Estonia gets new borrower database

Together with credit information and risk assessment firm Krediidiinfo, several Estonian banks are starting a new borrower database on Monday. Provided the private individual in question agrees to such an exchange, the system will facilitate the exchange of information about loan applicants.

In addition to Krediidiinfo, which has offered this kind of service since the early 1990s, LHV Bank, Bigbank, and Inbank are participating in the project, among others.

Read more from ERR News

About 66 pct of all domestic payments are made by card at the point of sale

  • The number of domestic cashless payments is growing continuously
  • Card payments account for 2/3 of all payments
  • Use of cards abroad by Estonian residents is also increasing and payments were made by card in 185 foreign countries in the second quarter

An average of 1.1 million domestic cashless payments were made each day in the second quarter of 2016 in Estonia, with a total value of 370 million euros. The number of payments was 7% higher than in the first quarter of last year, but the turnover was 6% smaller. The number of payments made by individuals and by companies has risen steadily, though the turnover of payments has been notably more volatile. The turnover of corporate payments is affected by the general level of economic activity, and also by the activities of individual large companies.

About 66% of all domestic payments are made by card at the point of sale. As card payments are used for small sums however, they account for only 3% of the total turnover. A daily average of 739,000 card payments were made in Estonia in the second quarter and 98% of them were made by private people.

Estonian residents made a daily average of 48,000 card payments outside Estonia in the second quarter. While December is the month that sees the most card payments in Estonia, it is the holiday months of June and July when cards issued in Estonia are used most frequently for payments abroad. The number of card payments made outside Estonia is 60-74% higher in the summer months than in January. Residents of Estonia paid by card in 185 different countries. Around one third of the card payments made abroad were made in Finland, where an average of 14,000 payments a day were made in the second quarter. Increased numbers of card payments were made in Sweden, Latvia and Russia too. In around half of the countries, Estonian residents made payments once a day on average. These were countries where the ability to pay by card is limited and to where fewer visits are made.

Data from Statistics Estonia show Estonian residents made 1.25 million trips abroad with an overnight stay in 2015, which is around one third more than ten years ago. At the same time that the number of card payments made outside Estonia has increased more than fourfold, the turnover is only 2.7 times higher, which indicates that cards are used more and more abroad for paying smaller amounts. The average payment abroad in 2006 was for 54 euros, but in the second quarter of this year, the average was 32 euros. The size of the average payment outside Estonia may be affected by the minimum sum for card payments imposed by some merchants.

Cash was withdrawn from ATMs outside Estonia an average of 3900 times per day, with withdrawals averaging 150 euros. The average withdrawal from cash machines in Estonia was 100 euros. While it is generally free to make card payments abroad, there is a service fee for making withdrawals from ATMs. More information about service fees can be found in Estonian from

Source: Bank of Estonia
Author: Tiina Soosalu, Payment and Settlement Systems Department

The portfolio of loans and leases to companies grew by 8 pct

  • The volume of loans and leases to companies continued to grow rapidly, increasing by 8% over the year
  • Households and companies had deposits of over 11 billion euros in banks at the end of June
  • The net profit of the banks was 89 million euros in the second quarter

The stock of loans and leases from banks to Estonian companies and private individuals was 6.4% larger in June than a year earlier at 16.5 billion euros. Growth accelerated in the loan and lease portfolio primarily because of loans to companies, which increased by 8% over the year.

In June, 230 million euros of long-term loans and leases were issued to companies, which is a similar amount to that of the preceding months. There was an increase of 18% in the loans and leases issued in June compared to the previous June. More loans went to companies in manufacturing and logistics in June than in the previous months.

Yearly growth in the portfolio of loans and leases to households has remained a little below 5% in the past half year. The largest share of loans to households was made up of housing loans, as 92 million euros of such loans were issued in June, 14% more than a year earlier. Having previously been relatively quick, growth in car leases slowed in June as sales of new cars were down on the previous two months.

The quality of the loan portfolio of the banks did not change, and the share of loans overdue by more than 60 days remained at 1.3%.

Households and companies had deposits of over 11 billion euros in banks for the first time in June, which was 7.5% more than a year earlier. The deposits of non-residents continued to shrink though.

The average interest rate on new housing loans rose slightly to 2.3% in June. This is the highest average interest rate on housing loans of recent years. The interest rate on corporate loans was the same as in the previous month at 2.5%.

Banks earned 89 million euros in net profit in the second quarter. Excluding dividends from subsidiaries and income tax paid, this is the biggest quarterly profit in recent years. Net interest income has particularly increased, primarily because interest expenses have declined.

