Eesti Pank’s strategy for 2018-2022 was put together in the first half of 2017. The strategy is brought up to date each year and whether it needs to be reviewed is assessed.

The strategy first presents a general picture of all of the most important activities and operations of Eesti Pank. After that the five most important goals are covered separately. These are the development tasks for the next five years, which can in themselves lead to major changes.

Eesti Pank’s mission

As the central bank of the Republic of Estonia and a member of the Eurosystem, we contribute to the sustainable development of the Estonian economy and to increased prosperity for Estonia. We keep price growth moderate, setting a common monetary policy together with the other central banks of the euro area and implementing it in Estonia. We maintain the stability of the Estonian financial system by helping to set policy for the financial sector.

We ensure that cash is of good quality and promote a safe and efficient payment environment. We give an independent assessment of the state and outlook of the economy, we advise the government on important matters of economic policy, and we produce high-quality statistics.

Eesti Pank’s vision

The positions and actions of Eesti Pank carry weight in Estonia and abroad. Eesti Pank is an efficient and innovative organisation that has the best available knowledge of in its field of expertise in Estonia.

The operating environment for Eesti Pank in 2017 and its most important tasks

The main functions of Eesti Pank are set out in section 2 of the Eesti Pank Act. In carrying out these functions, account must be taken of the current state of the economic environment, the development of the financial sector, and the strategic priorities of the central bank.

Eesti Pank plays an active role in setting monetary policy in the euro area and in the related central banking operations and decision making. This needs high-quality analysis both of the processes that affect the Eurosystem as a whole and of issues that affect only the Estonian economy. The purpose of economic research at the bank is to provide information that can be used in decisions on monetary policy and financial stability, and to give support to experts and managers from the central bank in discussions of economic policy. Eesti Pank ensures the quality of the analysis by working together with other central banks and with research institutions and universities in Estonia and abroad.

The economy in the euro area has started to improve from the lowest point of the global financial crisis. The extraordinary monetary policy measures that were taken at the time of the crisis, including negative interest rates and an extensive asset purchase programme, remain in place however. This has placed several new obstacles in the road of monetary policy. There are questions about what should be done to exit from these measures, or if circumstances again start to worsen and it becomes necessary to support the economy even more with monetary policy.

The decisions of the central bank about the price of money and how much of it there should be are passed on to households and businesses through the financial system. Monetary policy is enacted through the transactions of the central bank with the commercial banks, which issue loans and take in deposits. As part of the implementation of monetary policy, the financial soundness of banks as counterparties is assessed, and monetary policy operations are carried out. The commercial banks in Estonia have access to liquidity loans and deposit facilities under the agreed Eurosystem terms.

Low interest rates make it harder for Eesti Pank to manage its reserves. In investing its financial assets, Eesti Pank has reacted to changes in the operating environment and has spread its risks by adding further asset classes to the investment portfolio. The aim is, however, to make sure that the income earned from investment and from monetary operations is enough to improve the capitalisation of Eesti Pank and so its capacity to bear any losses that could arise from risk scenarios being realised. The long-term goal is to bring the capitalisation of Eesti Pank into line with the average of the central banks in the Eurosystem.

Recent political events have also affected the economic environment in the euro area and Estonia. The increasing aggressiveness of Russian foreign policy and the conflict in Ukraine have led the European Union and Russia to introduce sanctions on each other. The decision taken in the referendum in summer 2016 in the United Kingdom to leave the European Union has increased uncertainty around the European economy and intensified the discussions around the future of the European Union.

One task of Eesti Pank is to safeguard the functioning of the financial system as a whole. The role of central banks in financial supervision has become more important around the world since the financial crisis. Responsibility for banking supervision in the euro area has been taken over by the European Central Bank. Eesti Pank is responsible for macroprudential supervision, for analysing and assessing the risks to the Estonian financial sector as a whole, and for introducing requirements at an appropriate level for the capital and lending of the commercial banks. Although a macroprudential supervisory framework has now been developed and the initial requirements for reducing risk have been introduced, we need to continue developing the analytical capability of the central bank in the future so we can assess risks to financial stability and manage them in the best way possible.

