under subsection (5) of this section shall be fully reasoned and shall contain a detailed assessment of the market situation and future prospects of the bridge institution.
(7) Any proceeds generated as a result of the termination of the operation of the bridge institution shall benefit the shareholders of the bridge institution.
(8) The sale of the shares or assets of the bridge institution for a fee shall be based on the provisions of Chapter 4 of the State Assets Act.
(9) Where a bridge institution is used for the purpose of transferring assets of more than one credit institution under resolution proceedings, the provisions of subsections (7) and (8) of this section shall apply to the assets transferred from each of the credit institutions under resolution proceedings.
Division 5 Asset separation
§ 69. Asset separation
(1) The Financial Supervision Authority may decide to apply the asset separation tool. Under the decision the Ministry of Finance shall establish, on the proposal of the Financial Supervision Authority, a public limited company or acquire a public limited company (hereinafter asset management vehicle) where all or any assets of the credit institution under resolution proceedings are transferred. The assets of the bridge institution previously established may also be transferred to the asset management vehicle.
(2) The asset management vehicle shall manage the assets transferred to it with a view to maximising their value through eventual sale or wind up and liquidation of the asset management vehicle. The assets may be transferred without the consent of the shareholders of the credit institution under resolution proceedings or any third party for a fair compensation.
(3) The Financial Supervision Authority may decide to apply the asset separation tool if one of the following occurs:
1) the market situation for the sale of those assets in the bankruptcy proceedings is unfavourable or the sale of the assets could have negative effects on financial markets as a whole;
2) the transfer of those assets is necessary to ensure the proper functioning of the credit institution under resolution proceedings or the bridge institution;
3) the transfer of those assets is necessary to maximise proceeds from the subsequent sale thereof.
(4) If the Ministry of Finance establishes an asset management vehicle or acquires the shares thereof, the Financial Supervision Authority shall require the credit institution under resolution proceedings or the bridge institution to transfer of its assets to the asset management vehicle.
(5) The Financial Supervision Authority may apply the asset separation tool on more than one occasion.
6) The Ministry of Finance shall coordinate with the Financial Supervision Authority the asset management vehicle’s:
1) memorandum and articles of association;
2) remuneration of the members of the supervisory board and management board and their functions;
3) strategic plan and risk profile.
(7) The Financial Supervision Authority may make a proposal to the Ministry of Finance to transfer the assets back to the credit institution under resolution proceedings. The credit institution shall be obliged to take back any such assets.
(8) The assets may be transferred if the possibility that the assets might be transferred back has been previously specified in the transfer agreement or if the assets to be transferred back do not directly fall within the classes of, or meet the conditions for transfer of, assets specified in the transfer agreement.
(9) Without prejudice to the provisions of Chapter 8 of this Act, shareholders or creditors of the credit institution under resolution proceedings and third parties whose assets are not transferred to the asset management vehicle shall not have any rights in relation to the assets transferred.
(10) The members of the supervisory board or management board of the asset management vehicle shall have no responsibility to shareholders or creditors of the credit institution, and no liability to shareholders or creditors for acts and omissions in the discharge of their duties unless the act or omission implies gross negligence or intent which affects rights of such shareholders or creditors.
(11) When applying the asset separation tool, the Financial Supervision Authority shall determine the consideration for which the asset management vehicle acquires the assets, taking into account the valuation carried out in respect of the assets and liabilities of the credit institution and the State aid rules of the European Union. The consideration to be paid shall be in the direct interests of the credit institution under resolution proceedings. The consideration may also be paid in the form of debt obligations issued by the asset management vehicle.
Division 6 Bail-in
§ 70. Bases for bail-in
(1) In accordance with the principles governing resolution proceedings and to meet the resolution objectives, the Financial Supervision Authority may apply the bail-in tool (hereinafter bail-in tool) for any of the following purposes:
1) to recapitalise a credit institution or investment firm under resolution proceedings or an entity that is part of the same consolidation group as the credit institution or investment firm in accordance with the conditions for authorisation provided for in the Credit Institutions Act or Securities Market Act, and to sustain public confidence in the credit institution or investment firm or the entity, or
2) to convert liabilities to equity or reduce the principal amount of claims or liabilities where they are transferred to a bridge institution with a view to increase its capital or with a view to apply the sale of shares or assets tool or the asset separation tool.
(2) The Financial Supervision Authority may apply the bail-in tool for the purpose provided for in clause (1) 1) of this section only if there is a reasoned assumption that the application of that tool together with other relevant measures, including measures implemented in accordance with the business reorganisation plan provided for in § 48 of this Act, will, in addition to achieving relevant resolution objectives, restore the credit institution or any other entity specified in subsection (1) of this section to financial soundness and viability.
(3) In applying the bail-in tool, the Financial Supervision Authority shall respect the legal form of the credit institution or entity that is part of the same consolidation group as the credit institution and may also initiate the change in the legal form of that institution or entity.
§ 71. Scope of bail-in tool
(1) The bail-in tool may be applied to all liabilities (hereinafter eligible liabilities) of a credit institution under resolution proceedings or entity that is part of the same consolidation group as the credit institution, except the following liabilities:
1) covered deposits and deposits subject to compensation;
2) secured liabilities, including covered bonds and financial instruments used for hedging purposes which are secured in a way similar to covered bonds;
3) any liability that arises by virtue of the holding of client assets, including any liability that arises by virtue of assets held on behalf of investment funds;
4) any liability that arises by virtue of a fiduciary relationship between the credit institution under resolution proceedings or entity that is part of the same consolidation group as the credit institution as fiduciary and another person as beneficiary, provided that such a beneficiary is protected under the applicable insolvency or civil law;
5) contractual liabilities to companies, excluding entities that are part of the same consolidation group, with a maturity of less than seven days;
6) liabilities with a remaining maturity of less than seven days, owed to settlement and payment systems or operators of systems designated according to Directive 98/26/EC of the European Parliament and of the Council or their participants and arising from the participation in such a system;
7) liabilities under employment contracts to an employee, in relation to accrued salary, pension benefits or other fixed remuneration, except for the performance pay of members of staff specified in subsection 571 (3) of the Credit Institutions Act that is not regulated by a collective bargaining agreement;
8) liabilities to suppliers arising from the provision of goods or services that are critical, except for financial services, including IT services, utilities and the rental and upkeep of premises;
9) liabilities to the Tax and Customs Board, Social Insurance Board and the relevant tax and social security authorities of other EEA countries, provided that those liabilities are preferred under the applicable law;
10) liabilities arising under the Guarantee Fund Act in relation to contributions to the Deposit Guarantee Sectoral Fund.
