Integration between Financial Supervision Authority and European Union supervisory system becomes deeper
“The integration of the Financial Supervision Authority with the supervisory system of the European Union is deepening and encompassing new fields, as the European Commission seeks to establish a functioning single financial market,” said the chairman of the management board of the Financial Supervision Authority, Kilvar Kessler, in presenting the Financial Supervision Authority’s annual report to the Parliament.
“The mass and level of detail of the regulations allow for better protection of consumer interest, but on the other hand it is a burden on small and medium-sized enterprises, a category that encompasses all Estonian financial service providers,” said Kessler.
“It is in our interests to have less stringent regulations in place for SMEs where reasonable, as they are the engine of private enterprise and job creation,” he added.
“From the point of view of financial supervision, a positive area with regard to implementation of penal law is that heavy fines and/or imprisonment are becoming the new normal. These are topics I have advocated over 10 years and they clearly increase the liability of those who disregard the rules in the financial sector. After all, the financial market operates with a significant amount of other people’s money. Violations result in losses of other people’s assets and worst of all, they abuse trust in the honesty and transparency of the financial market. The course toward the new normal is supported by more recent European Union legal acts,” said Kessler.
In his overview of the Estonian financial market, Kessler emphasized that the regulated financial market in Estonia is, for the purposes of the asset volumes, controlled by corporate banking groups. 2013 was a year of stability and stabilization in the Estonian banking sector. As to asset management, it was a year of growth, led and propelled by the second pillar compulsory pension funds. In the insurance sector, shrinking margins and increasing competition put stress on the market.
“In 2013, the banking market was characterized by a trend of smaller banks seeking our new markets and opportunities for growth. Larger banks tended to be cautious in taking on risks. In the case of larger banks as well, we could see pressure for saving on costs, which occasionally manifested itself as a reputational and operational risk. Banks are well capitalized, they have capital buffers in place to cover risks and fiduciary norms are met with room to spare.
By the end of 2013, funds had 2.5 billion euros in assets. The last time similar levels were attained was in late 2007. But the structure of the funds has changed since that time: in 2013, the second pillar funds managed 1.77 billion euros, while the figure in 2006 was 0.5 billion.
Premiums amassed from non-life and life insurance grew in comparison to 2012. Motor TPL and motor own damage insurance still made up the main share of non-life insurance products. A drop in the share of motor own damage insurance could be seen, though. Loss and expense ratios have increased,” said the chairman of the management board of the Financial Supervision Authority Kessler.
Find the full report here