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Estonia pst 11,
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2004–2011: preparations for transition to the euro

Estonia commences operations in the Exchange Rate Mechanism ERM II, which is one of the prerequisites for joining the euro area.

The objectives of ERM II (the Exchange Rate Mechanism of the European Monetary System) are to ensure the success of the European Monetary System and to reduce the fluctuation of participating currencies with respect to the euro. Each joining country must be a member of ERM II for at least two years.

7 June 2005 Andres Lipstok assumes office as the Governor of Eesti Pank.


Andres Lipstok. Source: Eesti Pank

2005

This year the most significant amendment to banking regulations is the increase in the risk weight of residential loans from 50% to 100%. This means that upon granting residential loans a bank must make more use of its own capital and less use of deposits.

October 2005

Eesti Pank replaces the current interbank settlement system with the Interbank Settlement System of Ordinary Payments (ESTA). The updated system has faster payment settlements (ten times a day), the system operates for a longer period (from 8:30 to 18:00 each business day) and the entire system is more efficient for users, i.e. banks.

March 2006

Amendments to banking regulations enter into force with the primary aim of lowering risks related to residential loans. However, as these amendments do not adequately lower the risks, from 1 September 2006 Eesti Pank decides to increase the reserve requirement ratio of banks from 13% to 15%. By this resolution, the central bank sends a clear signal that there is a great danger of the economy overheating.

18 December 2006

Eesti Pank, Sveriges Riksbank, Latvijas Banka and Lietuvos Bankas sign a cooperation agreement on the management of financial crises, under which the contracting parties improve their readiness to cooperate upon a financial crisis affecting cross-border bank groups. The document states that primary responsibility for resolving a crisis situation lies with the owners and management of a bank or subsidiary bank experiencing difficulties. Central banks only intervene if special solutions do not work or are insufficient.

20 November 2006

Eesti Pank, the Estonian Central Depository for Securities and three commercial banks join TARGET – the central bank settlement system of the Eurosystem. This enables the banks and other financial institutions using the system via Eesti Pank to make faster euro payments than earlier.

19 May 2008

Eesti Pank joins the updated TARGET system or TARGET2. As seven Estonian commercial banks (incl. large-scale banks) also join TARGET2, it can be said that most Estonian bank clients have an alternative channel for urgent (same-day) euro payments through these banks.

13 June 2008

Jaan Sven Männik is appointed as the Chairman of the Supervisory Board of Eesti Pank.


Jaan Sven Männik. Source: Eesti Pank

eptember 2009

Inflation decreases in Estonia and, thereby, Estonia has an opportunity to meet the Maastricht criteria that form a prerequisite for joining the euro area. Extensive preparations for the introduction of the euro begin.

13 July 2010

The Economic and Financial Affairs Council (ECOFIN) of the 27 Member States of the European Union confirms a decision allowing Estonia to join the euro area. 1 January 2011 is determined as the date of joining the euro area. The exchange rate is fixed at the current level: EUR 1 = EEK 15.6466. Suomen Rahapaja (the Mint of Finland) starts minting 194 million Estonian euro coins (a total of around 600 tonnes) in July.


Minting Estonian euro coins. Source:  Eesti Pank Museum

19 September 2010

Jean-Claude Trichet, the President of the European Central Bank, hands the symbolic Euro Star over to Andres Lipstok, the Governor of Eesti Pank, in Independence Hall. Eesti Pank becomes one of the central banks of the euro area, participating in debates and decisions related to the euro area. An extensive information campaign on the introduction of the euro commences.


Jean-Claude Trichet handing the Euro Star to Andres Lipstok. Source:  Eesti Pank Museum
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