Today, June 6, Deputy Governor of Eesti Pank Andres Sutt gave a presentation at the Budapest Round Table on Financial Stability
organised by the Magyar Nemzeti Bank, where he spoke about the situation of the Estonian financial sector and outlooks in the
period of the adjusting economic cycle.
Andres Sutt provided an overview of the Estonian banking sector, which is
characterised by a high level of foreign shareholding. "The close integration with Nordic banking contributes to the reliability of the
Estonian banking sector. At the same time, funding by parent banks has become more expensive due to the international financial market tensions
and the more expensive credit in the global market is transferring to local banks through the parent banks."
"The
Estonian credit market showed first signs of adjustment in the second quarter of 2007, when credit growth started to slow and the increase in the
debt burden decelerated. In the first half of 2008, credit growth was broadly in line with Eesti Pank's spring forecast. Banks have continued
to finance good business projects, mainly as regards the exporting sectors of the economy and this trend is expected to last. The debt burden of
Estonia's enterprises and households as a ratio of GDP should remain close to the current level within the next three years, but growth will
continue in the long term. Compared to most other EU Member States, Estonians' debt burden is still relatively low," Sutt said when
speaking about the situation of Estonia's credit market.
Sutt pointed out that as the economic situation is changing,
banks should be ready for a decrease in their profitability. "The price of financing has risen in the world and tensions will persist in this
respect. In addition, loan losses will also increase to some extent, which is a natural development as the economic cycle turns. Estonia's
banks are sufficiently capitalised and their liquidity buffers are adequate to survive the times of slower growth, since banks in Estonia must
meet stricter requirements than the EU average," Sutt said.
"A new upturn in the Estonian economic cycle depends on
the strength of our economy and the financial sector as well as on the dynamics of the global economy."
Andres
Sutt's presentation is published on the web site of Eesti Pank.
