Macroprudential policy tools
The macroprudential tools available to Eesti Pank can be divided into three groups.
- Moral suasion measures, with which Eesti Pank can draw the attention of market participants to vulnerabilities in the financial system and so influence their decisions indirectly. This can include advice to market participants, but also covers the analysis and risk assessments in the Financial Stability Review, public presentations and press releases. Eesti Pank can also give its opinions and recommendations on measures that fall within the remit of other institutions.
- Measures set out in the European Union’s Capital Requirements Regulation and Directive, where the principles for implementation and coordination have been harmonised in the European Union. These include capital buffer requirements such as countercyclical capital buffer, systemic risk buffer, and systemically important institutions buffer, and also the measures under Article 458 of Regulation (EU) No 575/2013.
- Requirements for issuing loans, which derive their legal basis from the Credit Institutions Act. Eesti Pank has the right to set limits on the loan-to-value ratio, the debt service-to-income ratio, the maximum maturity of loans, and the loan-to-deposit ratio of credit institutions.
Eesti Pank generally assesses the need to set or change macroprudential measures twice a year and publishes the results in the Financial Stability Review.
The macroprudential measures of Eesti Pank
|Countercyclical capital buffer||1%||07.12.2022|
|Other systemically important institutions buffer||Swedbank AS||2%||01.08.2016|
|AS SEB Pank||2%||01.08.2016|
|Luminor Bank AS||2%||01.07.2018|
|AS LHV Pank||2%||01.01.2023|
|Risk weight floor for mortgage loans*||15%||30.09.2019|
|Requirements for issuing housing loans**||loan-to-value (LTV) limit||85%***||01.03.2015|
|debt service-to-income (DSTI) limit||50%****||01.03.2015|
|maximum maturity||30 years||01.03.2015|
* The floor is set for the average risk weight of the mortgage loan portfolio of credit institutions that use the Internal Ratings based Approach.
** The limits may be breached by 15% of the volume of mortgages issued each quarter.
*** The limit is 90% for loans guaranteed by KredEx.
**** The calculation of payment must use the interest rate set in the contract plus two percentage points or 6%, whichever is higher.
The macroprudential measures reciprocated by Eesti Pank
Systemic risk buffer for Lithuanian retail
Recommendation of the ESRB ESRB/2022/1
- Eesti Pank is requiring banks to hold larger capital buffers because of the rapid growth in credit (29.11.2022)
- Eesti Pank is raising its capital buffer requirement for LHV Pank as a systemically important institution (26.11.2021)
- House buyers must consider whether they are able to repay their loan when interest rates rise (03.11.2021)
- Eesti Pank continues to require caution from two large banks to reduce the risks from housing loans (20.07.2021)
- Eesti Pank has updated the principles for defining banks as systemically important (20.11.2020)
- Eesti Pank is cutting the capital buffer requirements for the banks by 110 million euros (25.03.2020)
- Eesti Pank sets a risk floor for mortgage loans (29.08.2019)
- The central bank requires additional capital buffers from two banks (17.04.2018)
- Eesti Pank will require Swedbank and SEB to hold additional buffers from August (31.05.2016)
- Eesti Pank introduced a capital buffer requirement for banks that responds to the credit cycle (02.12.2015)
- Eesti Pank has set three requirements for issuing housing loans (04.03.2015)
- Eesti Pank is setting requirements for housing loans from March 2015 (16.12.2014)
- Eesti Pank is planning to set requirements for housing loans (29.10.2014)
- Eesti Pank is to toughen capital requirements for banks from August (20.05.2014)
- Measures taken by Eesti Pank during the period of rapid credit growth (2009)