At today’s sitting, Chairman of the Management Board of the Financial Supervision Authority Kilvar Kessler gave the Riigikogu an overview of the Authority’s last year's Annual Report .
Kessler highlighted inflation, monetary policy and more conservative financing conditions, the prices of raw materials, energy, stocks, and real estate, instability in supply chain, and other similar factors as significant influences on the economic environment in the near future. He sees stagflation as a serious risk, with slow growth or outright shrinking of the economy adding to the high inflation rate.
“This will increase the cost of living while taking away people’s jobs. All this will impact the viability, reliability, and choices of businesses and households. As a society, it makes sense to acknowledge these risks and discuss different ways to manage, reshape, or accept these well ahead of time. All this plays a major role in financial supervision because the materialisation of credit risks, market risks, liquidity risks but also political risks can lead to drastic changes in the financial sector, which might consequently no longer function the way that the society wishes, or, in the worst-case scenario, might lead to significant added costs, for example in the case where compensation of bank deposits is called for through the Guarantee Fund,” he said.
In the near future, the Financial Supervision Authority intends to focus on the sustainability of financial intermediaries and the existence of sufficient buffers to absorb the damage from risks without jeopardising the rights of depositors and other creditors. “This is the right time to test the functionality of the financial network. For example, the Guarantee Fund must have a suitable framework for fulfilling its tasks, including borrowing,” Kessler said.
We need to understand that the framework for the realisation of loan guarantees, insolvency, and legal remedies is something that would help to ensure socially desirable results even in conditions of a crisis. “Do we have the processes and capabilities in place on when and how the state can help debtors to bounce back? In the worst-case scenario, it would only become clear in the heat of a crisis that the state expects the banks to fulfil tasks of social nature, and banks as businesses expect the state to take care of the same. Our experience shows that decisions that have been born out of confusion and adopted at haste could potentially upset all the concerned parties,” he said.
During the debate, Riina Sikkut (Social Democratic Party) took the floor.
Two Bills passed the second reading
The Bill on Amendments to the Government of the Republic Act and Other Acts (reorganisation of the National Centre for Defence Investments into a governmental authority) (590 SE), initiated by the Government, passed the second reading. The Bill changes the division of tasks in the area of government of the Ministry of Defence and reorganises the National Centre for Defence Investments into a governmental authority. The purpose of the amendments is to consolidate the administration of the assets necessary for national defence and the functional capacity of the construction works that serve national defence purposes into a single whole.
In order to ensure more effective independent defence capability, the functions and the exercise of supervision related to the duties imposed in the interests of national defence would be transferred from the Defence Resources Agency to the National Centre for Defence Investments. The procedures related to ensuring the functional capacity of the construction works that serve national defence purposes would be transferred from the Ministry of Defence to the National Centre for Defence Investments.
The Defence Resources Agency, which has so far been dealing with the resources necessary for national defence, including the imposition of duties on assets and resources necessary for national defence, would be organising only the services and tasks related to human resources in the future. Under the Bill, the Ministry of Defence, which so far has been performing the tasks relating to ensuring the functional capacity of the construction works that serve national defence purposes, including the approval of spatial plans and implementing the Earth’s Crust Act, would be focusing mainly on shaping the sectoral policy and on capability planning. Since the functions to be transferred are connected to the exercise of public authority, the National Centre for Defence Investments would be reorganised from an administered state agency into a governmental authority.
In addition, the Bill would allow a more flexible and faster transfer or grant of temporary use of state assets to authorities who need them for the resolution of an emergency, increased defence readiness, or a state of war, or for supporting a mobilisation or a demobilisation, or for the organisation of these.
During the debate, Leo Kunnas, Riho Breivel (both from Estonian Conservative People’s Party), and Tarmo Kruusimäe (Isamaa) took the floor.
The Bill on Amendments to the Aviation Act and Other Acts (524 SE), initiated by the Government of the Republic, also passed the second reading. The Bill organises the requirements for state aviation, creates a basis for the establishment of mainly geographical zones and temporary geographical zones to restrict the flight of unmanned aerial vehicles, and organises the requirements relating to the use of airspace for national defence purposes.