(2) The application of the bail-in tool may not affect the assets secured by covered bonds. All secured assets relating to a covered bond cover pool shall remain segregated and with enough funding.
(3) The provisions of clause (1) 2) and subsection (2) of this section shall not preclude the application of the bail-in tool in relation to any part of a secured liability, including a liability for which collateral has been pledged, that exceeds the value of the assets, pledge, lien or collateral against which it is secured.
(4) The provisions of clause (1) 1) of this section shall not preclude the application of the bail-in tool in relation to any amount of a deposit that is not covered and not subject to compensation.
(5) Having regard to the requirements for large exposure provided for in Regulation (EU) No 575/2013 of the European Parliament and of the Council and the Credit Institutions Act, the Financial Supervision Authority may limit, in accordance with subsection 34 (4) of this Act, the extent to which other credit institutions and investment firms hold eligible liability positions required for the application of a bail-in tool, save for liability positions that are held at entities that are part of the consolidation group.
§ 72. Exceptions in application of bail-in tool
(1) In exceptional circumstances, where the bail-in tool is applied, the Financial Supervision Authority may fully or partially exclude the application thereof where:
1) it is not possible to bail-in that liability within a reasonable time notwithstanding the good faith efforts of the Financial Supervision Authority;
2) the exclusion is strictly necessary and proportionate to achieve the continuity of critical functions and core business lines;
3) the exclusion is strictly necessary and proportionate to avoid widespread contagion, in particular as regards deposits held by natural persons and micro, small and medium sized enterprises, and this would severely disrupt the functioning of financial markets and of financial market infrastructures in a manner that could cause a serious disturbance to the economy of EEA countries;
4) the exclusion is strictly necessary and proportionate to ensure the equal treatment of creditors.
(2) In applying subsection (1) of this section, the Financial Supervision Authority shall give consideration to:
1) the principle that losses should be borne first by shareholders of the credit institution under resolution proceedings and next, pursuant to the general procedure, by creditors of the credit institution in order of preference;
2) the level of loss absorbing capacity that would remain in the credit institution under resolution proceedings if the liability or class of liabilities were excluded from the application of the bail-in tool;
3) the need to maintain adequate resources for financing resolution proceedings.
(3) In applying subsection (1) of this section, the Financial Supervision Authority may either to completely exclude a liability from write down or to limit the extent of the write down applied to that liability.
(4) In applying subsection (1) of this section, the Financial Supervision Authority may increase the level of write down or conversion applied to other eligible liabilities, taking into account the principle that no creditor shall incur greater losses than would have been incurred if the credit institution had been wound up and liquidated under bankruptcy proceedings.
(5) The Financial Supervision Authority shall notify the European Commission of the intention to apply the exceptions provided for in subsection (1) of this section.
§ 73. Assessment of amount of bail-in
(1) Prior to the application of the bail-in tool, the Financial Supervision Authority shall assess on the basis of a valuation of the financial situation the aggregate of:
1) where relevant, the amount by which eligible liabilities must be written down in order to absorb losses;
2) where relevant, the amount by which eligible liabilities must be converted into shares or other capital instruments in order to restore the Common Equity Tier 1 capital ratio of either the credit institution under resolution proceedings or the bridge institution.
(2) The assessment specified in subsection (1) of this section shall establish the amount by which eligible liabilities need to be written down or converted in order to restore the Common Equity Tier 1 capital ratio of the credit institution under resolution proceedings or, where applicable, establish the ratio of the bridge institution in accordance with the conditions for authorisation and to continue to carry out the activities in the longer term, taking into account any contribution made pursuant to the provisions of clause 7313 (1) 4) of the Guarantee Fund Act.
(3) Where the amounts of bail-in based on the valuation of the financial situation carried out in accordance with Chapter 5 of this Act exceed the amounts under the definitive valuation, a write-up mechanism may be applied to reimburse creditors and then shareholders to the extent necessary.
(4) The Financial Supervision Authority may establish additional requirements for the valuation of the financial situation of the credit institution under resolution proceedings or an entity that is part of the same consolidation group as the credit institution to ensure that the valuation is based on information about the assets and liabilities that is as up to date and comprehensive as is reasonably possible.
§ 74. Sequence of write down and conversion of liabilities
(1) When applying the bail-in tool, liabilities are written down or converted as follows:
1) Common Equity Tier 1 items are reduced in accordance with the provisions of clause 57 (4) 1) of this Act;
2) if the reduction pursuant to clause 1) of this subsection is less than the aggregate amount of write down, the amounts of Additional Tier 1 items are reduced to the extent required and, where appropriate, to the extent of the aggregate amount of Additional Tier 1 capital;
3) if the amount of the total reduction pursuant to clauses 1) and 2) of this subsection is less than the aggregate amount of write down, the amounts of Tier 2 items are reduced to the extent required and, where appropriate, to the extent of the aggregate amount of Additional Tier 1 capital;
4) if the total reduction of the own funds items specified in clauses 1)–3) of this subsection is less than the aggregate amount, the principal amount of subordinated liabilities that is not Additional Tier 1 or Tier 2 capital is reduced to the extent required in accordance with the hierarchy of claims in bankruptcy proceedings to produce the aggregate amount of write down.