Source: Bank of Estonia

Author: Jaak Tõrs, Head of the Financial Stability Department of Eesti Pank

Swedbank and SEB will hold additional buffers from August

  • From August the commercial banks will have to hold systemic risk buffers of 1% rather than 2%
  • Eesti Pank will require Swedbank and SEB to hold a further buffer of 2% because they are systemically important banks

Changes to the capital buffer requirements for the commercial banks will start to apply from 1 August. Eesti Pank will replace the earlier 2% systemic risk buffer requirement with a 1% requirement for all banks operating in Estonia and will also require Swedbank and SEB, the two largest banks, to hold an additional buffer of 2%.

Eesti Pank introduced the 2% systemic risk buffer requirement for all commercial banks in 2014. The buffer was intended to make the banks hold more capital and so increase their resilience so that they could cope with a sharp drop in the economy, and to reduce the risks that come from the concentration of the structure of the banking sector.

“The systemic risk buffer has so far protected the banking sector against two risks, but from August we will cut this tool into two pieces in effect. We will start to require that all banks hold a buffer of 1% to reduce the risk of a sharp fall in the economy that arises because Estonia has a small and open economy. We will require the two largest banks to hold an additional 2% buffer though, as the banking sector in Estonia is one of the most concentrated in the European Union. Furthermore, the big banks here are vulnerable to the same risks as the structure of their assets and their funding is very similar”, said Ardo Hansson, Governor of Eesti Pank.

From August, the two biggest banks operating in Estonia will have a total capital requirement of 13.5% of total own funds, and all the other banks will have a requirement of 11.5%.

Eesti Pank informed the banks of its intention to change the capital buffer requirements at the end of April.



From 1 August 2016

Minimum own funds requirement



Capital conservation buffer



Countercyclical buffer



Systemic risk buffer



Systemically important institutions buffer


Total requirement for Swedbank and SEB



Total requirement for other banks



The analysis by Eesti Pank of the introduction of the buffer requirements can be found on the website of the central bank.

Source: Bank of Estonia

Loans and leases to companies grew in April, 7 pct over the year

  • Loans and leases to companies grew fast in April (7%), just like in the preceding months
  • The stock of housing loans increased in April at the same rate as in recent months, 4% over the year
  • The average interest rate on long-term corporate loans has fallen this year
  • Deposits continued to grow strongly in April and did so by more than loans and leases

The portfolio of loans and leases to Estonian companies and households grew at the same rate in April as in the preceding months.The total value of the portfolio was 6% higher in April than a year earlier. The total volume of loans and leases increased during the month by 56 million euros to 16.3 billion euros.

Growth accelerated in the early months of the year in the volume of corporate loans and leases and it was relatively fast in April as well, at 7%. Some 880 million euros of new long-term loans were issued to companies in the first four months of the year, which is approximately one quarter more than a year previously, though some of this was refinancing earlier loans. The majority of the new long-term loans were to companies in real estate and manufacturing.

The stock of housing loans was 4% larger in April than a year earlier, meaning it grew at the same rate as in the preceding months.Activity in the housing loan market has declined a little though, and 10% fewer new housing loans were issued in March and April than a year before. The volume of other loans to households again grew faster than the volume of housing loans because of strong growth in car loans, and it was up 7% over the year in April.

The average interest rate on long-term corporate loans has fallen this year, if a sharp spike in March caused by individual transactions is excluded. The average interest rate for loans issued to companies was 2.1% in April, while the average interest rate for housing loans issued was 2.3%.

The volume of loans that were long-term overdue remained small. The volume of loans overdue by more than 60 days declined slightly in April and made up 1.3% of the loan portfolio at the end of the month.

Growth in corporate and household deposits remained fast in April. Total deposits were up 8% over the year at 10.8 billion euros. Corporate deposits have been increasing faster than household deposits since the second half of last year. Like before, deposits by both companies and households individually grew faster than loans and leases.

Source: Bank of Estonia

Author: Mari Tamm, Economist at Eesti Pank

Estonian financial stability review

The international financial environment became less confident at the start of 2016, Bank of Estonia reports in its financial stability review. The review is published twice a year.

Doubts about the outlook for global growth led to increased volatility in international securities markets and falls in the prices of financial assets. With commodities prices remaining low for a long time and inflation very low, central banks maintained their position of using accommodative monetary policy to support inflation and GDP growth. At the same time, the activities of banks in several European Union countries are continuously being affected by the problem assets that appeared at the time of the global financial crisis, and more and more by the combination of weak economic growth and low monetary policy interest rates.

There has been no reduction in the main risks to the stability of the Estonian financial sector, which arise from imbalances in the Swedish economy and from the funding of the large Nordic banking groups. Relatively strong growth continued in Sweden and the loose monetary policy environment saw rapid growth in loans with real estate as collateral and in real estate prices. Macroprudential supervisory institutions in the Nordic countries have put in place measures to support the resilience of the banks, but this has not slowed the build up of risks in Sweden. Although the larger banking groups in the Nordic countries are well capitalised by international standards, their capital buffers have not particularly increased as a ratio to total assets while risks have been increasing, and in international comparison they are around the average.

