CHRONICLE OF MONETARY POLICY OF 1999 OCTOBER AND NOVEMBER

12 October

On the proposal of Eesti Pank (Bank of Estonia), Riigikogu (the Parliament) appointed Urmas Kaarlep and Gordon Latimer from PriceWaterhouseCoopers as auditors of the central bank's financial activities of 1999.

15 October

Decree of the Governor of Eesti Pank
On the Acquisition of the Qualifying Holding in a Bank

Based on Article 30, Section 3 and Article 96, Section 2 of the Credit Institutions Act it was decided to approve "The Guidelines for the Submission of Data and Documents Applying for the Permission to Acquire the Qualifying Holding in a Bank" and "The List of Data and Documents to be Submitted when Applying for the Permission to Acquire the Qualifying Holding in a Bank" (see below).

THE GUIDELINES FOR THE SUBMISSION OF DATA AND DOCUMENTS APPLYING FOR THE PERMISSION TO ACQUIRE THE QUALIFYING HOLDING IN A BANK

Part I
General Provisions

1. These Guidelines provide for credit institutions established as public limited companies (hereinafter referred to as the bank) the procedure for submitting data and documents applying for the permission to acquire the qualifying holding in a bank, establishing also the permit application procedure.

2. For the purpose of these Guidelines the qualifying holding means a holding of 10 or more per cent of the stock capital or votes of the bank pursuant to Article 29, Section 1 of the Credit Institutions Act.

3. A person going to acquire a qualifying holding in a bank or increase it to more than 20, 33 or 50 per cent of the bank's stock capital or votes or going to conclude a transaction resulting in the bank becoming a subsidiary in the meaning of Article 7 of the Credit Institutions Act, is obliged in writing to apply for a permission to acquire the qualifying holding (hereinafter referred to as the permit) from the Banking Supervision Department of Eesti Pank (hereinafter referred to as the Banking Supervision Department).

4. In considering the qualifying holding votes are attributed to the person pursuant to Article 10 of the Credit Institutions Act.

5. The size of the holding is calculated pursuant to the following principles:

5.1. If the qualifying holding is going to be acquired through acquiring voting stocks, the size of the holding will be calculated on the basis of votes reflecting the amount of the stock capital calculated in compliance with the articles of association of the bank entered in the commercial register by the date the permit application is submitted.

5.2. If the qualifying holding is going to be acquired or increased through subscribing voting stocks from votes complying with the stock capital during the increase of the stock capital, the size of the holding will be calculated on the basis of the sum of votes reflecting the amount of the stock capital calculated in compliance with the articles of association of the bank entered in the commercial register by the date the permit application is submitted and of votes determined by the new stocks issued.

5.3. If the qualifying holding is going to be acquired through acquiring preferred stocks, the size of the holding will be calculated on the basis of the amount of the stock capital of the bank entered in the commercial register by the date the permit application is submitted.

5.4. If the qualifying holding is going to be acquired during the increase of the stock capital through subscribing preferred stocks, the size of the holding will be calculated on the basis of the sum of the amount of the stock capital of the bank entered in the commercial register by the date the permit application is submitted and of the nominal values of the new stock issue.

5.5. If the qualifying holding is going to be acquired through the acquisition of voting and preferred stocks, the size of the holding will be calculated on the basis of the amount of the stock capital of the bank entered in the commercial register by the date the permit application is submitted.

5.6. If the qualifying holding is going to be acquired during the increase of the stock capital through subscribing voting stocks and preferred stocks, the size of the holding will be calculated on the basis of the sum of the amount of the stock capital of the bank entered in the commercial register by the date the permit application is submitted and of the nominal values of the new stock issue.

Part II
Application to Acquire or Increase the Qualifying Holding

6. The application is submitted to the Banking Supervision Department by a person who is going to acquire or increase the qualifying holding or a proxy authorised by his/her letter of attorney (hereinafter referred to as the applicant).

