Over the last week Eesti Pank has adopted several radical
decisions to prevent possible instability in the Estonian
banking sector. When taking these decisions, Eesti Pank
proceeded from the chosen aims of monetary and banking policy
and the possibilities set by legislation.
The difference of the measures implemented by the central
bank to different commercial banks is due to their clearly
diverse financial situation and causes of problems. Eesti
Pank has considered the commercial banks' net worth,
potential future market value as well as the owner's and
management's view of the bank's future regarding the
altered situation. Eesti Pank will stricktly observe its
legal rights and obligations when intervening in the
activities of commercial banks.
The recent problems were first and foremost due to
erroneous financial and management decisions made in the
tightening competition. The changed economic environment had
a significant effect on the banking in general, including
negative developments in Russia which impact on small banks
was the most significant. Also, psychological and emotional
factors had their role in amplifying the problems which were
especially clearly seen in the case of ERA Pank over the last
few days.
In the opinion of Eesti Pank, there is room for commercial
banks of different size and with different profile in the
Estonian banking sector. Therefore, the central bank will be
unambiguously supporting the merger process of Estonian
Investment Bank and Eesti Forekspank.
Eesti Pank is convinced that all commercial banks
operating in Estonia and the mass media understand the
situation and adequately react to it. In order to guarantee
that good banking practice is followed by market
participants, the central bank will act with more strength
than before to speculations and rumours spread against other
market participants. Eesti Pank has for that extensive
administrative possibilities set by law.
Before taking decisions, Eesti Pank consulted with and
informed the Government of the Republic of Estonia of the
steps planned. We firmly believe that only with co-ordinated
actions it is possible to maintain both domestic and
international confidence in the Estonian economic
environment. In addition to monetary and banking policy, it
has to involve an on-going conservative fiscal policy of the
state and the implementation of structural reforms in the
economic system.
Eesti Pank stresses once again to the public in Estonia
and abroad that it is ready to take decisive action also in
the future. The central bank continues to meet the
obligations imposed to it by law and is convinced of the
rightness of its steps.
