Estonians offer credit scoring solution based on social media

Estonian company Big Data Scoring that is managed and co-owned by Erki Kert, former board member of LHV Pank, is offering credit scoring based on social media data, writes Äripäev.

The company is active at this point in Estonia, Finland and Poland.

The models used by Big Data Scoring predict on the basis of data from Facebook and other online sources which clients are more likely to default on their loan. In developing the model the company has gathered over 45 million lines of data on the internet which it has combined with real-life payment behavior data in a number of European countries over a period of more than a year.

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Swedbank has the biggest market share in Estonia

Four largest banks in Estonia – Swedbank, SEB, Nordea and Danske Bank – account for 91% on the loan market and 89% for deposits, shows a survey by the Financial Supervisory Authority.

In the loan market, Swedbank’s market share was 41% last year, followed by SEB which has 23% of the loan market.

In the market of deposits, Swedbank’s market share was 45%, as opposed to the market share of SEB at 21%.

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Bank of Estonia allocated 25 pct of its profit to the state budget

The Supervisory Board of Eesti Pank decided on May 7, 2013 to transfer three quarters of the 34.1 million euros it made in profit last year to strengthen its capital. One quarter of last year’s profit, or 8.5 million euros, is to go to the state budget.

“The Supervisory Board of Eesti Pank confirms the long-standing strategy for profit distribution that the central bank gives the state up to 25% of its profit. The Supervisory Board decided today to give the maximum permitted under this strategy. Eesti Pank will cover part of the profit distribution from its share of the income that the central banks of the euro area earned last year from the Greek government bonds bought within the framework of the bond purchase programme” said Chairman of the Supervisory Board of Eesti Pank, Jaan Männik.

The ratio of Eesti Pank’s capital to the risk assets used for monetary policy is the lowest of any of the central banks of the euro area. Last year the Supervisory Board set a long-term goal of increasing its capital to 3.5 times its then level, meaning an increase in capital of around one billion euros to 1.3 billion euros.

The Supervisory Board decided that the relative level of Eesti Pank’s capital should increase to the average level of the central banks of the euro area, as the balance of risks to the capital of the Eurosystem as a whole is considered when joint monetary policy decisions are made.

Last year, Eesti Pank received 51.6 million euros in income from the joint monetary policy and currency issuance activities of the Eurosystem, which is made up of the national central banks of the euro area and the European Central Bank. In 2011 income from this source was 20.2 million euros. Earnings from investment activities were 8.1 million euros last year, and 14.7 million in the previous year. Eesti Pank’s operating expenses fell last year to 16.2 million euros from the 19.4 million of 2011.

Since 1992 Eesti Pank has allocated a total of 123 million euros to the state budget.

Background Risks to Eesti Pank in monetary policy The risks to Eesti Pank under the currency board came from the investments of the central bank and from the banking system. When Eesti Pank became a euro area central bank, it also took on the risks of the euro area as a whole, which are mainly related to monetary policy operations.

The Eurosystem is made up of the central banks of the euro area countries and the European Central Bank. The Eurosystem divides the income and costs of the single monetary policy, so that the income earned from monetary policy loans to euro area banks is divided among the central banks to match their participation in the Eurosystem, and the same is done with risks. Eesti Pank’s participation in the Eurosystem is 0.26 per cent.

The Eurosystem’s monetary policy operations currently fall into two groups, monetary policy loans to commercial banks, which stood at 852 billion euros at the end of April, and the Securities Markets Programme, SMP, which stood at 203 billion euros.

Hedging of monetary policy risks To hedge against the risks of the monetary policy loans, the central banks of the Eurosystem have the right of claim against banks that have taken loans. The content of the collateral is the equity of the bank that has taken the loan. The euro area central banks only give out loans if collateral is provided, meaning that if the bank cannot pay back its loan to the central banks, then the central banks can instead take the collateral. If even this is not enough, the credit risk for the central banks is reduced by the national authorities and their desire to recapitalise their insolvent banks.

The SMP is backed by the promises of governments to meet all their obligations in full, meaning that if governments fail to meet their obligations fully or partially, including their obligations to the central banks of the euro area, then the euro area central banks suffer the loss.

The capital of central banks and its importance In this case, the capital of Eesti Pank and the other central banks is taken in the wider sense to mean the part of the reserves and capital that the bank can use to cover losses.

The level of capital of the central bank is important because a central bank that has little or negative capital can cause two sorts of public concern. The first is the question of the central bank’s independence if the bank needs to ask the government for additional capital. The second is the question of how much the central bank really wants to meet its inflation targets, which will then cause increased public expectations of inflation. The result of both these concerns is a loss of trust and of public faith that the central bank will be able to keep inflation under control successfully.

Source: Bank of Estonia

Shadow economy in Estonia at 30 pct of GDP

A survey commissioned by credit card Visa and made by Austrian professor of economics Friedrich Schneider shows that the size of the shadow economy in Estonia is about 30% of the country’s GDP.

According to the report, in Europe as a whole, shadow economy shrank from 19.3% in 2011 to 19% of GDP in 2012.

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Estonia good place to be a mother

Estonia ranks high in the annual Mothers’ Index released by the international nonprofit Save the Children in the run-up to Mother’s Day, but placed even four rungs higher three years ago. The Mothers’ Index rankings are determined by five indicators on education, income, women’s political representation, and the chances a mother and her baby will survive.

This year’s index ranks Finland, Sweden, Norway, Iceland and the Netherlands as the best places in the world to be a mother.

Estonia was ranked 21st out of 176 countries surveyed, below Ireland and ahead of Canada. Of neighboring countries Latvia placed 38th, Lithuania 26th and Russia 59th.

Being a mother is the toughest in Sierra Leone, Somalia and Democratic Republic of Congo, the survey found.

In 2010 Estonia was ranked 17th.

Source: BNS via Estonian Review

Estonia’s first satellite reaches orbit

Estonia’s first satellite, ESTCube-1, was rocketed off to orbit the Earth on Tuesday, 7 May at 05:06, after strong winds had caused setbacks, postponing the initial planned launch date on Saturday.

Estonia has thus become the 41st nation to have a man-made object in space, beating out Finland and the other Baltic countries, all of which are due to launch their first satellites in the coming years.

The nanosatellite reached orbit at around 07:06 Estonian time. Launched from the Guiana Space Center, ESTCube-1 was carried by the launch vehicle Vega and was accompanied by two other satellites, Europe’s Proba V and Vietnam’s VNREDSat 1A.

The ESTCube-1 team said on its Facebook page that everything went according to plan and that the satellite will first come into view in Estonia at 10:30 today. One of the project’s leaders, Tartu Observatory senior researcher Mart Noorma, watched the launch live at “I am very proud to be seeing all these students here who are watching their handiwork of five years,” Noorma said. Speaker of Parliament Ene Ergma, an astrophysicist by training who was in French Guiana to observe the launch, said Estonia is now a “tiny space country.” “It’s a really big deal in my opinion,” she said.

University students had been developing the nanosatellite since 2008 and preparations for the project were made even earlier. ESTCube-1 is now due to carry out innovative solar wind experiments.

Source: Estonian Review