Should the Estonian Association Bank cofounded by the City of Tallinn be unable to get a license, Tallinn should consider acquiring a stake in some small bank, Tallinn deputy mayor Aivar Riisalu said.
"I've been to the Financial Supervision Authority with the managers of the bank to discuss the subject," Riisalu told the city government weekly Pealinn. "There is still no clarity over what the outcome concerning the license could be.
"Personally, it seems to me that articles of association like this, where you have one vote at the general meeting no matter how much money [you have put in], may make raising capital difficult in the future," he continued. "At the same time, I find that it makes sense when small Estonian banks stand up to the big Swedish banks, which obviously are not currently fully interested in supporting small and medium sized businesses in Estonia."
According to Riisalu, there are two options for moving forward at this point. "First — the existing bank will get a license; then it will be possible to develop the bank," he said. "Of course, the city cannot be the dominant player in it. It has to be an association bank, where there are very many owners and where all capital requirements and other requirements are properly met."
If this is not the case, the idea of having an association bank must be abandoned, Riisalu said. "In that case, the City of Tallinn should seriously consider participation in some bank linked to Estonian capital, giving it extra posture with its participation and making the bank more attractive for international institutions and all sort of supervision as well," he suggested, "Because the budget of the City of Tallinn is big enough, and Tallinn holding a stake in some bank would really make sense."
"Whether it's in six months or a year, we will find out quite soon what will become of it," the deputy mayor concluded. "The limbo concerning the association bank must end."
Tallinn City Council deputy chairman Mart Luik (IRL) said in an opinion article published on the same page of the paper that the Center Party has the opportunity to demonstrate that it is ready to change in Tallinn by quitting the Association Bank, which he described as "purely an ego project of [longtime former party chairman and Tallinn ex-mayor] Edgar Savisaar."
The Financial Supervision Authority in April suspended the review procedure of the Estonian Association Bank's application for an activity license, citing failure to obtain additional information on Savisaar, who is currently standing trial on corruption charges. The Association Bank has contested the decision of the Financial Supervision Authority.
A ruling on the bank's appeal of the decision is expected in March. Until then, the bank can continue providing loans to businesses, which can be done without having a credit institution license.
As of the end of last year, the City of Tallinn had spent over €5 million on the establishment of the Association Bank and is planning on investing another €4.2 million over the next few years.
The Association Bank of Estonia was formally established in June 2015 by 122 private individuals and 32 legal persons, including the City of Tallinn, Mainor, E-Piim Tootmine, Silikaat Grupp, Saidafarm, Fund Ehitus, Endover KVB and Seven Oil, the credit and loan associations of Põlva County, Kambja and Kehtna, the Rura Development Credit Cooperative and EELK Varahaldus, the property management company of the Estonian Evangelical Lutheran Church (EELK).
Editor: Aili Vahtla