Strategy 2011-2015 of the Financial Supervision Authority
PRIORITY 1. IMPROVEMENT OF SUPERVISORY CAPACITIES OF THE FINANCIAL SUPERVISION AUTHORITY
1.1. Consistency and enhanced transparency of procedures
To achieve the consistency and enhanced transparency of procedures through formalized and digitalised work processes. To prepare various handbooks, especially on licensing and fit & proper procedures. Consistent procedures reduce also the personnel risk. To continue implementing IT-solutions, e.g. implementation of mail workflow solutions, etc., for the better management and evaluation of internal workflows. To improve the arrangement of project-based internal work processes, in order to ensure the optimal use of resources of a small organization and increase thus the legal certainty of complex procedures.
1.2. Improved risk-based supervision model
To consider financial market developments when improving the risk-based supervision model. To increase the weight of risk-based supervision model in the supervision of pension funds, including the risk-based analysis of portfolios. To complement the risk-based supervision model in the insurance sector and to ensure the conformity of the model with requirements of the new capital adequacy framework Solvency II. To establish the knowledge base that is based on supervised entities and risks (IT solution that enables to add and use systematically various supervisory data based on supervised entities and risks). To cooperate actively in the work of supervisory colleges in order to establish common methods of analysis (common synchronized process for analyses and decision making). To organize regular national crisis exercises together with the Ministry of Finance and the Bank of Estonia. To prepare recommendations, especially in the area of prudential supervision, for regulating the framework of preventive administrative measures, in order to ensure timely supervisory intervention and adequate flexibility in implementing such measures. To ensure the readiness to implement the new capital adequacy framework for banks Basel 4, including to perform impact assessments on changed capital requirement and established liquidity requirement, to participate in the development of regulations related to Basel 3 at national level, and to design the adequate supervisory model.
1.3. Optimized reporting
To follow the principles of proportionality and materiality in optimizing the supervisory reporting burden. To provide the supervised entities with the possibility of online reporting, in order to optimize the costs of preparing and submitting supervisory reports. To provide the supervisory authorities of Member States and EU supervisory authorities with the possibility to submit reports in the format and by deadlines established by the EU. To increase the weight other control methods besides the computer-based control, including the weight of on-site inspections, in order to increase the reliability of reported data.
1.4. Lower risks of the financial sector
To make proposals in the implementation of the Supervisory Review and Evaluation Process for increasing legal certainty and transparency, including the right to require additional capital from supervised entities. To consult the home country (group supervision) supervisory methodology when making the supervisory evaluation on cross-border groups, and to make corresponding amendments to its own supervisory process, if necessary. To improve the methodology of stress testing, to update the systemic model for performing supervision over major branches, and to specify the responsibilities and the limit of liability in supervising various sectors, especially for the supervision of liquidity risk. To conclude detailed agreements in case of credit institutions of systemic importance, in order to receive information from home country supervisory authorities on the management of risks in centralized business lines. To improve the monitoring of the organization of financial institutions (conflict of interests, personal transactions, attractions, etc.). To manage through improved monitoring the risk that employees of supervised entities or entities themselves prioritize – with no legal basis – their own interests over the interests of their clients or that the complex organization or unclear division of responsibilities allow infringements or irresponsibility in the entity.
1.5. Improved service provision standards
To agree with the home country supervisory authority upon the control principles under the Markets in Financial Instruments Directive (MiFID) in respect of major branches of credit institutions that provide investment services, based on relevant documents of the European Securities Market Authority, in order to ensure the equal treatment of market participants in the Estonian market. To focus the attention on the supervision of anti-money laundering in case of payment authorities. To enforce and implement the Responsible Lending Guideline, in order to specify the due diligence level of credit institutions in granting loans. To contribute to the work of audit committees of listed public limited companies and supervised entities, as well as to updating of Good Corporate Governance (GCG) and development of auditing.
1.6. Discourage potential financial market abusers
To explain the harmfulness of financial market abuses. To disclose punishments decides by the Financial Supervision Authority. To disclose the results of procedures to the extent that does not jeopardize the procedure or is not in contradiction of law. To contribute with know-how to criminal proceedings initiated on the basis of notifications received from the Financial Supervision Authority. To continue working – together with the Ministry of Finance and the Ministry of Justice – with proposals, which are aimed at increasing considerable the pecuniary punishment rates in case of infringements in the financial sector. To continue cooperating with market participants and the development of Advisory Guidelines of the Financial Supervision Authority, if necessary, in order to prevent potential infringements in financial mediation area. To continue cooperating and to support such developments that would enhance the efficiency of the Police Board and the Prosecutor’s Office in conducting proceedings on market abuses in the financial sector (specialized units, trainings, etc.). To provide the employees of these institutions with the possibility to participate in a short-term training in the Financial Supervision Authority, in order to improve their knowledge on the functioning of the financial sector and the specialities of the supervisory work.