7. The applicant submits the application personally or by mail together with all documents listed in the "The List of Data and Documents to be Submitted when Applying for the Permission to Acquire the Qualifying Holding in a Bank" (hereinafter referred to as the List).

8. The originals of the documents listed in the List are submitted to the Banking Supervision Department. Documents supplemented to the application are either originals or notarised copies.

9. If the applicant has not submitted all documents listed in the List or if they are inadequately formatted, the Banking Supervision Department will issue within a month as of the day following the receipt of the application a written claim for getting missing documents or correcting formatting errors.

10. The term indicated in Article 31, Section 2 of the Credit Institutions Act commences on the day following the receipt of the application, unless the Banking Supervision Department has issued a written claim pursuant to Clause 9 of these Guidelines. Upon a written claim issued by the Banking Supervision Department, the term stipulated by the law will commence on the day following the receipt of the supplementary documents submitted in compliance with the written claim.

11. The Banking Supervision Department can require additional documents and information in order to specify and check the submitted documents.

Part III
Issue or Refusal to Acquire the Qualifying Holding

12. The issue or refusal of the permit is based on the application and all supplemented documents, additional documents, certificates and other information submitted by the applicant and evaluated by the Banking Supervision Department in compliance with the Credit Institutions Act in their integrity and mutual linkage.

13. The Banking Supervision Department notifies the applicant and the stock ledger registrar in writing of the issue or refusal of the permit.

14. The permit is issued by the Banking Supervision Department setting out the following required information:

14.1. the registration number of the permit and the date of issue;

14.2. name of the person (business name) to who the permit is issued;

14.3. the business name of the bank and the size of the holding permitted to acquire;

14.4. the signature of the Head of the Banking Supervision Department.

THE LIST OF DATA AND DOCUMENTS TO BE SUBMITTED WHEN APPLYING FOR THE PERMISSION TO ACQUIRE THE QUALIFYING HOLDING IN A BANK

In order to acquire the qualifying holding in a credit institution founded as a public limited company (hereinafter referred to as the bank) the following documents and data should be submitted to the Banking Supervision Department of Eesti Pank.

1. A written application, indicating:

1.1. the name of the applicant (business name), personal data, location and address, communication numbers,

1.2. data about contact person(s),

1.3. data about the size of holding acquired in percentages, the number of stocks corresponding the holding to be acquired, the sum of the nominal values of the stocks corresponding to the holding acquired and the basis of the acquisition (eg transaction, acquisition of shares during the increase of the stock capital, etc).

1.4. The application is signed by the applicant or his/her proxy. If the application is signed by the proxy, an authorising document should be attached to the application.

2. On the legal entity acquiring the qualifying holding:

2.1. CVs of the members of the management board or supervisory board or of the bodies replacing them, containing the following data:

2.1.1. on education and professional qualification,

2.1.2. on work experience,

2.1.3. on participation in the business;

2.2. the list of stockholders (shareholders) or members having the qualifying holding together with the information on their share in the capital of the legal entity and votes;

2.3. the valid articles of association of the legal entity;

2.4. a valid excerpt from the registry card of part B of the business register or any other register or an excerpt of a corresponding foreign register or a copy of the registration certificate;

2.5. the address and communication numbers;

2.6. an overview of the operation of the legal entity setting out:

2.6.1. its specific objectives and market position compared to its competitors in this field of activity,

2.6.2. business interests, including aspects which could bring along a conflict of interest between the bank and the legal entity acquiring the qualifying holding,

2.6.3. liabilities arising from loan agreements and other agreements to the bank in which the qualifying holding is going to be acquired,

2.6.4. bank liabilities to the applicant arising from bank guarantees and other agreements,

2.6.5. whether the legal entity has applied for and whether public licences have been issued, refused or revoked to it;

2.7. annual reports together with the auditor's report on the last three economic years. If more than nine months have passed from the end of the last economic year, an interim report on the first half of the economic year will be submitted;

2.8. decisions taken by the competent bodies of the legal entity on the acquisition of the qualifying holding setting out:

2.8.1. the place and time of the meeting of the competent body (bodies),

2.8.2. the composition of the competent body (bodies),

2.8.3. names of the members of the competent body (bodies) and the names of the chairman and minutes-secretary of the meeting,

2.8.4. an excerpt of the decision taken at the meeting containing the voting results.