The connection between the Estonian financial sector and the banking markets in the Baltic states and Nordic countries must be borne in mind, as must the increased  role of non-bank financial institutions in financial intermediation. Estonia is very exposed to any risks coming from the Nordic banking sector. Alongside its work to prevent financial crises, Eesti Pank also contributes jointly with the other central banks and resolution authorities in Estonia and the other Baltic and Nordic countries, to improving readiness to react in case of crisis. A crisis resolution framework is being developed for this, and crisis drills are being conducted.

In payments and settlements, the central bank’s role as overseer has become more important and the focus of attention has been drawn to the possibility of faster and cheaper payment systems, and the banks and technology companies are moving in the direction of developing such systems. Eesti Pank supports the development of the payment environment by participating in designing the legal framework for it, and by working with market participants. Although the share of payments made in cash is continually declining, the amount of cash in the economy has not been reduced. Together with the other central banks of the euro area and the European Central Bank, Eesti Pank issues the notes and coins of the legal tender of the euro area. Eesti Pank makes sure that demand for euro banknotes and coins is met and sufficient cash reserves are maintained, and that cash is of the appropriate quality and protected against forgery.

Payment systems are a central part of the financial infrastructure of an economy. Eesti Pank operates the TARGET2-Eesti settlement system, which is a technical platform for executing monetary policy and which is used for fast and secure interbank transfers of funds. By the end of 2017 Eesti Pank will have joined the security settlement platform TARGET2-Securities.

Eesti Pank is responsible for compiling the statistics on the Estonian financial and external sectors and the financial accounts. As a compiler of national statistics, the central bank supplies good quality, reliable, up-to-date and impartial information that is used in analysis, forecasting and policy setting, and is released publicly. Eesti Pank also helps compile statistics on the European economic and monetary union and works in developing new statistical methodologies.

Eesti Pank’s key development tasks 2018-2022

Goal one

To make the organisation of work at Eesti Pank even more efficient


Eesti Pank has taken on several new tasks in recent years. At the same time, knowledge, skills and technological resources have all improved, allowing tasks to be done better and more efficiently. The relatively low staff turnover at Eesti Pank helps productivity to increase, as long as staff continue to be motivated and feel able to develop. The organisation of work at the bank is also put to the test by changes in the labour market in Estonia, such as the increase in flexible and off-site working.

Expected results

  1. The staff of Eesti Pank are skilled, dedicated, and satisfied with their employer and with the content of their work.
  2. Eesti Pank’s expenses for completing its existing tasks grow more slowly than Estonian GDP at current prices.
  3. Efficiency improves, meaning that in five years’ time the same work will be done in less time.

Actions and resources

  1. At least 250,000 euros is budgeted each year for increasing the skills of employees, and this should be enough to allow each employee an average of five days of training per year. Where possible and necessary, modern ICT and smart solutions are used to improve the organisation of work. Up-to-date technology allows work to be organised more efficiently and flexibly, but the security requirements of a central bank must be considered when changes are made. Organising work on a more mobile basis means changing the attitude to flexible working, and so staffing policies need to be clarified, the rules about the organisation of work changed, and new technological solutions procured and services introduced.
  2. One of the biggest IT projects for the years ahead is the planned development of an integrated data processing system that will cater for the constantly increasing demands for statistics.
  3. It is assumed that demand will increase for IT support services for users. The development of each new large-scale solution requires a thorough analysis of costs and revenues, to ensure that the new solution is cost efficient for Eesti Pank.

Goal two

Eesti Pank is more influential in economic policy in achieving price and financial stability.


To implement successfully policies that will help achieve price and financial stability, it is important that we have an overview and a very good understanding of the functioning of both the financial sector and the macroeconomy. Under the Eesti Pank Act, Eesti Pank advises the government on monetary policy issues and the government does not take any important economic policy decisions without first listening to Eesti Pank’s opinion. Eesti Pank’s role in advising the government derives from the economic analysis and forecasting the bank does on the Estonian economy and financial sector and on Estonia’s main trading partners, and so the bank has the knowledge necessary to carry out this task. Eesti Pank can give valuable help in making Estonian economic policy successful. This is also important in advising the public more broadly, as we can be more influential than before if we consider the needs of our interest groups more carefully and can make our operations more systemic and better planned. If the advice from Eesti Pank is presented in a form that can easily be taken into account, it is more likely to be listened to. Eesti Pank is also an advisor to the Fiscal Council.