(2) If, and only if, the total reduction of shares or other instruments of ownership, capital instruments and eligible liabilities provided for in subsection (1) of this section is less than the amounts referred to in § 57 of this Act, the Financial Supervision Authority applies the bail-in tool to the extent required to the rest of liabilities, reducing the principal amount of, or outstanding amount payable in respect of, eligible liabilities in accordance with the hierarchy of claims in bankruptcy proceedings.
(3) When applying subsections (1) and (2) of this section, the losses are allocated equally between shares of the same class or other instruments of ownership or eligible liabilities of the same rank by reducing the outstanding amount payable in respect of those shares or other instruments of ownership or eligible liabilities to the same extent pro rata to their value.
(4) The provisions of subsection (3) of this section shall not apply where exceptions provided for in § 72 of this Act are used.
(5) The provisions of subsections (2) and (3) of this section shall not prevent liabilities which have been excluded in accordance with § 72 of this Act from receiving more favourable treatment than eligible liabilities which are of the same rank of claims in bankruptcy proceedings.
(6) Before applying the write down or conversion under subsection (2) of this section, the Financial Supervision Authority shall convert or reduce the principal amount on instruments specified in subsection (1) of this section when those capital instruments have not already been converted and they contain the terms prescribing the following:
1) the reduction of the principal amount of the capital instrument of the credit institution or entity that is part of the same consolidation group as the credit institution to redress the financial position, restore the solvency or increase the levels of own funds;
2) the conversion of the capital instruments to shares or other instruments of ownership on the occurrence of the reduction specified in clause 1) of this subsection.
(7) Where the principal amount of an instrument has been reduced, but not to zero, in accordance with terms specified in clause (6) 1) of this section before the application of the tool specified in subsection (1) of this section, the Financial Supervision Authority shall apply the write-down and conversion powers to the residual amount of that principal amount of the instrument in accordance with subsection (1) of this section.
(8) When deciding on the write down or conversion of liabilities, the Financial Supervision Authority shall take into account the principle that one class of liabilities is not written down or converted, while a class of liabilities that is subordinated to that class remains substantially unconverted into equity or not written down, unless otherwise provided for in § 72 of this Act.
§ 75. Rate of conversion of liabilities to equity
(1) A conversion rate means the factor that determines the number of shares or other instruments of ownership into which a liability of a specific class will be converted, by reference either to a single instrument of the class in question or to a specified unit of value of a debt claim, and it shall express appropriate compensation to the creditors who have incurred any losses by virtue of the exercise of the write down and conversion powers.
(2) When the Financial Supervision Authority exercises the powers specified in §§ 42 and 56 of this Act, it may apply a different conversion rate to different classes of capital instruments and liabilities
(3) When the Financial Supervision Authority applies different conversion rates, the conversion rate applicable to liabilities that are considered to be senior under applicable insolvency law shall be higher than the conversion rate applicable to subordinated liabilities.
§ 76. Conversion of liabilities arising from derivatives
(1) When the bail-in tool is applied to a liability arising from a derivative, it shall only be applied upon or after closing-out the derivative contract.
(2) Upon the commencement of the resolution proceedings, the Financial Supervision Authority shall be empowered to terminate any derivative contract to which the credit institution under resolution proceedings is a party, except for the derivative contract subject to the provisions of § 72 of this Act.
(3) Where derivative transactions are subject to a netting agreement, the Financial Supervision Authority or an independent valuer appointed by it under Chapter 5 of this Act shall assess the balance of the claim remaining after netting mutual liabilities arising from those transactions in accordance with the terms of the netting agreement.
(4) The Financial Supervision Authority shall determine the value of liabilities arising from derivatives, taking account of the following:
1) appropriate methodologies for determining the value of classes of derivatives, including transactions that are subject to netting agreements;
2) principles for establishing the term at which the value of a derivative position is established;
3) appropriate methodologies for comparing the reduction in value that would arise from the close out of derivative contracts and the application of the bail-in tool with the amount of losses that would be borne by derivatives in bail-in proceedings.
§ 77. Validity of bail-in tool
(1) Where the Financial Supervision Authority exercises the powers specified in clauses 42 (1) 4)–7) and § 56 of this Act, the administrative act of the Financial Supervision Authority on the reduction of principal or outstanding amount due in respect of liabilities or conversion or cancellation of debt shall be published in accordance with § 50 of this Act and it takes effect as of making the administrative act public. The administrative act is immediately binding on the credit institution under resolution proceedings and affected creditors and shareholders.
(2) Where the Financial Supervision Authority has applied the bail-in tool and reduced to zero the principal amount of, or outstanding amount payable in respect of, a liability in relation to contingent liabilities or claims, in the event of which the terms of the obligation or claim have not accrued, that liability shall be treated as discharged for all purposes, and shall not be provable in any subsequent proceedings in relation to the credit institution under resolution proceedings or any successor entity in any subsequent winding up or liquidation proceedings.
(3) Where the Financial Supervision Authority reduces in part, but not in full, the principal amount of, or outstanding amount payable in respect of, a liability by applying the bail-in tool:
1) the liability shall be discharged to the extent of the amount reduced;
2) the relevant instrument or agreement that created the original liability shall continue to apply in relation to the residual principal amount of, or outstanding amount payable in respect of the liability, subject to any modification of the amount of interest payable to reflect the reduction of the principal amount, and any further modification of the terms.
Chapter 7 Use of resolution fund and public tools
§ 78. Terms of using resources of Resolution Sectoral Fund
(1) The resolution fund resources may be used for the credit institution under resolution proceedings where the Financial Supervision Authority decides, in applying the bail-in tool, to exclude or partially exclude certain liabilities from the exercise of that power in accordance with the provisions of § 72 of this Act, and the losses that would have been borne on account of the holders of those liabilities have not been passed on fully to other creditors.
