Finantsinspektsioon carries out supervision over credit institutions, creditors and credit intermediaries that operate under a licence that it has issued. Creditors and credit intermediaries are supervised by Finantsinspektsioon if they lend to consumers. The European Central Bank is responsible for capital supervision over banks that are considered systemically important under the European Single Supervisory Mechanism (SSM), and it works together on this with the local financial supervisors of the countries in the euro area, including Finantsinspektsioon.
There were 14 credit institutions operating in the Estonian banking sector at the end of 2025, of which six were branches of foreign banks. There were also 41 creditors in the market and seven credit intermediaries operating in Estonia.
There were four licensed credit collectors, and two cross-border providers of credit management services.
Finantsinspektsioon supervised the larger banks jointly with the European Central Bank
The European Central Bank is responsible for capital supervision over banks that are considered systemically important under the European Single Supervisory Mechanism (SSM), and it works together on this with the local financial supervisors of the countries in the euro area. The banks operating in Estonia that come under the direct supervision of the SSM are SEB Pank, Swedbank, LHV Pank and Luminor Bank. The other banks are under the direct supervision of Finantsinspektsioon.
Supervision of the important banks in 2025 focused on credit risk and operating risk and governance. Assessment of operational risk and IT risk looked particularly at digitalisation processes, the complexity of activities, and aggregation and reporting of risk data.
Finantsinspektsioon took part in several on-site inspections led by the European Central Bank in 2025 that concentrated on the business models, profitability, internal governance, risk controls and credit risks of the banks. The banks then have to remedy any shortcomings that are identified during the inspection within a fixed deadline.
Some of the larger banks use internal ratings when calculating their capital requirements, in which case the risk weights used to calculate the capital requirements are set from the internal risk assessments of the banks. Finantsinspektsioon participated in 2025 in the assessment led by the European Central Bank of the internal models for credit risk. The inspections identified shortcomings in the internal models for credit risk that arose from the quality and representativeness of the data used as the base for the modelling, the differentiation and quantification of risk parameters, the use of the margin of conservatism, validation, and the operation of the control function.
Two banks operating in Estonia that come under direct supervision of the SSM were fined by the European Central Bank in 2025. One was fined 410,000 euros because its internal models did not give a conservative enough estimate of the parameters for credit risk from July 2022 to September 2024. The other was fined 405,000 euros for reporting risk-weighted assets for which market risk was calculated incorrectly from the second quarter of 2022 to the first quarter of 2024.
The additional capital requirements of the banks remained stable
Finantsinspektsioon regularly assesses whether the risks of the credit institutions it supervises are backed by sufficient capital to ensure trustworthy management. The Supervisory Review and Evaluation Process (SREP) assesses the business models, management systems and risk profiles of the banks, and the sufficiency of their capitalisation and liquidity. If the generally applicable capital requirement set as Pillar 1 in the banking regulation does not cover the risks of a particular bank sufficiently, Finantsinspektsioon can set an additional Pillar 2R capital requirement. The sufficiency of the internal capital of the banks is also assessed each year with consideration of the results of the supervisory stress tests, and if needed the bank can be given additional Pillar 2G guidance about its capital. The Pillar 2 requirement and guidance are set as a ratio of the total risk exposure of the bank.
Additional capital requirements and guidance that totalled 960 million euros were set in 2025 for the banks operating in Estonia. The requirements set by the European Central Bank for the large banks were 769 million euros, and Finantsinspektsioon set requirements for the small banks of 189 million euros. The additional capital requirement and guidance made up 46% of the general capital requirements set for the banks under the banking regulation.
Finantsinspektsioon tested the resilience of banks to a crisis
Finantsinspektsioon ran credit risk stress tests for all the banks operating with a licence in Estonia to assess whether they would have sufficient capital if they were faced with stiff economic headwinds. Both corporate and private loans were tested, including the resilience of loans backed by real estate. The stress scenario defined by the European Banking Authority (EBA) described increasing geopolitical tensions and a fracturing of trade that caused demand to weaken, asset prices to fall, and financing conditions to tighten, with this then putting companies and households in a worse position and increasing unemployment.
The stress tests showed the credit losses of the credit institutions reaching 4% of the loan portfolio over three years in the resulting recession. The biggest losses would be the 39% of the total loss arising from loans to private individuals not secured by real estate, and the 26% from the commercial real estate portfolio of businesses.
The stress tests also showed that smaller banks, which have smaller capital buffers, are more vulnerable to conditions of extraordinary stress and their level of core equity would fall fast. This makes it important that they hold sufficient capital buffers to cover the credit losses that would be caused by a stress incident. The results of the stress tests were used to set additional capital guidance for the smaller banks.