The ability of Estonian companies and households to repay their loans remains good. Rapidly rising incomes have led to increased demand for loans from households. However, indebtedness remained at the same level for the second consecutive year and the coverage of debt liabilities with liquid assets increased further. Corporate results worsened further in the second half of 2015 though because of weak demand for exports and the continuing rapid rise in labour costs. Investment activity was sluggish, and so demand from companies for loans did not increase. Although sales turnover was down, companies managed to increase their liquid assets. This means that the borrowing capacity of companies and households is being supported both by larger liquidity buffers than before and by low loan servicing costs, and also by the continuing rapid rise in household incomes.

Together with the rise in real estate prices, construction of residential property picked up, and increased supply restrained the growth in average prices in the second half of 2015. Demand for dwellings has been aided in recent years by relatively fast growth in wages, a labour market that favours households, and low interest rates, while credit growth has remained moderate. Alongside residential property, office and retail space is being developed at quite a rapid rate. The bigger banks remained fairly conservative in lending for real estate development however, and the volume of loans to real estate companies has not increased faster than volumes to other companies. However more has been lent to real estate companies by companies in other sectors than was the case before, which means that exposure to risks in the real estate market could affect businesses more broadly.

The resilience of the banks to risks remained strong. The portfolio of loans and leases was up around 5% over the year in 2015 and its quality remained generally good. The funding of the banks was mainly supported by growth in domestic deposits. The banks kept a high level of liquid assets and new liquidity requirements that started to apply from the start of 2015 will help to ensure that banks maintain their liquidity. The capital buffers of most banks increased last year and the share of CET1 capital was very large at the end of the year, standing at 35% of risk weighted assets for the banks on a consolidated basis. Although the low rate of base interest rates put pressure on the income of the banks, improved cost effectiveness means this has not really yet affected the return on assets, and profitability remained high by international standards. Weak GDP growth and low interest rates and additional legal requirements for the banking sector mean that banks will probably continue to make changes in their business operations.

Read more from the Bank of Estonia website

Source: Financial Stability Review 1/2016

Savings continue to grow faster than debt liabilities

  • As investment activity remained quiet, savings continued to increase faster than debt liabilities
  • Around one billion euros more was invested abroad in 2015 than was taken in from there
  • Domestic borrowing by Estonian companies increased while their borrowing from abroad decreased
  • The indebtedness of the Estonian private sector is around the international average level, while general government indebtedness is small

The saving of Estonian households, companies and general government in the fourth quarter of last year and in the year as a whole were more than their investments, and so the Estonian economy as a whole was a net lender to the rest of the world. This means that as in the past six years, more funds were invested abroad than were taken in from there. The net outflow of financial assets became faster in 2015 and reached around one billion euros, or 5% of GDP.

Weak investment activity meant that corporate debt liabilities grew only a little. Debt liabilities increased by less than 1% over the whole year. Liabilities from Estonia increased by around 3% and foreign liabilities decreased by 6%. The decrease was mainly because companies reduced their short-term intra-group loan liabilities. Despite lower sales revenues, reduced investment in fixed assets has increased the liquid assets of companies. The deposits held both in banks operating in Estonia and abroad increased in 2015 by around 12%.

The income and savings of households are still increasing faster than their debt liabilities. The rate of growth in debt liabilities increased on the back of loans for real estate investment and car leases to 5% by the end of last year, and loan liabilities stood at 8.2 billion euros. The relatively rapid growth in incomes and the high savings rate helped the cash and deposits of households to increase by around 9% over the year to 6.7 billion euros. Despite the rapid growth, the financial savings of Estonian households in relation to incomes are still below the European Union average.

The European Commission treats the indebtedness of companies and households in the private sector and the general government, or the debt-to-GDP ratio, as an indicator that can reveal potential imbalances in an economy. The threshold where there is a risk of imbalance is set at 160% for the private sector1 and 60% for the general government. The indebtedness of the Estonian private sector declined slightly in 2015 to 128% at the end of the year, which is around the average level for the European Union. The indebtedness of Estonian companies and households is relatively large compared to that in countries with a similar income level. The general government debt level also shrank slightly last year, and it stood at 9.7% of GDP at the end of the year, which is still the lowest figure in the European Union.

1 The threshold is 160% for unconsolidated data and 133% for consolidated data. The consolidated debt level of the Estonian private sector was put at 116% of GDP at the end of 2014 by Statistics Estonia.

Source: Bank of Estonia

Author: Taavi Raudsaar, Economist at Eesti Pank



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