The aim of the other systemically important institutions buffer is to increase the resilience of systemically important market participants. Their importance may stem from their size, their complexity or their interdependence with other participants in the financial system.

In 2018 Eesti Pank named four banks as systemically important credit institutions: Swedbank AS, AS SEB Pank, Luminor Bank AS and AS LHV Pank. Swedbank AS and AS SEB Pank banks have been subject to a 2% capital buffer requirement since 1 August 2016. For Luminor Bank AS an O-SII buffer of 2% will be introduced from 1 July 2018. The buffer rate for AS LHV Pank will be raised from its current 0.5% to 1% from 1 January 2019. The buffer requirement applies to the total risk exposure of systemically important credit institutions, and must be met by common equity tier 1 own funds.

Buffer requirement

Swedbank AS: 2% (from  01/08/2016)
AS SEB Pank: 2% (from  01/08/2016)
Luminor Bank AS: 2%(from 01/07/2018)
AS LHV Pank: 0.5%* (from  01/01/2018)

Risk exposure

Total risk exposure amount calculated in accordance with Article 92 (3) of Regulation (EU) No 575/2013

Legal basis

The Decree of the Governor of Eesti Pank No.7 of 30 May 2016 "The list of other systemically important credit institutions and the requirement for the other systemically important institutions buffer"

* AS LHV Pank will be subject to a buffer rate of 1% from 1 January 2019.

The reason for introducing the other systemically important institutions buffer is the high level of concentration in the Estonian banking sector, where the four systemically important banks hold roughly 85% of the total assets of the banking sector with a value equal to over 90% of GDP. Furthermore, the structure of the assets and liabilities of the biggest banks is similar, and so they are vulnerable to the same sort of risks. The additional buffer will help reduce the negative impacts that possible financial problems at one systemically important bank could cause for the functioning of the financial system and for the real economy.

Eesti Pank assesses the systemic importance of credit institutions each year and updates the list of credit institutions that are important to the domestic financial system. Eesti Pank uses the guidelines issued by the European Banking Authority (EBA) for its assessment, and also considers the specific features of the Estonian financial system.

See The principles for identifying the systemically important credit institutions in Estonia and calibrating the buffer rates