ESTONIA
Report on Observance of Standards and Codes (ROSC)
Update document by Ministry of Finance of the Republic of Estonia and Bank of Estonia
An assessment of Estonia's observance of and consistency with international standards and core principles in the financial sector was undertaken at the request of Estonian authorities under the auspices of the Financial Sector Assessment Program (FSAP) by World Bank and the IMF during the first half of 2000. The assessment covered the following areas of financial policies:
- Banking supervision - compliance with the Basle Core Principles for Effective Banking Supervision;
- Insurance supervision - compliance with the International Association of Insurance Supervisors' (IAIS) Supervisory Principles;
- Securities supervision - compliance with the International Organization of Securities Commissions' (IOSCO) Objectives and Principles of Securities Regulation;
- Payment systems - compliance with the Committee on Payment and Settlement Systems' (CPSS) Draft Core Principles for Systemically Important Payment Systems;
- Monetary and financial policies - compliance with the IMF's Code of Good Practices on Transparency in Monetary and Financial Policies.
The reports on Estonia's compliance with relevant standards and codes (Report on the Observance of Standards and Codes, ROSC) as of March 31, 2000 will be published by the IMF on July 18, 2000. In addition, Estonian authorities have introduced additional measures after March 31, 2000 to improve the compliance of Estonia's practices with internationally recognized standards and codes. The most important steps are described in the following table.
As of July 17, 2000, the following changes have taken place:
|
Standard |
Current assessment by the IMF and World Bank |
Corrective action proposed by the IMF and World Bank |
Update |
|
Basle Core Principle 8: Assets |
Materially noncompliant |
Issuing decree on loan classification and loan loss provisioning |
The Decree No 9 by the Governor of the Bank of Estonia on rules for loan classification and loan loss provisioning was signed on June 27, 2000 |
|
Basle Core Principle 11: Country risk |
Materially noncompliant |
Issuing capital adequacy regulations to cover these risks |
The Decree No 9 by the Governor of the Bank of Estonia on rules for loan classification and loan loss provisioning signed on June 27, 2000 partially covers guidance on the management of country and transfer risk |
|
IAIS Supervisory Principle 5: Prudential Assets |
Broadly observed |
Establishing restrictions on the use of derivatives |
The new Insurance Law was passed by the Parliament on June 6, 2000. The Article 43 of the Law regulates use of derivatives. Use of derivative instruments is only permitted for managing risks and provided that several other provisions are met. Insurance companies are not permitted to write put-options |