(2) In the case provided for in subsection (1) of this section, the resolution fund resources may be used to do the following:
1) cover losses which have not been absorbed by eligible liabilities and restore the net asset value of the credit institution under resolution proceedings to zero in accordance with the provisions of clause 73 (1) 1) of this Act, or
2) purchase shares or other capital instruments in the credit institution under resolution proceedings in order to recapitalise the credit institution in accordance with the provisions of clause 73 (1) 2) of this Act.
(3) Unless otherwise provided for in this section, the resolution fund resources may only be used if the shareholders of the credit institution under resolution proceedings or the holders of capital instruments and other eligible liabilities have previously absorbed losses to the extent of an amount not less than 8 per cent of the assets of the credit institution, valuated in accordance with the provisions of Chapter 5 of this Act, through write down, conversion or otherwise.
(4) The resolution fund resources may be used to the extent of up to 5 per cent of the assets of the credit institution under resolution proceedings, valuated in accordance with the provisions of Chapter 5 of this Act.
(5) Where all unsecured and non-preferred liabilities, other than covered deposits, of the credit institution under resolution proceedings have been written down or converted in full, the Financial Supervision Authority may, in extraordinary circumstances, take a decision to use the resolution fund resources to the extent exceeding 5 per cent of the assets of the credit institution and where the resolution fund resources derive from:
1) alternative financing sources pursuant to the provisions of §§ 86, 861 or 87 of the Guarantee Fund Act;
2) contributions of the resolution fund provided for in the Guarantee Fund Act that have not been previously used for the benefit of the credit institution under resolution proceedings.
(6) In extraordinary circumstances, the application of the threshold provided for in subsection (3) of this section may be excluded and the resolution fund resources may be used under subsection (2) of this section where:
1) the shareholders or creditors specified in subsection (3) of this section previously absorb losses equal to an amount not less than 20 per cent of the risk weighted assets of the credit institution;
2) the resolution fund includes by way of contributions, not including quarterly contributions made to the Deposit Guarantee Sectoral Fund, raised in accordance with the provisions of the Guarantee Fund Act an amount which is at least equal to 3 per cent of covered deposits and deposits subject to compensation of the credit institutions authorised in Estonia; and
3) the credit institution has assets below 900 billion euros on a consolidated basis.
§ 79. Use of public tools in resolution proceedings
(1) Extraordinary public support may be provided to the credit institution under resolution proceedings to maintain financial stability and other public tools (hereinafter public tools) may only be applied:
1) after consulting the Financial Supervision Inspection;
2) after the Financial Supervision Authority has assessed the feasibility of using resolution tools provided for in this Act or they have actually been applied to the maximum extent.
(2) For the purposes of this Act, public tools mean State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union, or any other support, which, if provided for at national level, would constitute State aid, and that is provided in order to preserve or restore the viability, liquidity or solvency of a credit institution or entity that is part of the same consolidation group as the credit institution.
(3) Public tools shall, inter alia, mean the following performed in relation to a credit institution under resolution proceedings or an entity that is part of the same consolidation group as the credit institution:
1) the acquisition of shares or other capital instruments or any other form of recapitalisation;
2) the achievement of a temporary control relationship, including the expropriation of the shares of the credit institution in accordance with the provisions of the Credit Institutions Act.
(4) Public tools may only be applied if the conditions for the commencement of the resolution proceedings are met and their application complies with at least one of the following conditions:
1) after consulting the Financial Supervision Authority and Eesti Pank, it is assessed that the mere application of a resolution tool does not avoid a negative effect on the financial system;
2) the mere application of a resolution tool does not sufficiently protect the public interests, and where Eesti Pank has previously provided an extraordinary liquidity loan;
3) after consulting the Financial Supervision Authority, it is assessed that the mere application of a resolution tool does not sufficiently protect the public interests and the shares or other capital instruments of the credit institution under resolution proceedings or entity that is part of the same consolidation group as the credit institution have already been acquired and it is appropriate to acquire a controlling interest in that credit institution or entity.
(5) The holdings or capital instruments specified in subsection (3) of this section are sold to legal persons in private law as soon as possible when the market and financial conditions are appropriate.
Chapter 8 Legal remedies
§ 80. Bases for compensation for loss
(1) If the valuation of the financial situation carried out under Chapter 5 of this Act determines that any shareholder or creditor of the credit institution has incurred greater losses than it would have incurred in winding up and liquidation of the credit institution under bankruptcy proceedings, they are entitled to compensation for the difference from the Guarantee Fund.
(2) The provisions of subsection (1) of this section shall also apply where:
1) only parts of the rights, assets and liabilities of the credit institution under resolution proceedings have been transferred in the resolution proceedings, and the shareholders and creditors whose claims have not been transferred receive in satisfaction of their claims at least as much as what they would have received if the credit institution under resolution proceedings had been wound up and liquidated under bankruptcy proceedings;
2) the bail-in tool has been applied in the resolution proceedings in case of which the shareholders and creditors whose claims have been written down or converted to equity do not incur greater losses than they would have incurred if the credit institution under resolution proceedings had been wound up and liquidated under bankruptcy proceedings.
(3) In the event that the ex-post valuation’s estimate of the net asset value of the credit institution is higher than the provisional valuation’s estimate of the net asset value, the Financial Supervision Authority may:
1) increase the value of the claims and instruments of creditors or shareholders which have been previously written down in the course of the application of the bail-in tool, or restore the value;
2) instruct a bridge institution or asset management vehicle to make a further payment of consideration in respect of the assets, rights and liabilities or shares of the credit institution under resolution proceedings paid to the creditors or shareholders.
(4) Claims concerning the determination of the consideration shall be reviewed in the proceedings on petition in a civil procedure. A petition for the determination of the consideration shall be filed with a court within three months of the publication of the resolution of the management board of the Financial Supervision Authority which relies on the ex-post valuation.
