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.

Speaking to the Riigikogu, Kessler noted that, last year, the activities of the Financial Supervision Authority had been significantly affected by Russia’s war in Ukraine.

“With war and other deep crisis situations, the financial supervision visualises a grim picture of potential risks. For example, people become anxious and begin to withdraw their money from their bank accounts, jamming up even sound and normally functioning credit institutions. We call it a liquidity risk,” Kessler began. “For example, hostile persons attack the infrastructure of online governance and financial intermediaries in such a way that the necessary services in society freeze. This is the materialisation of a cyber risk. For example, pariah states take advantage of the financial system to buy the technology they need and other such things. For supervision, this means a breach of international financial sanctions. For example, our businesses wither because, due to sanctions and other constraints, companies can no longer trade with their usual partners and regions, and this leads to insolvency of businesses. For the Financial Supervision Authority, this means the materialisation of credit risk and worsening of credit quality.”

In Kessler’s words, the Financial Supervision Authority had mapped the risks related to the war in Ukraine and had directed the market participants’ focus to managing those risks immediately before the beginning of the war. “We stopped the activities of the only market participant who was significantly connected with risks from Russia, and eventually their authority was revoked. After the war broke out, we set up meetings with market participants, at first every other day and later every week and every month, according to the crisis or risk environment. We set up special reporting and prepared regular monitoring analyses to assess the need for immediate intervention by supervision. We can now conclude that the risks arising from the war were mapped in good time, measured, and managed in cooperation with the financial sector and other relevant authorities. They were managed in such a way that society and economy continued to function seamlessly in 2022,” Kessler said.

Another major issue last year, in Kessler’s words, had been an international mission’s assessment of Estonia’s capacity to prevent money laundering. He noted that the report had been published at the beginning of this year and according to it there were a few weak spots in the money laundering prevention system, for example certain moments in criminal proceedings as well as in crypto asset sector but in general the evaluators had thought that Estonia’s capacity to prevent money laundering was good, especially in banking, Kessler confirmed.

In his report, Kessler also looked at the risks in 2023. He pointed out the technological risks of financial intermediaries relating to online governance. He added that, in his opinion, inflation was the main risk affecting the financial market in 2023, and monetary policy as well as fiscal policy steps corresponded to that. In Kessler’s words, this year the credit risk is likely to increase, that is, there will be more cases where recipients of loans fail to duly meet their obligations.

The Chairman of the Management Board of the Financial Supervision Authority concluded his report by making a proposal to the Riigikogu to establish a financial ombudsman at the Financial Supervision Authority to better protect consumers and to resolve disputes.

During the debate, Andres Sutt took the floor as representative of the Estonian Reform Party Group.

Photos of the sitting (Author: Erik Peinar, Chancellery of the Riigikogu)

Verbatim record of the sitting (in Estonian)

The video recording of the sitting will be available to watch later on the Riigikogu YouTube channel.
(Please note that the recording will be uploaded with a delay.)

Riigikogu Press Service
Merilin Kruuse
Phone: +372 631 6592, +372 510 6179
E-mail: [email protected]
Questions: [email protected]