The Estonian Parliament has approved amendments to the Securities Market Act and related legislation, marking a significant step forward in modernizing the country’s financial market ecosystem, the bank reported. The reform, supported by the European Bank for Reconstruction and Development (EBRD), introduces uniform application of close-out netting under Estonian law and expands the scope of the financial collateral regime.
The changes eliminate longstanding legal uncertainties around the enforceability of close-out netting—a mechanism that allows financial institutions to consolidate obligations into a single net payment in the event of default. The amendments also broaden the range of eligible counterparties entitled to benefit from protections under the financial-collateral regime.
These amendments mark progress in Estonia’s effort to establish a robust legal and regulatory framework for derivatives and repos (repurchase agreements), ensuring legal clarity and safeguards for such transactions. They will pave the way for Estonia to be recognized as a “netting-friendly” jurisdiction by the International Swaps and Derivatives Association, unlocking new opportunities for local and international market participants.
The EBRD worked closely with the Estonian Ministry of Finance to support this legislative reform, with support from the TaiwanBusiness-EBRD Technical Cooperation Fund. Alex Pivovarsky, EBRD Director of the Capital and Financial Markets Development team, says the new framework will enhance the country’s investment climate and capital market activity. “Increasing the attractiveness of Estonia’s enterprises and financial institutions to global credit managers and investors,” he said.
This reform builds on the EBRD’s extensive experience supporting legal frameworks for derivatives across nearly 20 of its countries of operation, with Estonia joining successful reformers like Armenia, Bulgaria, Georgia, and Kazakhstan.
