By a bill to prevent and resolve financial crises sent for Riigikogu rounds, finance ministry seeks to equip Financial Supervision Authority (FSA) with generously boosted powers: for instance, the Authority may require rearrangement of a bank’s structure or its bosses to be replaced. The Authority may even assume control over the bank.
«The bill prescribes the measures by which, based firstly on public interests, a financial crisis may most effectively be prevented or resolved with minimal costs to society and taxpayers,» writes the ministry in its letter of explanation. The bill is based on EU crisis resolution directive.
The bill lays down measures to be prepared for crisis situations aimed at ensuring a possible crisis be resolved in a manner most effective. For instance: banks will be required to regularly make up plans for restoring financial situation.
Also, FSA will be obligated to compile crisis resolution plans for every bank or banking group.
In addition to that, the Authority will be authorised to demand changes to legal or operational structures of banks, such as splitting investment arm from traditional banking. Financial support of units within a banking group will be regulated in a manner more specific.
Not limited to that, the bill prescribes means for early intervention to prevent a crisis. In case a bank is not insolvent, FSA will have the right to demand replacement of bank managers, and the ban of payments out of profits. Also, if needed, FSA may assume control of a bank i.e. appoint a special interim trustee.
According to the ministry, the intent is to lay clear-cut responsibility on shareholders and creditors who, in times to come, need to be increasingly ready to lose their investments or money.