(5) The partial or full annulment of a decision of the Financial Supervision Authority to commence the resolution proceedings or apply a resolution tool or power shall not affect the validity of transactions and acts performed in the resolution proceedings and the compensation for loss shall be limited to the compensation for the direct proprietary loss.
Chapter 9 Cross-border consolidation group resolution
Division 1 Resolution colleges
§ 81. Resolution colleges and management thereof
(1) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall establish a resolution college to carry out, in particular, the tasks specified in §§ 18, 30, 33, 35, 84 and 85 of this Act more efficiently and, where appropriate, to coordinate resolution activities and cooperation with relevant third-country resolution authorities.
(2) In addition to the Financial Supervision Authority, the members of the resolution college shall be:
1) the resolution authorities of the EEA countries in which consolidation group entities or significant branches are located;
2) the financial supervision authority exercising supervision on a consolidated basis and financial supervision authorities of the EEA countries in which consolidation group entities or significant branches are located;
3) Eesti Pank or central banks of other EEA countries specified in clauses 1) and 2) of this subsection, unless central banks are the financial supervision authorities, and where financial supervision authorities of the EEA countries decide to involve central banks in the resolution college;
4) the Ministry of Finance or relevant ministries of other EEA countries specified in clauses 1) and 2) of this subsection, unless they are the resolution authorities;
5) the Guarantee Fund or deposit guarantee schemes of other EEA countries specified in clauses 1) and 2) of this subsection;
6) the European Banking Authority as an observer.
(3) The resolution authorities of third countries may be invited to participate in the resolution college as observers if subsidiaries or significant branches established in the European Economic Area are part of the same consolidation group as the parent undertaking established in a third country or if subsidiaries or significant branches established in a third country are part of the same consolidation group as the parent undertaking established in the European Economic Area, provided that they are subject to confidentiality requirements equivalent to the conditions provided for in § 90 of this Act.
(4) A resolution college shall perform the following tasks:
1) exchange information relevant for the development of consolidation group resolution plans, for the application to consolidation groups of preparatory and preventative measures and resolution tools and powers;
2) develop consolidation group resolution plans;
3) assess the resolvability of a consolidation group;
4) address or remove impediments to the resolvability of consolidation groups;
5) decide on the need to develop a consolidation group resolution scheme provided for in §§ 84 and 85 of this Act and reach the agreement on the scheme;
6) coordinate public communication of consolidation group resolution strategies and resolution schemes;
7) coordinate the use of resolution fund resources;
8) set the minimum requirements for own funds for a consolidation group at consolidated and subsidiary level under Division 2 of Chapter 2 of this Act.
(5) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall, under the leadership of the resolution college, perform the following tasks:
1) establish rules of procedure for the functioning of the resolution college, after consulting the other members of the resolution college;
2) coordinate the activities of the resolution college;
3) convene and chair meetings and keep the members of the resolution college fully informed in advance of the organisation of meetings of the resolution college, of the issues to be discussed and of the items to be considered;
4) decide which members and observers shall be invited to attend meetings of the resolution college, taking into account the relevance of the issue to be discussed for those members and observers, in particular the potential impact on financial stability in the EEA countries concerned;
5) keep the members of the resolution college informed of the decisions of those meetings.
(6) Where a credit institution or parent undertaking of the consolidation group established in a third country has a subsidiary or significant branch in Estonia and in at least one more EEA country, the Financial Supervision Authority shall establish a resolution college along with the relevant EEA country (hereinafter third-country related resolution college). If the Financial Supervision Authority and no other financial supervision authority of the EEA country does not exercise supervision on a consolidated basis over the group, the Financial Supervision Authority shall agree with the EEA country who shall chair the third-country related resolution college. The provisions of this section concerning the resolution college shall apply to the third-country related resolution college.
(7) If the Financial Supervision Authority is the resolution authority of the consolidation group, the resolution college need not be established if forms of cooperation or colleges established in any other manner perform the same functions and carry out the same tasks provided for in this section and comply with the conditions and procedures covering membership and participation in colleges provided for in this section and the requirement for the exchange of information provided for in § 83 of this Act.
§ 82. General principles regarding decision-making involving other EEA countries
(1) When making decisions related to the resolution proceedings, the Financial Supervision Authority shall have regard to the potential impact of its decisions on the stability of the financial system of the other EEA country and comply with the following principles in its decision-making:
1) the imperatives of efficacy of decision-making and of keeping resolution costs as low as possible by efficient coordination and approval of decisions when applying a resolution tool;
2) that decisions are made and resolution tools are applied in a timely manner and with due urgency when required;
3) that, in making decisions, consideration is given to the impact of any decision on the fiscal position, resolution fund and deposit guarantee and investor compensation system of relevant EEA countries, including the EEA countries where significant branches are located;
4) that the objective is to balance the interests of various EEA countries and to avoid unfairly prejudicing or unfairly protecting the interests of EEA countries, including to avoid unfair burden allocation across EEA countries;
5) that any obligation to consult under this Act implies that, when applying the proposed decision or tool, consulting is required, in particular, on the circumstances which have or which are likely to have an effect on the parent undertaking or subsidiary of the consolidation group established in the European Union or its branch and an impact on the stability of the EEA country where the group entity or branch has been established;
6) that, when applying resolution tools and powers, resolution plans are followed under the procedure provided for in § 30 of this Act, unless it is considered that the resolution objectives will be achieved more effectively by taking other tools which are not provided for in the resolution plans.
(2) In addition to the provisions of subsection (1) of this section, the Financial Supervision Authority, the Ministry of Finance and Eesti Pank shall cooperate with each other to ensure that resolution decisions are made and tools are applied in a coordinated and efficient manner.
§ 83. Information exchange
(1) The Financial Supervision Authority and the Ministry of Finance shall provide one another and relevant authorities of other countries in a timely manner with information required for the exercise of the tasks under this Act. The Financial Supervision Authority shall primarily provide the Ministry of Finance with information if the state budget or other public funds or resolution fund resources may be required to apply a resolution tool or power.