2.9. If the qualifying holding is going to be acquired or increased during the increase of the bank's stock capital, the following information will be supplemented to the Banking Supervision Department additionally:

2.9.1. the resolution on the increase and terms of the stock capital adopted at the stockholders' general meeting pursuant to requirements provided for in Article 342 of the Commercial Code,

2.9.2. the resolution adopted by the bank's supervisory board containing the information provided in Article 342 of the Commercial Code if the bank's stock capital is increased pursuant to the bank's articles of association by the resolution of the supervisory board.

2.10. If the qualifying participation is acquired or increased as the result of a transaction or if the bank becomes as a result of the transaction a subsidiary of another legal entity, resolutions of the competent bodies of the legal entity will be submitted to the Banking Supervision Department, setting out:

2.10.1. the place and time of the meeting of the competent body (bodies),

2.10.2. the composition of the competent body (bodies),

2.10.3. names of the members of the competent body (bodies),

2.10.4. the names of the chairman and minutes-secretary of the meeting,

2.10.5. resolutions adopted at the meeting on the conclusion of the transaction including with the voting results.

2.11. If a business undertaking belonging to a concern acquires or increases its qualifying holding in a bank, the following information will be submitted to the Banking Supervision Department:

2.11.1. an overview of the concern setting out:

2.11.1.1. the description of the concern's structure together with information about the size of the holdings of member business undertakings and information about all significant links pursuant to Article 7, Section 4 and Article 10, Section 2 of the Credit Institutions Act,

2.11.1.2. information on the declaration of bankruptcy of the business undertaking belonging into the concern unless this is set out in the concern's annual report,

2.11.1.3. information on the issue or revocation of licences and application of other means of influence by the national supervisory body or other supervisory institution to the business undertaking belonging into the concern,

2.11.1.4. information about the liabilities arising from the guarantees and other agreements issued by this bank to business undertakings belonging to the concern;

2.11.2. consolidated annual reports of the concern on the last three years together with the auditor's report.

2.12. A letter of confirmation validating the authenticity of the information set out in the documents, issued by the members of the management board or a replacing body of the legal entity applying for the qualifying holding and signed by all members of the management board. If a member of the management board has not signed due to a physical or other significant obstacle, a written explanation will be attached by the signatories.

2.13. If a non-resident credit institution, an insurance company, an investment fund or other financial institution wants to acquire the qualifying holding, apart from the documents and information provided in this List, a certificate issued by a supervisory body in the country of residence setting out that the credit institution, the insurance company or the investment fund has a valid activity permit or licence and pursues prudential ratios will be submitted to the Banking Supervision Department.

2.14. If a non-resident credit institution wants to acquire or increase the qualifying holding in the bank transforming the latter into its subsidiary as the result of this transaction, additional documents and information provided for in Article 21 Section 2 of the Credit Institutions Act will be submitted to the Banking Supervision Department.

3. The following information about the natural person will be added to the application:

3.1. documents on the financial position of the natural person for the last three years -- a copy of the tax return verified by the Tax Board and a full list of real estate, buildings, movable property and securities owned by the natural person;

3.2. "The Questionnaire Corroborating the Information on Reliability and Immaculate Business Integrity" annexed to this List. The natural person's notarised copies of certificates of education and professional qualification (diplomas from higher educational establishments, documents validating academic decrees, vocational certificates, etc) and other written documents setting out the suitability, experience and business integrity of the person filling in the questionnaire will be attached to the questionnaire.

