31 July 2019
The European Banking Authority (EBA) published today a response to a letter received from the European Commission (EC) regarding an EBA Opinion on the intention by Eesti Pank, the Estonian Central Bank, to introduce stricter national measures for credit institutions in Estonia using the Internal Ratings Based (IRB) approach, in accordance with Article 458 of the Capital Requirements Regulation (CRR). In its Opinion, the EBA had concluded that the evidence presented by Eesti Pank was not sufficient to support the suitability and appropriateness of the suggested measure. In the letter received by the Commission, the EBA was asked to either revise or confirm its Opinion following the submission of additional information by Eesti Pank. In its reply, the EBA assessed that there were not sufficient grounds to change its initial Opinion.
On 15 April 2019, Eesti Pank notified the EBA of its intention to introduce a credit institution-specific minimum level of 15% for the average risk weight on residential mortgage loans applicable to credit institutions that have adopted the IRB approach in Estonia. In its Opinion in response to the notification, the EBA concluded that the evidence received from Eesti Pank was not sufficient to support the suitability and appropriateness of the suggested measure. The EBA raised several concerns on the choice to deploy Article 458 of the CRR to address Eesti Pank's concerns.
The EBA's Opinion was approved by the EBA Board of Supervisors and submitted to the EC on 15 May 2019. Separately, the EC informed Eesti Pank that it considered the notification incomplete and that it did not provide all the information required to ascertain that the proposed measure complies with the requirements of Article 458 of the CRR.
The EC shared the additional information received from Eesti Pank with the EBA and invited it, in its letter of 27 June 2019, to either revise or confirm its original Opinion. The EBA assessed the additional information received and concluded that its Opinion of 15 May 2019 remains valid.