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 2016 Eesti Pank named two banks as systemically important credit institutions: Swedbank AS and AS SEB Pank. Those banks are subject to a 2% capital buffer requirement that applies to their total risk exposure. The requirement must be met by common equity tier 1 own funds.

Buffer rate

2%

Applies to

Swedbank AS and AS SEB Pank

Risk exposure

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

From

01/08/16

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"

The reason for introducing the other systemically important institutions buffer is the high level of concentration in the Estonian banking sector, where the two biggest banks hold over 60% of the total assets of the banking sector with a value equal to 70% 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.