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Estonia pst 11,
10141 Tallinn

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1995–1999: modernisation and regulation of the banking environment

27 April 1995

Vahur Kraft is appointed as the Governor of Eesti Pank.

Vahur Kraft. Source: Eesti Pank Museum


By a resolution of the Supervisory Board of Eesti Pank, the minting and issuing of five-cent coins is terminated because their production is more costly than their denomination and they have forfeited their importance as a means of payment. Five-cent coins remain in circulation for an unspecified term.

From 1996 Eesti Pank starts accounting for Estonia’s international investment position and external debt. The international investment position shows how many external assets and liabilities a state has on a certain date expressed in the market prices of that date, while the external debt indicates the size of the debt of a state in relation to other countries. The first indicators are published as of 31 March 1996.

9 January 1996

The rules of quoting TALIBOR (interbank deposit interest) and TALIBID (interbank loan interest) are approved.

May 1996

The due diligence and procedure for application of provisions of money laundering prevention of the Credit Institutions Act are established. The addition of a chapter addressing money laundering prevention to the version of the Credit Institutions Act effective since the beginning of 1995 is the first step in the establishment of the framework for money laundering prevention in Estonia.

1 July 1996

The demand to continuously meet the reserve requirement of banks – a certain share of all of the deposits (liabilities) of a bank that banks must deposit in the central bank – is replaced with a requirement to keep the current account balance in Eesti Pank at the level of an average of a month. Banks can use a considerably greater money buffer for daily settlements, which helps to lower the liquidity risk and stabilise the interbank money market interest rate.

Eesti Pank eliminates the bid and ask rate differences in transactions involving the Estonian kroon and German mark. This reduces transaction costs and increases the currency turnover of the banking system. In December 1997, the monthly turnover of foreign currency transactions is 14 times greater than in June 1996.


Several risks incurred with rapid economic development are clearly seen in the macroeconomic environment. Money supply increases relatively quickly and banks become more active in granting loans. This causes a need to adjust the framework of monetary policy. Eesti Pank adopts many measures with the aim of increasing the liquidity of banks (the amount of available funds) or strengthening the management thereof.

11 September 1997

The rating agencies Moody's and IBCA (current Fitch) give Estonia the first credit rating commissioned by Eesti Pank. A rating is a sign of credibility for a small country, because it enables financial market participants to compare countries. The existence of a sovereign rating makes it possible to issue ratings to companies operating in the state. A high rating favours a positive attitude among investors.

November 1997

In order to stabilise the banks' intra-month kroon liquidity and to minimise potential settlement risks, Eesti Pank raises the daily minimum reserve requirement from 2% to 4% of the reserve requirement base or liabilities (mostly deposits). At the same time, a penalty interest rate for non-compliance with the reserve requirement increases to 20%. As a counterbalance, interest paid on the account balance above the minimum required reserve level is increased.


Several changes in the prudential rules or requirements of banks serving as a basis for assessing the strength of banks enter into force at the beginning of the year. The consideration of market risk in calculating the capital adequacy indicator (showing how much the bank has contributed its funds in comparison with the amount of deposits or liabilities) and establishment of prudential rules for subsidiaries of banks (in accounting for the bank group) is more significant.

Estonia signs up to the special data dissemination standard (SDDS) of the International Monetary Fund (IMF), which completely alters the culture of statistics in Estonia, incl. Eesti Pank.

Eesti Pank terminates the issuing of the one-kroon coins emitted in 1992, 1993 and 1995, because they are too similar to the German one-mark coins in terms of their composition, dimensions and weight. One-kroon coins made from a different alloy and having different dimensions are put into circulation and the issuing of one-kroon banknotes to banks is terminated.

April 1998

The Riigikogu adopts the Deposit Guarantee Fund Act, which lays the foundations for the deposit insurance system of Estonia. In accordance with this system, the state guarantees deposits held by people in banks to a certain extent. The Act enters into force in October 1998.

18 June 1998

Mart Sõrg is appointed as the Chairman of the Supervisory Board of Eesti Pank.

Mart Sõrg. Source: Eesti Pank Museum

1 September 1998

Financial guarantees granted to subsidiary financing institutions (e.g. leasing companies of the bank group) and non-resident banks (branches or subsidiaries of banks operating in foreign countries) are fully included in the reserve requirement, i.e. in the accounting basis of liabilities deposited in the central bank. Thus, if a leasing company or a branch of a foreign bank has raised loans with the guarantee of a parent bank, these guarantees are included in the accounting for the reserve requirement.

31 December 1998

Eesti Pank establishes the exchange rate of the kroon against the euro at EUR 1 = EEK 15.6466. This equals the official exchange rate of the Estonian kroon against the German mark (DEM 1 = EEK 8).