The Estonian government said yesterday that it will challenge in the European Court of Justice a directive easing companies' financial reporting requirements.
In an effort to cut red tape and streamline financial reporting practices, the EU directive provides a financial reporting framework and states that member states cannot demand more stringent requirements than specified by the directive.
The Finance Ministry has responded with skepticism, however, saying that lower reporting standards will reduce transparency, constricting access to and raising the cost of credit, and thus damaging the economy.
The Estonian Banking Association is lobbying against the directive. "If companies' financial transparency for banks decreases as a result of implementing the directive, it also is likely to lead to greater prudence in accepting bank loan applicants and thus a slight worsening of loan financing options for all companies," the Banking Association said in a statement addressed to the Finance Ministry.