(2) If the Financial Supervision Authority is the resolution authority of the consolidation group, it shall coordinate the flow of all relevant information between resolution authorities participating in the resolution college and provide them with the relevant information in a timely manner.
(3) If the Financial Supervision Authority has obtained information from a third-country resolution authority, it shall seek the consent of the third-country resolution authority for the onward transmission of that information, save where the third-country resolution authority has already consented to the onward transmission of that information. The Financial Supervision Authority shall not transmit information provided from a third-country resolution authority if the third-country resolution authority has not consented to its onward transmission.
§ 84. Consolidation group resolution in case of notification of resolution authority of subsidiary
(1) Where the Financial Supervision Authority assesses that a subsidiary credit institution that is part of a consolidation group or any other subsidiary in a group meets the conditions for the commencement of the resolution proceedings, it shall notify the following information without delay to the resolution authority of the consolidation group, to the financial supervision authority exercising supervision on a consolidated basis and to the other members of the resolution college:
1) the decision that the subsidiary meets the conditions for the commencement of the resolution proceedings;
2) the proposed relevant resolution tools or powers or insolvency measures or powers.
(2) If the Financial Supervision Authority is the resolution authority of the consolidation group and has received a notification under subsection (1) of this section from the resolution authority of the other EEA country, the Financial Supervision Authority, after consulting the other members of the resolution college, shall assess the likely impact of the tools proposed by the resolution authority that forwarded the notification on the consolidation group and on consolidation group entities, and whether the proposed tools would make it likely that the conditions for the commencement of the resolution proceedings would be satisfied in relation to consolidation group entities in other EEA countries.
(3) If the Financial Supervision Authority assesses in accordance with the provisions of subsection (2) of this section that the proposed tools would not make it likely that the conditions for the commencement of the resolution proceedings are satisfied in relation to consolidation group entities in other EEA countries, the Financial Supervision Authority may take other measures. Where the Financial Supervision Authority has not forwarded the notification under subsection (1) of this section to the resolution authority or resolution authority of the consolidation group, it may also take other measures if the resolution authority of the consolidation group assesses that the proposed tools would not make it likely that the conditions for the commencement of the resolution proceedings are satisfied in relation to consolidation group entities in other EEA countries.
(4) If the Financial Supervision Authority assesses in accordance with the provisions of subsection (2) of this section that the proposed tools would make it likely that the conditions for the commencement of the resolution proceedings would be satisfied in relation to consolidation group entities in other EEA countries, the Financial Supervision Authority shall, no later than within 24 hours after receiving the relevant notification, propose a resolution scheme to the members of the resolution college. That 24-hour period may be extended with the consent of the resolution authority which made the notification.
(5) If the Financial Supervision Authority has made the notification under subsection (1) of this section and in the absence of an assessment by the resolution authority of the consolidation group within the term provided for in subsection (1) of this section, the Financial Supervision Authority may apply the tools or measures specified in clause (1) 2) of this section.
(6) A consolidation group resolution scheme shall:
1) take into account and follow the resolution plans, unless the Financial Supervision Authority assesses along with resolution authorities of other EEA countries that resolution objectives will be achieved more effectively by applying tools which are not provided for in the resolution plans;
2) outline the resolution tools that should be applied by the Financial Supervision Authority and other resolution authorities of the EEA countries in relation to the consolidation group with the aim of performing the resolution functions or meeting the resolution objectives in accordance with the provisions of §§ 4 and 40 of this Act;
3) specify how those resolution tools should be coordinated between the resolution authorities;
4) establish a financing plan of the resolution proceedings which takes into account the provisions of the group resolution plan and principles for sharing responsibility and costs pursuant to the provisions of clause 29 (2) 6) of this Act and § 7321 of the Guarantee Fund Act.
(7) The Financial Supervision Authority shall agree on a consolidation group resolution scheme in cooperation with resolution authorities of other EEA countries.
(8) If the Financial Supervision Authority disagrees with the resolution scheme proposed by the resolution authority of the consolidation group or considers that it is more appropriate to take other independent measures other than those proposed in the resolution scheme for reasons of financial stability, the Financial Supervision Authority shall notify the resolution authority of the consolidation group and other resolution authorities associated with the consolidation group of those circumstances along with any reasons. In disagreeing with the resolution scheme, the conditions agreed in the resolution plan, the potential impact on financial stability in the other EEA countries concerned as well as the effect of the tools or measures applied by the Financial Supervision Authority on other consolidation group entities shall be taken into consideration.
(9) The decision specified in subsection (7) of this section or the decision taken by the Financial Supervision Authority in the absence of a joint decision provided for in subsection (8) of this section shall be recognised as conclusive in respect of the resolution authorities of other EEA countries.
(10) In any case where the Financial Supervision Authority does not implement a consolidation group resolution scheme, it shall, in applying its tools or measures, inform the resolution authorities of other EEA countries regularly about those tools or measures and shall cooperate with them within the resolution college with a view to achieving a coordinated resolution strategy for all the consolidation group entities that are insolvent or likely to become insolvent.
§ 85. Consolidation group resolution in case of notification of resolution authority of parent undertaking
(1) Where the Financial Supervision Authority is the resolution authority of the consolidation group and it assesses that a parent undertaking of the consolidation group meets the conditions for the commencement of the resolution proceedings, it shall notify the following information without delay to the other members of the resolution college:
1) the decision that the parent undertaking meets the conditions for the commencement of the resolution proceedings;
2) the proposed relevant resolution tools or powers or insolvency measures and powers.
