In Estonia's currency board based monetary system, the liquidity of banks is mainly managed by means of a standing facility of buying/selling foreign currency. Credit institutions holding a licence from Eesti Pank may, according to the applicable procedure[1], enter into unlimited buying and selling transactions with Eesti Pank between the Estonian kroon and foreign currencies (currently ten different currencies). In addition, Eesti Pank may enter into buying and selling transactions with credit institutions between any of the other currencies officially quoted by Eesti Pank and the Estonian kroon. Eesti Pank may also enter into buying and selling transactions with Estonian credit institutions between the currencies quoted by Eesti Pank. Banks have the facility to sell securities to Eesti Pank for kroons[2]. So far, the banks have not used that option.

To maintain the high liquidity of the Estonian kroon and facilitate the free movement of capital, there is no difference in the buying and selling rates being applied to transactions between Estonian kroon and the euro. Transactions between the Estonian kroon and the anchor currency - the euro - are made by Eesti Pank and credit institutions at the rate quoted by Eesti Pank (1 euro = 15.6466 kroons). The fact that no rate difference is applied facilitates the creation of foreign currency liquidity buffers (and using the inclusion of foreign assets when meeting the reserve requirement), stabilises interest rates on the Estonian loan market, and reduces the role of the domestic interbank market. For foreign banks, the lack of a rate difference simplifies the obtainment of funds from the parent bank. Transactions with any other currency are made based on the market rates of these currencies and the exchange rate of the Estonian kroon to the euro.

Eesti Pank's forex window