* * * * *

Decree of the Governor of Eesti Pank
On the Procedure of Submission of the Information on the Conformity of Persons Specified in the Credit Institutions Act and the Declaration of Their Financial Interests

Based on Article 48, Section 7 and Article 49, Section 4 of the Credit Institutions Act the Decree endorsed "The Procedure of Submission of Corroborating Information and Documents on the Reliability, Suitability and Conformity of Executives of Credit Institutions and the Head of the Internal Control Department or the Chairman (Members) of the Internal Audit Committee and of the Declaration of Financial Interests and Conflicts of Interests of the Executives of Credit institutions" (see below).

THE PROCEDURE OF SUBMISSION OF CORROBORATING INFORMATION AND DOCUMENTS ON THE RELIABILITY, SUITABILITY AND CONFORMITY OF EXECUTIVES OF CREDIT INSTITUTIONS AND THE HEAD OF THE INTERNAL CONTROL DEPARTMENT OR THE CHAIRMAN (MEMBERS) OF THE INTERNAL AUDIT COMMITTEE AND OF THE DECLARATION OF FINANCIAL INTERESTS AND CONFLICTS OF INTERESTS OF THE EXECUTIVES OF CREDIT INSTITUTIONS

Part I
General Provisions

1. The current Procedure provides on the basis of Credit Institutions Act the procedure of submission of corroborating information and documents on the reliability, suitability and conformity of executives of credit institutions and the head of the internal control department, chairman and members of the internal audit committee, executives of the credit institution's non-resident subsidiary, the head(s) of the credit institution's non-resident branch and the head(s) of the non-resident credit institution's branch (hereinafter referred to as the persons specified in the Credit Institutions Act), including the conditions and procedure of the declaration of financial interests and conflicts of interests of the executives of credit institutions.

2. Only the persons capable of ensuring sound and reliable management of the credit institution and who comply with the requirements set out in the Credit Institutions Act, ie persons who are competent within their functions, diligent and reliable, can be elected or designated as executives of credit institutions or into other offices specified in the Credit Institutions Act.

3. The executives and the staff of credit institutions are obliged to work with the anticipated foresight and competence, in compliance with the requirements set to their offices pursuant to the credit institution's and its customers' interests. The executives and the staff of credit institutions are obliged to set the credit institution's and its customers' financial interests above their personal financial interests.

4. The management and controlling bodies of the credit institution are obliged to ensure sound and reliable management of the credit institution.

5. The Banking Supervision Department of Eesti Pank (hereinafter referred to as the Banking Supervision Department) checks and evaluates on the grounds of the provisions of the Credit Institutions Act periodically the reliability, suitability and conformity with the requirements provided for in the Act of the persons specified in the Act.

Part II
The Submission of Information Corroborating the Reliability, Suitability and Conformity with the Requirements of the Credit Institutions Act of the Persons Specified in the Credit Institutions Act

6. The corroborating information on the reliability, suitability and conformity with the requirements of the Credit Institutions Act of the persons specified in the Credit Institutions Act is submitted in the questionnaire format.

7. The questionnaire annexed to this Procedure "The Questionnaire on Corroborating Information about the Reliability, Suitability and Conformity with the Requirements of Executives of Credit Institutions and the Head of the Internal Control Department or Chairman (Members) of the Internal Audit Committee" (hereinafter referred to as the Questionnaire) and other documents should be submitted to the Banking Supervision Department:

7.1. by the applicant of the credit institution's licence, applying for the permit pursuant to the procedure established by Eesti Pank about the person who has been elected, appointed or designated as:

7.1.1. the member of the credit institution's management or supervisory board by the founding agreement or the resolution of the founding meeting;

7.1.2. the head of the credit institution's internal control department by the resolution of the supervisory board of the credit institution under foundation or the head or member of the internal audit committee by the resolution of the founding meeting of the cooperative bank;

7.1.3. the head(s) of the non-resident credit institution's branch by the resolution of the competent body of the non-resident credit institution.

7.2. The management board of the operating credit institution applying for the permit to establish or acquire a non-resident subsidiary credit institution or to establish a non-resident branch pursuant to Article 20 of the Credit Institutions Act about a person going to be elected or designated as:

7.2.1. the member of the management or supervisory board of the non-resident subsidiary credit institution:

7.2.2. the head(s) of the non-resident branch.