(2) The tools or measures specified in clause (1) 2) of this section may include the implementation of a consolidation group resolution scheme in any of the following circumstances:
1) tools or measures applied at parent level make it likely that the conditions for the commencement of the resolution proceedings would be fulfilled in relation to group entities in other EEA countries;
2) tools or measures applied at parent level only are not sufficient to stabilise the crisis situation or are not likely to provide an optimum outcome;
3) one or more subsidiaries of the consolidation group meet the conditions for the commencement of the resolution proceedings according to a determination by the resolution authorities of those subsidiaries;
4) tools or measures applied at consolidation group level will be necessary for the subsidiaries of the group.
(3) Where the tools or measures specified in clause (1) 2) of this section of the Financial Supervision Authority are not reflected in a consolidation group resolution scheme, the Financial Supervision Authority shall take its decision after consulting the other members of the resolution college. In taking its decision, the Financial Supervision Authority shall take into account and follow the resolution plan, unless it assesses along with resolution authorities of other EEA countries that resolution objectives will be achieved more effectively by applying tools which are not provided for in the resolution plan, and the Financial Supervision Authority shall also take into account the financial stability of the other EEA countries concerned.
(4) Under the provisions of subsection (2) of this section, the Financial Supervision Authority as the resolution authority of the consolidation group shall agree on a consolidation group resolution scheme in cooperation with resolution authorities of other EEA countries.
Division 2 Resolution of third-country credit institutions
§ 86. Recognition and enforcement of third-country resolution proceedings
(1) A third-country related resolution college shall, by way of cooperation, take a joint decision on whether to recognise third-country resolution proceedings. The resolution proceedings shall relate to a credit institution or a parent undertaking of a consolidation group established in a third country which:
1) has subsidiaries or significant branches established in Estonia and located in at least one more EEA country;
2) has otherwise assets, rights or liabilities located in Estonia and in at least one more EEA country and governed by the law of Estonia and the other EEA country.
(2) The provisions of subsection (1) of this section shall not apply in the event provided for in § 87 of this Act.
(3) Where the joint decision on the recognition of the third-country resolution proceedings is reached, the Financial Supervision Authority shall implement the decisions taken in the third-country resolution proceedings in accordance with this Act and the Credit Institutions Act.
(4) In the absence of a joint decision on the recognition of the third-country resolution proceedings, the Financial Supervision Authority shall make its own decision on whether to recognise and enforce third-country resolution proceedings. In making the decision, the Financial Supervision Authority shall give due consideration to the interests of other relevant EEA countries where a third-country credit institution or parent undertaking of the consolidation group operates, and to the impact of the recognition and enforcement of the third-country resolution proceedings on the other consolidation group entities and the financial stability in other relevant EEA countries.
(5) To achieve those objectives, the Financial Supervision Authority may:
1) exercise the resolution powers in relation to assets of a third-country credit institution or parent undertaking of the consolidation group that are located in Estonia or governed by the law of Estonia;
2) exercise the resolution powers in relation to rights or liabilities of a third-country credit institution that are held in the name of the branch located in Estonia or governed by the law of Estonia, or where claims in relation to such rights and liabilities are enforceable in Estonia;
3) perfect a transfer of shares or other instruments of ownership to a subsidiary of the third-country consolidation group which has been established in Estonia or require another person to apply the respective tool;
4) suspend payment rights, delivery obligations, security interests or temporarily the performance of a contract, where such powers are necessary in order to enforce third-country resolution proceedings;
5) render unenforceable any right to terminate or liquidate contracts, or affect the contractual rights, of third-country credit institutions or other entities that are part of the same consolidation group as the credit institution, where such a right arises from resolution tools applied in respect of such entities, whether directly by the third-country resolution authority itself or otherwise pursuant to legislation governing the resolution arrangements in that third country.
(6) The Financial Supervision Authority may apply, where necessary in the public interest, a resolution tool with respect to a parent undertaking of the third-country consolidation group where the relevant third-country resolution authority or other authority determines that a credit institution that has been established in that third country meets the conditions for resolution under the law of that third country. The Financial Supervision Authority is empowered to use any resolution power in respect of that parent undertaking.
(7) The recognition and enforcement of third-country resolution proceedings shall be without prejudice to any bankruptcy or liquidation proceedings in respect of entities established in Estonia.
(8) This section shall apply in respect of the third-country resolution proceedings until an international agreement specified in Article 93(1) of Directive 2014/59/EU of the European Parliament and of the Council enters into force with the relevant third country. This section shall also apply following the entry into force of an international agreement with the relevant third country to the extent that the recognition and enforcement of the third-country resolution proceedings is not governed by that agreement.
§ 87. Right to refuse recognition or enforcement of third-country resolution proceedings
The Financial Supervision Authority, after consulting resolution authorities of other EEA countries within a third-country related resolution college, may refuse to recognise or to enforce third-country resolution proceedings if it considers:
1) that the third-country resolution proceedings would have adverse effects on financial stability in Estonia or in another EEA country;
2) that an independent resolution tool in relation to a branch established in Estonia is necessary to achieve one or more of the resolution objectives;
3) that creditors, in particular depositors located or payable in Estonia, would not receive the same treatment as third-country creditors and depositors with similar rights under the third-country resolution proceedings;
4) that recognition or enforcement of the third-country resolution proceedings would have material fiscal implications for Estonia; or
5) that the effects of such recognition or enforcement would be contrary to the effective law.
§ 88. Resolution of branch of third-country credit institution established in Estonia
(1) The Financial Supervision Authority shall have all the powers provided for in this Act in relation to a branch of a third-country credit institution established in Estonia that is not subject to any third-country resolution proceedings or that is subject to third-country proceedings, but one of the circumstances specified in § 87 of this Act applies to that branch.