Finantsinspektsioon also ran liquidity risk stress tests for the smaller banks. These are intended to assess the capacity of banks to cope with a crisis, determine how long they could cope for in the near future, and assess whether there is any need for additional liquidity buffers. The liquidity positions of some banks would deteriorate if the crisis scenario were to be realised. Finantsinspektsioon set additional liquidity requirements to prevent this or recommended that the banks change their internal processes.
Finantsinspektsioon assessed the risks from taking deposits in through platforms
One priority for Finantsinspektsioon in 2025 was to assess how ready the banks were to replace the funds taken in through deposit platforms in the event that the platforms were unexpectedly interrupted. It did this by asking the banks that take in deposits through platforms to simulate a scenario where the deposit taking platform that they work with ceased activity simultaneously in all countries. The banks estimated that this event would not cause them to breach the capital and liquidity requirements and found that they would be able to meet their obligations to their clients on time if such a stress scenario were to be realised. Finantsinspektsioon sent the banks a memo recommending measures that could be taken to minimise the potential risks.
Finantsinspektsioon analysed the risk management of the banks and its position in the independence of the decision-making process for credit
Finantsinspektsioon looked at whether the banks have clear and functioning internal controls in the decision-making process for credit. This needs the roles and responsibilities to be clearly defined, tasks to be separated, control over decisions to be independent, and the process for possible review and approval of the decisions to be in place.
The analysis showed that there were quite wide differences between the approaches of the banks. Finantsinspektsioon considered that the process of taking decisions about credit should be organised so that the person responsible is always clearly identified and risk management is involved independently in the decision process.
Finantsinspektsioon analysed how the assignment by banks of non-performing loans affected the quality of their credit portfolios and their capital
Several banks assign non-performing loans in order to maintain the quality of their loan portfolios. It is mainly consumer loans that have become non-performing which are sold, and to a smaller extent business loans as well. Sales of problem loans have particularly affected the smaller banks as the share of non-performing loans at some small banks would exceed 5% if they did not assign claims. Leaving those claims on the balance sheet of the banks would need them to make more write-downs, reducing their profitability and capitalisation and so restricting their ability to issue new loans. Finantsinspektsioon regularly analyses the sale of problem loans and how it affects the strength of the capitalisation of the banks.
Finantsinspektsioon assessed how internal audit was organised at creditors and credit intermediaries
Finantsinspektsioon ran a remote inspection for all creditors and credit intermediaries to assess the organisation and execution of their internal audits. The existence and the qualifications, independence, and role within the organisation of the internal auditor were inspected. The frequency, planning and consistency of the audit was also assessed, and how the proposals and improvements suggested by the internal auditor were implemented.
Finantsinspektsioon contacted the creditors and credit intermediaries individually about the shortcomings that were identified, and asked for clarification of the circumstances.
Finantsinspektsioon inspected compliance with the requirements for responsible lending
Finantsinspektsioon carried out on-site inspections and remote inspections of responsible lending at three creditors. The inspections found that the internal rules and procedures for assessing the credit capacity of consumers did not always comply fully with the requirements of the Creditors and Credit Intermediaries Act. Finantsinspektsioon required that the deficiencies be remedied.
Finantsinspektsioon inspected compliance with the requirements for the cost of credit
Finantsinspektsioon carried out inspections at four creditors to assess how the cost of credit is calculated and the procedural rules for doing so. It analysed whether the rules for calculating the cost of credit at the creditors were applied correctly and in compliance with the requirements for them. No shortcomings were found in the calculation process.
Finantsinspektsioon contacted the creditors individually about the methodologies described in the internal rules and asked for clarification of some aspects.
Credit collectors started to operate under supervision by Finantsinspektsioon
Finantsinspektsioon issued operating licences in 2025 to two credit collectors that collect debts that have arisen under credit contracts signed with credit institutions or creditors. It issued an advisory guideline setting requirements for how credit collectors and purchasers communicate with the debtors in order to harmonise supervisory practices. The guideline is intended to clarify the legal requirements and set single and transparent standard practice for the work of credit collectors and credit purchasers in communicating with debtors.
Finantsinspektsioon assessed the risk culture of the banks
Finantsinspektsioon ran inspections at small banks to identify their risk cultures. The aim was to find out whether the banks have acted to address the bottlenecks identified in the analysis of 2023 and presented in a memo sent to them in 2024 and started to move towards instilling a more informed risk culture. The analysis found that although the principles of a risk culture are described and defined in most of the internal rules, a complete understanding of risk culture still needs further development and attention.