7.3. The management board of the operating credit institution pursuant to the procedure provided for in Article 48, Section 6 of the Credit Institutions Act about the person who is going to be elected, appointed or designated as:

7.3.1. the member of the management or supervisory board;

7.3.2. the head of the internal control department or chairman of the internal audit committee.

8. The provisions of the Clauses 7.2 and 7.3 of this Procedure are applicable in each repeated election of the member of the management or supervisory board and the head of the internal audit committee. The questionnaire on the head of the internal control department is submitted every two years of work.

9. The persons specified in Clauses 7.1.1-7.1.3, 7.2.1, 7.2.2, 7.3.1 and 7.3.2 of this Procedure (hereinafter referred to as the Questionnaire respondent) fill in the questionnaire in two copies.

10. Filling in the Questionnaire for the first time the following information is added:

10.1. the description of the area of responsibility or the job description approved of by the competent body of the credit institution;

10.2. notarised copies of certificates of education and professional qualification (diplomas from higher educational establishments, documents corroborating academic decrees, vocational certificates, etc) and other written documents setting out the professional suitability, experience and immaculate business integrity of the person filling in the Questionnaire.

11. In the repeated submission of the Questionnaire the documents specified in Clause 10 of this Procedure will be attached only if they have not been submitted earlier or if the information reflected in the documents has changed.

12. A copy of the completed Questionnaire will be submitted to the Banking Supervision Department. The respondent submits the other copy to the person designated internally in the credit institution pursuant to the procedure and conditions provided for in Clause 19 of this Procedure.

13. The respondent is obliged to notify immediately the person designated internally in the credit institution about any significant change in the information set out in the Questionnaire, including:

13.1. his/her criminal sentence entered in the penal register;

13.2. if he/she is declared insolvent;

13.3. other circumstances, which have or could have an impact on the evaluation of his/her credibility, suitability and conformity with the requirements provided for in the Credit Institutions Act.

14. The management board of the credit institution will communicate the information provided pursuant to Clause 13 of this Procedure to the Banking Supervision Department within 10 days of the receipt of the information at the latest. The management board of the credit institution is also obliged to communicate to the Banking Supervision Department immediately the significant information exposed to it, the respondent has not submitted pursuant to Clause 13 of this Procedure but which has or could have an impact on the evaluation of his/her reliability, suitability or conformity with the requirements provided for in the Credit Institutions Act.

15. The Banking Supervision Department could require in cases provided for in the Credit Institutions Act additional documents and information in order to specify and check the submitted documents and certificates.

Part III
The Declaration of Financial Interests and Conflicts of Interests by the Executives of Credit Institutions

16. The persons specified in Clauses 7.2.1, 7.2.2 and 7.3.1 of this Procedure have apart from the information set out in the Questionnaire also to declare their financial interests and conflicts of interests in a written explanation.

17. The explanation has to set out the following information about:

17.1. the stocks, shares, holdings and other securities (including options) issued in the Republic of Estonia and/or abroad belonging to the person and to other persons having equal financial interest, indicating:

17.1.1. the issuer,

17.1.2. the type of stocks, shares, etc,

17.1.3. the amount of stocks, shares, etc,

17.1.4. the quoting body for publicly tradable securities;

17.2. proprietary obligations to the credit institution of the person and other persons having equal financial interest, indicating:

17.2.1. the loan principal and additional loans applied for,

17.2.2. the loan stock at the time of submitting the explanation,

17.2.3. the interest rate,

17.2.4. the date of maturity and information about its extension;

17.3. liabilities to the third parties of the person and other persons having equal financial interest, in the amount exceeding the median six months income in the previous calendar year for natural persons and the three months median turnover in the previous calendar year for legal entity, indicating:

17.3.1. the lender's name (business name),

17.3.2. the loan principal and additional loans applied for,

17.3.3. the loan stock at the time of submitting the explanation,

17.3.4. the interest rate,

17.3.5. the date of maturity and information about its extension;

17.4. other significant circumstances which cause or could cause conflicts of interests, indicating:

17.4.1. significant circumstances related to his/her personality,

17.4.2. significant circumstances related to other persons having equal financial interest.