The Bill assigns to the Estonian Air Navigation Services the following national defence tasks: ensuring the provision of the air traffic service, communication, navigation, and surveillance services, and air navigation service. The specific manner for the Estonian Air Navigation Services to help the Defence Forces would be outlined in the airspace control plan established by the Commander of the Defence Forces.
With a view to ensure aviation safety, the owners or holders of open firing ranges or field firing ranges must forward to the Transport Administration the coordinates of the firing range before it is taken into use in order for pilots and remote pilots to take it into account when choosing their routes and flight altitudes.
The Economic Affairs Committee added provisions in the Bill prior to the second reading. These provisions would allow to erect constructions necessary for national security or for resolving crisis situations through a simplified procedure, which means more quickly than normal. The decision on whether a construction is necessary to ensure national security or resolve a crisis situation is made by the government at the proposal of the relevant minister, with the proposal also including the pertinent threat assessments.
Andres Metsoja (Isamaa) took the floor during the debate.
The second reading of one Bill was suspended
On the motion of the leading committee, the Riigikogu decided to suspend the second reading of the Bill on Amendments to the Natural Gas Act, the Emergency Act and the Competition Act (596 SE), initiated by the Government. The purpose of the Bill is to ensure the resilience of the Estonian gas system during a prolonged interruption of the gas supply.
The Bill would create a regulation to ensure the continuity of the gas system and to cover the costs relating to the storage of a strategic gas reserve. According to the Bill, from 1 May 2023, the costs of managing the gas reserve would be covered from the stockpiling fee collected from balance providers. The costs of storage for the first year would be covered from the state budget.
The Bill will also specify the obligation to coordinate the conditions for the use and the methodology for calculating the tariffs for the use of LNG terminals, including by an addition of the regulation to the Competition Act concerning the obligation of LNG terminal operators to contribute to the budget of the Competition Authority as regulated persons.
Before the second reading, the Economic Affairs Committee introduced an amendment to the Environmental Charges Act into the Bill, obliging builders of wind energy stations to pay turbine dues to local residents. The amendment provides that individuals who reside up to three kilometres from the wind turbine would start receiving dues amounting to up to six months’ minimum wage from onshore wind farm operators. In case of offshore wind farms, the dues would be calculated the same way but paid to local governments whose coastline is closer than 20 kilometres to the wind farm. Fishery operators would receive the dues in cases where the wind farm negatively affects their catch. The obligation to pay the turbine dues would not extend to the wind farms that are already operating.
During the debate, Kalvi Kõva (Social Democratic Party), Annely Akkermann (Reform Party), Andres Metsoja (Isamaa), and Kristen Michal (Reform Party) took the floor.
The deadline for submission of motions to amend was set for 9 a.m. on 6 June.
The first reading of one Bill was adjourned
The first reading of the Bill on Amendments to the Family Benefits Act (560 SE), initiated by the Social Democratic Party Faction and Member of the Riigikogu Raimond Kaljulaid, was suspended due to the end of the working hours of the sitting. The discussion will be continued at a regular sitting next working week.
The Bill provides for raising the child allowance for the first and every subsequent child in the family to EUR 100 per month. Currently, the child allowance for the first and second child is EUR 60 per month, and EUR 100 per child per month starting with the third child. The initiators explained that the idea behind the Bill was the incremental rise in the prices of energy and food, which has affected the economic coping of many families and has particularly hit lower income families.
During the debate Helmen Kütt (Social Democratic Party), Urmas Reinsalu (Isamaa), Jürgen Ligi (Reform Party), and Mart Helme (Estonian Conservative People’s Party) took the floor.
The sitting ended at 2.01. p.m.
Photos of the sitting (Erik Peinar, Chancellery of the Riigikogu)
The video recording of the sitting will be available on the Riigikogu YouTube channel. (Please note that the recording will be uploaded with a delay.)