In an interview with the ECB’s Supervision Newsletter, Kilvar Kessler, Chair of Estonia’s Finantsinspektsioon and ECB Supervisory Board member, reflects on Estonia’s digital banking success, cyber threats, and the future of European supervision.
Digital drive and early IT roots
Estonia’s digital leadership stems from strong computer science traditions and business-driven innovation. Without legacy systems, banks adopted modern tech early. Finantsinspektsioon included IT auditors from its start to ensure proper oversight.
Cybersecurity is a constant battle
Cyberattacks have risen slightly since Russia’s 2022 invasion of Ukraine, but Estonia has been dealing with such threats since 2007. Strong cooperation between telecom providers and financial institutions has kept services running smoothly.
Penalties: rare but effective
Kessler sees fines as necessary tools when used proportionally. Publicizing penalties often has a greater impact than the financial punishment itself.
Lessons from AML scandals
Cases like Danske and Swedbank taught Estonia’s supervisors to stay curious, act boldly on hidden risks, and show that uncontrolled risky business will lead to exit. Estonia now has strong processes and looks forward to supporting the EU’s new AML authority.
Proportionality and culture matter
Smaller Baltic banks face the same rules as larger institutions, which can be burdensome. Kessler advocates for rules that respect local context and support risk-based supervision.
Rethinking EU regulation
While rules ensure stability, too much regulation can stifle innovation. Kessler supports “maximum harmonisation with minimal rules” – simple, principle-based frameworks across the EU.
SSM: a success story with room to grow
Kessler praises the ECB’s trust in national supervisors and digitalisation efforts. But he calls for better use of cross-border inspections and a more strategic role in banking sector changes like mergers.
Overall, he is optimistic about the path of European banking supervision and supports continued evolution toward efficiency and trust-based, risk-driven oversight.