18. The explanation pursuant to Clauses 16 and 17 of this Procedure is submitted once a year by 1 March at the latest in compliance with the conditions and procedure provided for in Clause 19 of this Procedure to the responsible person designated internally in the credit institution. If the information set out in the explanation changes significantly, they will be communicated to the above person immediately in writing.

Part IV
Final Provisions

19. The questionnaires and explanations completed by the persons specified in the Credit Institutions Act in compliance with this Procedure are collected and preserved by competent bodies of the credit institution responsible for their management, designating a responsible person in the credit institution for this function.

20. Resolutions reflected in Clause 19 of this Procedure have to be documented and all documents compiled pursuant to this Procedure have to be available on the grounds provided for in Article 101 of the Credit Institutions Act.

19 October

Decree of the Governor of Eesti Pank
On Public Disclosure Reports of Credit Institutions

Based on Section 2 of Article 92 and Articles 90 and 91 of the Credit Institutions Act the Decree endorsed the "Procedure for the Preparation of Public Disclosure Reports" (the translation will be published later).

Credit institutions shall submit Public Disclosure Reports to the Banking Supervision Department of Eesti Pank electronically as text files. Tables included in Public Disclosure Reports shall be submitted to the Banking Statistics and Analysis Department electronically in Excel 97 format, pursuant to the terms specified in the Appendix to this Decree. Credit institutions shall publish and submit Public Disclosure Reports to the Banking Supervision Department commencing with the Interim Disclosure Report for 12 months of 1999.

27 October

Decree of the Governor of Eesti Pank
On Establishing the Price of the Framed Sheet of 100kroon Banknotes

The price of the framed sheet of forty-five 100kroon banknotes of the 1999 issue is comprised of the price of the sheet (EEK 4,500), service charge (EEK 100) and the price of the frame purchased by Eesti Pank. Framed sheets of 100kroon banknotes are available at Eesti Pank Museum.

28 October

Decision of the Board of Eesti Pank
On Amending the Decision of the Board of Eesti Pank from 7 May 1996

Proceeding from Section 2 of Article 87 of the Credit Institutions Act and in accordance with Clause 1, Section 2 of Article 9 of the Central Bank Act, the Board of Eesti Pank amended its Decision of 7 May 1996 On the Time for Settlement of Payments and Bank Charges for Overdue Payments (see Eesti Pank Bulletin No 5, 1996, pp 5-6) in such a way that in the period from 30 to 31 December 1999 credit institutions can process the payment orders so that the money would arrive from the payer to the beneficiary within three banking days (usually the period is two banking days).

The Decision is based on the appeal of the Estonian Banking Association to Eesti Pank, asking to allow credit institutions to use the last day of 1999 for making additional copies, preparing status reports and taking other such measures. The Decision of the European Central Bank on shutting down its payment system for the last day of the year as well as the suggestion to choose a working regime different from the usual on 31 December was taken into account too.

The Governor of Eesti Pank was obliged to impose the amendments to the Instructions for Time for Settlement of Payments for the period in question.

9 November

A joint seminar of the European Central Bank and the central banks of the countries striving to join the European Union began in Helsinki, with Vahur Kraft, the Governor of Eesti Pank and Peter Lõhmus, Deputy Governor, participating.

25 November

Decision of the Board of Eesti Pank
On Approving the Statutes of the Banking Supervision Department of Eesti Pank

Due to legislative amendments and the improvements in the organisational structure of Eesti Pank and proceeding from Section 5 of Article 2 and Clause 5, Section 2 of Article 9 of the Central Bank Act, the Board approved the Statutes of the Baking Supervision Department of Eesti Pank (the translation will be published later). The Decision of the Board of 7 November 1995 on the previous version of the Banking Supervision's Statute was declared null and void.