1.7. Motivated employees
The human resources policy of the Financial Supervision Authority acknowledges and values highly qualifies specialists. To improve the reputation of the Financial Supervision Authority as an excellent employer. To support short-term study visits to foreign supervisory authorities and to make maximum use of possibilities provided by the cooperation at the level of European supervisory authorities (3L3) in training its employees. To prefer 3L3 trainings and internal group trainings because of cost-efficiency.
PRIORITY 2. FINANCIAL SUPERVISION AUTHORITY AS AN ACTIVE COOPERATION PARTNER
2.1. Cooperation with market participants, clarification of norms and guidance of the financial market
To continue providing guidance to the financial market through instructions and circulars in order to ensure the uniform implementation of norms. To prepare detailed instructions for market participants and new entrants on various licensing procedures. To pursue the decreased level of regulative and supervisory arbitrage, by making proposals for the elaboration of legal framework on the provision of financial services in different financial sectors, in order to ensure the equal treatment of consumers of financial services as well as their knowledge of risks that accompany the service and the adequacy of service. To base various supervisory proceedings (on-site inspections, etc.) on risk assessments of the Financial Supervision Authority and on the principle of equal treatment of supervised entities. To continue the cooperation with sector-based associations and to make at least one satisfaction survey among market participants in order to receive better feedback from the financial market.
2.2. National professional cooperation
To cooperate actively with the Ministry of Finance and the Bank of Estonia in order to support financial stability and market development. To ensure openness and constructiveness in its activities, based on concluded cooperation agreements and well-established cooperation networks. To provide its know-how, if possible, in order to train its cooperation partners (the Prosecutor’s Office and the Police Board) and judges in the financial area, in order to ensure the effective, objective and fast proceeding of financial crimes and to increase thus the reliability of the financial sector. To support and, if necessary, to consult the establishment of a mechanism for solving extra-judicial consumer disputes. To make a proposition to the Estonian Competition Authority for the conclusion of a cooperation agreement. To participate actively in the development of the national financial literacy strategy and in the subsequent implementation of this strategy.
2.3. Cross-border professional cooperation
The role of cross-border cooperation will increase considerably in the activities of the Financial Supervision Authority in the nearest future. This is based on new EU regulations that cover the cross-border cooperation, cross-border procedures, the necessity to harmonize proceeding principles and methodologies as well as the establishment of new 3L3 level supervisory authorities. This necessitates the increase in the contribution of the Financial Supervision Authority to the harmonization of the EU financial market (drafting new regulations, ensuring the uniform application of regulations). In order to strengthen the presentation of its position at the 3L3 level, it is important to establish strategic partnerships, especially with countries surrounding the Baltic Sea as well as with host countries in case of specific issues. To participate actively in the establishment of new 3L3 level authorities, in order to ensure the adequate representation of our interests in the management bodies of these authorities. To support at the 3L3 level such regulative initiatives that would improve the efficient functioning of the internal market, so that the delegation of supervisory rights would be accompanied by the respective delegation of responsibilities.
PRIORITY 3. ROLE OF THE FINANCIAL SUPERVISION AUTHORITY IN PROVIDING CONSULTATION AND GUIDANCE TO CONSUMERS OF FINANCIAL SERVICES
3.1. Participation in the improvement of financial literacy
The project “Minuraha projekt” is aimed at increasing the level of financial literacy, to introduce this issue to people and to increase the awareness of people in the long run. To participate in the process of preparing the financial literacy strategy. Main priorities of the project “Minuraha projekt” are as follows: (1) training of trainers, i.e. training of teachers, career counsellors and other specialists on financial literacy issues; (2) teaching financial literacy issues in general education schools; (3) cooperation projects with different organizations in order to reach various target groups, draft necessary informative materials for them and organize trainings. To make proposals for defining the responsibility for the promotion of financial literacy in the Financial Supervision Authority Act, in order to clarify its mandate.
3.2. Presentation of specific expertise of the Financial Supervision Authority
Studies on the activities of the Financial Supervision Authority show that the reputation of the Authority is good. To continue the strengthening of achieved level of reputation through proactive communication as well as systematic and relevant presentation of its activities. To differentiate more clearly the communication on the Financial Supervision Authority from the communication on the project “Minuraha projekt”. Employees of the Financial Supervision Authority will hold lectures on professional issues and participate in the writing of topical expert articles on the activities in the financial sector.