Work of Financial Supervision Authority assessed highly by IMF
The Financial Sector Assessment Program report by the International Monetary Fund (IMF) gave the work of the Financial Supervision Authority, including the professionalism of its supervision specialists, a high assessment.
"In the assessment of the IMF, strong capital supervision of banks merits highlighting. The IMF confirmed that our banking supervision, including the assessment of the capitalisation level of banks, in every respect, accords with both international standards and the capital requirement directive. The organisational structure of the Financial Supervision Authority enables, in the assessment of the IMF, the performance of effective supervision, taking into account the peculiarities of the financial market in Estonia. The report also points out that our supervision capability has improved significantly in the areas of insurance and securities," Raul Malmstein, Chairman of the Management Board of the Financial Supervision Authority, commented.
The FSAP (Financial Sector Assessment Program) assessment mission to Estonia by the International Monetary Fund took place 18-27 February 2008, and the follow-up mission in December 2008. Estonia was assessed last based on the FSAP program criteria in 2000.
As part of the IMF Financial Sector Assessment Program, the organisation of banking, insurance and securities supervision, the strength analyses and report on the banking and insurance sectors were assessed, and an assessment was given to the Financial Supervision Authority as an organisation on the whole.
The activity of the Estonian Financial Supervision Authority was assessed to be, in every respect, in accordance with international standards and the directives of the European Union and no significant deficiencies were identified. One of the essential recommendations brought up by the IMF concerned the need to increase the number of staff at the Financial Supervision Authority due to additional activities pertaining to the new higher risk-sensitive capital adequacy framework Basel II being implemented in the European Union and the implementation of the similar Solvency 2 framework.
The IMF also submitted its recommendations for the enhancement of the supervision of the funded pension system, the regulation of fund managers? personal transactions and emphasised the need to ban in marketing the tying of pension funds to other financial services. Further to the recommendations by the IMF, from 1 January 2009, the supervision of the launched disbursements phase of the pension system into the risk-based supervision model for life insurance companies. Based on the proposal by the Financial Supervision Authority, today the tying of pension funds to other financial services in sales has been banned with the Funded Pensions Act. The Financial Supervision Authority has also submitted to the Ministry of Finance the proposal to regulate the personal transactions of the management and staff of fund managers.
The Financial Sector Assessment Program, FSAP, is a joint program established in 1999 by the IMF and the World Bank, which aims to assess in a country the state of its financial system, risk management, development directions and needs and supervision organisation. The mission report was submitted to the IMF board of directors and the report was published together with Estonia?s Article IV consultations report on 10 March 2009.