Systemic risk buffer

The aim of the systemic risk buffer is to avoid or minimise systemic risks that could have a serious negative impact on the financial system and the Estonian economy. The buffer requirement helps to ensure that banks have sufficient capital to cover systemic risks.

The systemic risk buffer rate in Estonia has been 0% since May 2020, when the major uncertainty surrounding the Covid-19 pandemic led Eesti Pank to remove its earlier requirement of a capital buffer of 1% of risk exposures located in Estonia. The systemic risk buffer requirement has been one of the main macroprudential tools of Eesti Pank since 2014 (see Table).

The options for applying a systemic risk buffer requirement will be broader from 2021. Eesti Pank may not only apply the buffer requirement to all the exposures of the banks, it may also impose the requirement in more targeted fashion on sectoral exposures* or subgroups of them. Eesti Pank follows the guidelines of the European Banking Authority (EBA) in defining sectoral exposures.

Eesti Pank can apply the systemic risk buffer requirement to all banks, a group of banks, or only one bank.

Decrees of the Governor of Eesti Pank

• Decree of the Governor of Eesti Pank No. 6 of 30 May 2016 “Establishment of the requirement for the systemic risk buffer”.
• Decree of the Governor of Eesti Pank No. 9 of 02 June 2021 “Calculation of the systemic risk buffer”.
• Decree of the Governor of Eesti Pank No.10 of 02 June 2021 “Recognition of the systemic risk buffer requirement”.

* Sectoral exposures are:

1. all retail claims on natural persons that are secured by residential real estate
2. all claims on legal persons that are secured by a mortgage on commercial real estate
3. all claims against natural persons except those defined in point 1
4. all claims against legal persons except those defined in point 2