Authority analysing Authority

Photo: Peeter Langovits / Postimees

European Banking Authority is investigating activities of Estonia’s Financial Supervision Authority as related to happenings around Krediidipank.

Small investors of Krediidipank have sent Andrea Enria, chairperson of European Banking Authority (EBA) a letter desiring EBA to investigate whether Financial Supervision Authority (FSA) has violated EU law allowing Bank of Moscow to acquire majority holding in Krediidipank.

Among other stings, EBA is tasked with supervision of due and total application of EU law in member states. Essentially, this means limited supervision over activities of national and international banking supervision authorities. 

Authority accused

To Postimees’ knowledge, EBA sees Krediidipank shareholders’ complaints as relevant and has launched investigations in FSA activities. Neither EBA nor FSA agreed to comment the issue; even so, chairman of Krediidipank Andrus Kluge admitted that the bank’s minority shareholders had indeed had recourse to EBA.

«Activities by FSA having been controversial, the bank’s small shareholders filed a complaint to EBA, whose task it is to provide supervision of member state financial supervision bodies, including FSA, and to ensure uniform application of EU banking legislation over the entire European Union,» said he.

«Credit Institutions Act and EU law, providing the basis to it, set extremely high requirements regarding shareholders in credit institutions. Considering earlier practice of financial supervision authorities of other countries, FSA’s included, and activities and violations by Bank of Moscow as shareholder in Krediidipank, linked both to acquisition of holding in Krediidipank and attempts by Bank of Moscow to gain access to information on Krediidipank clients subject to banking secrecy, it’s difficult to see how Bank of Moscow would comply with these requirements,» added Mr Kluge.

Krediidipank’s small shareholders have quite a list of claims against FSA. According to the accusations, FSA allowed Bank of Moscow to acquire majority holding even though the bank didn’t inform FSA in a timely manner nor presented the documentation required.   

In the opinion of the small shareholders, the Bank of Moscow majority holder – Russian state bank VTB – violated rules for acquisition of qualifying holding while purchasing a qualifying holding.

Gaining control over Bank of Moscow, VTB acquired indirect holding in Krediidipank and should, for that, have secured prior approval by FSA. VTB, however, did not notify FSA of acquisition of the holding, neither did it apply for approval.  

As VTB never informed FSA of acquisition of indirect qualifying holding in Krediidipank and obtained FSA permit for that only in September, 2012, small inspectors say Bank of Moscow had no right to vote at Krediidipank’s 2011 and 2012 general meetings with more than ten percent of the votes.

Proceedings underway

FSA did not notify Krediidipank nor its shareholders of the fact that, while voting with all shares in its possession at the general meetings, Bank of Moscow allegedly violated the law. Also, as stated in the accusations, FSA has not properly assessed suitability of the acquiring company according to EU law nor considered their reputation including the fact that, as confirmed by Harju County Court ruling, Bank of Moscow used unlawful assistance by former state officials to access client data of Krediidipank, by paying them a total of €300,000.

The tussle between Krediidipank’s shareholders, as well as with FSA, has lasted for years. Bank of Moscow has contested in court the decision taken by shareholders’ general meeting in March 2012, where Mr Kluge was elected to chair the bank – to the exclusion of Bank of Moscow representatives. In Tallinn Circuit Court, Bank of Moscow took the victory; even so, Supreme Court yesterday accepted cassation complaint filed by Krediidipank.

Council meeting, in October of last year, arrived at stalemate. Also, FSA has set a question mark over Mr Kluge’s suitability for his job.

At the beginning of February, FSA chief Kilvar Kessler told Postimees that there were quite a number of legal procedures underway between the parties – some public, some not.