(2) The powers specified in subsection (1) of this section may be exercised by the Financial Supervision Authority where it considers that the tool is necessary in the public interest and at least one of the following conditions is met:
1) the branch no longer meets, or is likely not to meet, the conditions for its authorisation and operation and there is no prospect that any private, supervisory or relevant third-country action would restore the branch to compliance or prevent insolvency in a reasonable timeframe;
2) the third-country credit institution is, in the opinion of the Financial Supervision Authority, unable or unwilling, or is likely to be unable, to pay its obligations to creditors of the branch, or obligations that have been assumed for the branch, as they fall due and the Financial Supervision Authority is satisfied that no resolution proceedings or bankruptcy or liquidation proceedings under the law of the third country have been or will be initiated in relation to that third-country credit institution in a reasonable timeframe;
3) the third-country resolution authority or other authority has initiated third-country resolution proceedings in relation to the third-country credit institution, or has notified to the Financial Supervision Authority its intention to initiate such proceedings.
(3) Where the Financial Supervision Authority applies an independent resolution tool in relation to a branch, it shall have regard to the resolution objectives and general principles and apply the relevant tool in accordance with the general principles governing resolution proceedings provided for in § 40 of this Act and provisions of Chapter 5 concerning valuation of financial situation.
§ 89. Cooperation with third-country resolution authorities and other authorities
(1) Where appropriate, the Financial Supervision Authority concludes cooperation arrangements with the relevant third-country resolution authority or other authority. The cooperation arrangements shall include an agreement on processes and arrangements between a third-country resolution authority or other authority and the Financial Supervision Authority for sharing necessary information and cooperation in carrying out the following tasks:
1) the development and maintenance of resolution plans;
2) the cooperation in the development of resolutions plans, including of principles of exercising powers under §§ 86 and 88 of this Act and of principles of exercising similar powers provided for in the law of the relevant third countries;
3) the application of resolution tools and exercise of resolution powers and similar powers provided for in the law of the relevant third countries;
4) the application of early intervention measures and consultation before taking any significant tool under this Act or relevant third-country law affecting the credit institution or consolidation group;
5) the coordination of public communication in the case of the application of joint resolution tools and powers.
(2) The provisions of this section shall not preclude the power of the Financial Supervision Authority to conclude bilateral or multilateral arrangements with third countries in accordance with Article 33 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council.
(3) The Financial Supervision Authority shall notify the European Banking Authority of cooperation arrangements concluded with third-country resolution authorities or other authorities.
§ 90. Communication of confidential information to third country
(1) The Financial Supervision Authority and the Ministry of Finance shall communicate confidential information, including recovery plans, to relevant third-country resolution authorities or other authorities only if the following conditions are met:
1) those third-country resolution authorities or other authorities are subject to requirements of professional secrecy that are at least equivalent to the provisions of § 51 of this Act;
2) the information is necessary for the performance by the third-country resolution authorities or other authorities of their resolution functions under national law and is not used for any other purposes.
(2) In so far as the exchange of information relates to personal data, the handling and transmission of such personal data to third-country authorities shall be governed by the Personal Data Protection Act.
(3) Confidential information originating in another EEA country may be disclosed by the Financial Supervision Authority or the Ministry of Finance to relevant third-country resolution authorities or other authorities if the following conditions are met:
1) the resolution authority or other competent authority of the EEA country where the information originated agrees to that disclosure;
2) the information is disclosed only for the purposes permitted by the resolution authority or other authority of the EEA country.
Chapter 10 Additional administrative measures
§ 91. Upper limit for penalty payment for each imposition thereof
(1) In the event of a failure to comply with or inappropriate compliance with the precept issued pursuant to this Act or another administrative act, the Financial Supervision Authority may impose a penalty payment pursuant to the procedure provided for in the Substitutive Enforcement and Penalty Payment Act.
(2) In the event of a failure to comply with or inappropriate compliance with an administrative act, the upper limit for a penalty payment is:
1) in the case of a natural person, up to 5,000 euros for the first occasion and up to 50,000 euros for each subsequent occasion to enforce the performance of one and the same obligation but no more than 5,000,000 euros altogether;
2) in the case of a legal person, up to 32,000 euros for the first occasion and up to 100,000 euros for each subsequent occasion to enforce the performance of one and the same obligation but no more than a total of 10 per cent of the net annual turnover of the whole legal person, including gross income which, in compliance with Regulation (EU) No 575/2013 of the European Parliament and of the Council, consists of commissions and fees and interest and other similar income.
Chapter 11 Liability
§ 92. Failure to disclose and submit information
(1) A failure to disclose or submit to the Financial Supervision Authority a report, document, explanation or other information, including a recovery plan, provided for in this Act in a timely manner, including late submission or disclosure thereof or submission or disclosure of inaccurate, inadequate or misleading information,
is punishable by a fine of up to 300 fine units.
(2) The same act, if committed by a legal person,
is punishable by a fine of up to 32,000 euros.
§ 93. Violation of requirements for intra-group financial support
(1) Violation of requirements for intra-group financial support provided for in §§ 23–27 of this Act
is punishable by a fine of up to 300 fine units.
(2) The same act, if committed by a legal person,
is punishable by a fine of up to 32,000 euros.
§ 94. Violation of minimum requirement for own funds and eligible liabilities
(1) Violation of minimum requirement for own funds and eligible liabilities of a credit institution
is punishable by a fine of up to 300 fine units.
(2) The same act, if committed by a legal person,
is punishable by a fine of up to 32,000 euros.
§ 95. Proceedings
The Financial Supervision Authority is the body conducting extra-judicial proceedings of the misdemeanours provided for in §§ 92–94 of this Act.
Chapter 12 Implementation of Act
§ 96. Bringing into compliance with requirements arising from Act
(1) Credit institutions are required to bring their activities into compliance with the requirements of this Act by 30 June 2015.
(2) Credit institutions are required to bring their activities into compliance with the minimum requirement for own funds and eligible liabilities provided for in Division 2 of Chapter 2 of this Act by 1 January 2016.
Chapter 13 Amendments to other acts
§ 97. – § 103.The provisions concerning amendments to other acts are omitted from this translation
1Directive 2014/59/EU of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (Text with EEA relevance) (OJ L 173, 12.6.2014, p. 190–348).
Eiki Nestor
President of the Riigikogu
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