Bank of Estonia
Eesti Pank
Head office at Estonia puiestee 13 in Tallinn, erected 1935 on a design by architects Eugen Habermann and Herbert Johanson[1]
Head office at Estonia puiestee 13 in Tallinn, erected 1935 on a design by architects Eugen Habermann and Herbert Johanson[1]
HeadquartersTallinn
Coordinates59°25′58″N 24°44′57″E / 59.432778°N 24.749167°E / 59.432778; 24.749167
Established24 February 1919; 105 years ago (1919-02-24)
Ownership100% state ownership[2]
GovernorMadis Müller (2019-)
Central bank ofEstonia
Reserves300 million USD[2]
Succeeded byEuropean Central Bank (2011)1
Websitewww.eestipank.ee
1 The Bank of Estonia still exists but many functions have been taken over by the ECB.

The Bank of Estonia (Estonian: Eesti Pank) is the Estonian member of the Eurosystem and has been the monetary authority for Estonia from 1919 to 2010, albeit with a long suspension between 1940 and 1991, issuing the Estonian kroon. The bank doesn't translate its name to English but uses its Estonian name Eesti Pank in all English communications.

History

Former building of the bank of the Credit Society of the Estonian Knighthood at Estonia puiestee 11 in Tallinn, now home of the Museum of the Bank of Estonia[1]
Former building of the State Bank of Russia at Estonia puiestee 13, now part of the Bank of Estonia head office complex; site of the Estonian Declaration of Independence[1]

1919: establishment

The bank was established on 24 February 1919 by the provisional government of Estonia following the independence of Estonia. In 1921, Eesti Pank was made the national bank and given the duty of printing the Estonian mark.[3][4]

1927: Introduction of the first kroon

The Bank of Estonia was restructured under the conditions of the stabilization loan coordinated by the Economic and Financial Organization of the League of Nations. A new version of the Statutes was approved in 1927, according to which Eesti Pank became an independent note-issuing central bank with limited functions. The main tasks of the bank remained to guarantee the value of the money through currency circulation and through the arrangement and regulation of short-term credit volume. Through the sale of government securities, the bank became a true joint-stock bank.

A foreign loan of GBP1.35 million (27.6 million kroon) supplemented the foreign currency reserves, of which Eesti Pank received GBP 1 million. The gold and foreign currency reserves of the State Treasury were also transferred to the central bank. The fixed capital of the bank was increased from 2.5 million kroon to 5 million kroon. The sizes of the issues in relation to the reserves backing the kroon were determined. Long-term loans that had become illiquid were transferred to the Long Term Loan Bank, founded specifically for the purpose of releasing Eesti Pank from this burden.[5]

1940: Suspension

Upon the Soviet invasion of 1940, the operations of Eesti Pank were nationalized as "the Estonian Republican Office of the State Bank of the Soviet Union". With the introduction of the Russian ruble as legal tender, it lost much of its functions.

1990: Reestablishment

Eesti Pank recommenced operations on 1 January 1990 after an interval of 50 years, though not yet as the central bank of an independent country. The fact that it was possible to restore the central bank in spite of the fact that Estonia was not yet independent was a paradox of that time. The Statutes of Eesti Pank were confirmed in March 1990, and 400 million rubles were allocated for the statutory fund. According to the Statutes, Eesti Pank was an independent public organisation, an issue centre subordinate to the highest authority of the Estonian SSR. The main tasks of the bank included the following:

Foreign Trade Bank take-over

Eesti Pank took over the Tallinn branch of the Foreign Trade Bank of the Soviet Union, re-organising it into the Foreign Currency Operations Centre of Eesti Pank. The central bank also attempted to take other steps within its ability for the liberalisation of the economy and in order to make the transition to a market economy: it began organising currency auctions, publishing quotations of the number of rubles in circulation, issuing licenses for foreign payments and settlements, etc.

Introduction of regulatory function

At the same time it was necessary to begin transforming Eesti Pank into an actual regulator of the Estonian banking sector. At that time, settlements were performed through Moscow, the local Clearing Centre being subordinate to Moscow. In the first years, Eesti Pank was not yet able to regulate and inspect the operations of the local commercial banks.

Reserves

The formation of reserves backing the kroon was commenced. After the recognition of Eesti Pank as the legal successor of the central bank of the Republic of Estonia, established in 1919 during the independence period, the government of Great Britain decided to return the gold that had belonged to the pre-war Eesti Pank to Estonia. The restoration of the membership of Eesti Pank in the Bank for International Settlements was accompanied by the restoration of its rights to the gold and other assets deposited there. Reserve felling areas from the State Forest Fund worth 150 million dollars were also included in the balance sheet of Eesti Pank as an additional foreign currency reserve (although the latter had more a moral and an emotional value for the general public than a practical one).

Reintroduction of the kroon

The new banknotes (the second kroon) reached Estonia in April 1992. The Estonian kroon was pegged to the German Deutschmark to ensure stability. The German Bundesbank was informed of this. The Estonian kroon was declared the sole legal tender in circulation and Eesti Pank the only regulator of monetary relations in Estonia. Within three days, 1500 rubles were exchanged to krooni for each resident natural person at the rate of 1 kroon = 10 rubles. Almost the entire amount of rubles in circulation in Estonia was exchanged to kroons at the same rate (deposits, money held by enterprises, etc.). The rate was considered under-priced by many opponents, but it actually corresponded to the market rate of that time. Time and the later course of events have indisputably proven the correctness of the choice made. All the laws and other legal acts planned for the beginning of the monetary reform came into effect. Eesti Pank began to publish daily exchange rates of the Estonian kroon against the most important foreign currencies.

TALIBOR

Prior to the introduction of the euro, TALIBOR or the Tallinn Interbank Offered Rate was a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Estonian wholesale money market (or interbank market in Estonian kroons). TALIBOR was published daily by the Bank of Estonia, together with TALIBID (Tallinn Interbank Bid Rate).

TALIBOR was calculated based on the quotes for different maturities provided by reference banks at about 11.00 am each business day by disregarding highest and lowest quotation and calculating arithmetic mean of the quotations.

2011: Introduction of the euro

With the introduction of the euro on 1 January 2011,[6] the Bank of Estonia became a member of the Eurosystem or the system of Eurozone central banks that of that collectively set and implement the zone's monetary policy. Some of the functions of the bank were taken over by the European Central Bank. Other functions, as well as membership to the European System of Central Banks remained.

Chairmen

See also

References

  1. ^ a b c "The buildings of Eesti Pank". Eesti Pank. 28 September 2012.
  2. ^ a b Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek.
  3. ^ Bank of Estonia. "SOME FACTS FROM THE HISTORY OF EESTI PANK AND ESTONIAN FINANCE". Archived from the original on 7 July 2004. Retrieved 13 May 2010.
  4. ^ "Major Banks". A to Z World Culture. 2023. Retrieved 20 February 2023.
  5. ^ 1927–1930 Central bank and monetary reform as a precondition for a strong economy
  6. ^ "Estonia ready for euro". European Commission. 12 May 2010. Archived from the original on 15 May 2010. Retrieved 12 May 2010.