Eesti Pank’s analyses are seen as objective and reliable, but the messages and analyses are not always taken into consideration to the extent that Eesti Pank would expect. This may be because opinions vary about any given situation, but also because the analysis by Eesti Pank does not always give sufficiently clear conclusions and policy recommendations. The analysis may focus on descriptions of the situation rather than on assessments and practical recommendations. Specific economic policy recommendations and conclusions need to be well thought through however, because the bank will be seen as less reliable if the conclusions prove misleading. It is also important when raising topics that Eesti Pank remains within the limits of its duties and competencies.

Eesti Pank provides a range of statistics to the public, including information on the financial sector, though the data provided by Eesti Pank do not yet cover the financial sector in sufficient detail. To improve the quality of analysis of the financial sector, it is important that the statistics provided by Eesti Pank can be used to analyse the functioning of the whole of the financial sector.

Expected results

  1. The positions and opinions of Eesti Pank are clearly worded and well-focused. Our advice is listened to.
  2. The analysis by specialists from Eesti Pank and the resulting conclusions are meaningful and interesting enough that they are referred to and used by various communications groups and by the media.
  3. Eesti Pank is the most highly regarded authority in Estonia on questions of the macroeconomy and the financial sector at the macro level.
  4. Eesti Pank publishes statistics on the whole of the financial sector.

Actions and resources

  1. By introducing new forms of internal cooperation, we bring together better our economic policy advice, communication within Estonia with economic policy-makers, and public relations, which all helps explain Eesti Pank’s positions to the wider public more clearly. One way to do this is through regular discussions between specialists from the appropriate areas, which would review the relevant activities of the previous couple of months and coordinate the future work in advising the government.
  2. We will gradually publish additional statistics as the new statistical work is introduced in stages and the need for data is mapped. As the financial sector is relatively concentrated and there is little need for additional datasets, this does not need significant amounts of additional resources.
  3. When producing our analyses we will focus more attention on our goals and on the clarity of our message. When giving advice we will consider the readiness and the needs of those to whom the advice is addressed. Where necessary we will help to carry out what we advise, as far as this is in line with the skills and abilities of Eesti Pank.

Goal three

Eesti Pank is an influential expert on new financial technology that affects the payment environment and financial stability.


The use of new technology to provide financial services has increased sharply around the whole world, especially outside of the strictly regulated and supervised banking sector. The new financial technology solutions commonly referred to as FinTech are already providing retail clients with better settlement options than before, and platforms for intermediating investment and automating planned savings have been created. It is possible that securities and money settlement systems based on the block chain will start to compete with the financial sector infrastructure that we currently have. The central bank is very directly affected by the concept of digital base money, which would make electronic central bank money available more widely and not just to commercial banks.

Several central banks have actively supported development in financial technology in their role as market supervisors, a role which is played by the Financial Supervision Authority in Estonia, or at least they have entered into active dialogues with companies to understand better the risks and advantages of the solutions being proposed. The European Commission, the Financial Stability Board (FSB), and the European Central Bank are among the bodies that are coordinating international cooperation. They are looking to understand what the new technological solutions can offer, but also how they will affect the structure of the financial sector and financial stability, so they can be sure the solutions are secure and can assess the need for further regulation. There are already several companies in Estonia that use the newest technology to provide alternative payment services, bringing together companies looking for funding and retail investors through an online platform, or providing other new solutions used in the financial sector, such as client identity confirmation.

Technological innovation and new business models bring with them new risks into the financial sector, at first for clients and, if they grow in size, for financial stability more broadly. For this reason it may be necessary to introduce additional supervision and rules for certain services and companies.

Expected results

  1. Eesti Pank regularly assesses financial innovation and the opportunities and risks offered by new technologies and services for clients and for the Estonian settlement environment and financial stability.
  2. We work with the Financial Supervision Authority and the Ministry of Finance in designing the Estonian regulatory environment so that we support stronger competition in the financial sector while paying sufficient attention to risk management.

Actions and resources

  1. We play an active role in the work of the FinTech working group at the Financial Supervision Authority.
  2. Where necessary we assess the possible impact on the functioning of the Estonian financial sector and on financial stability of financial sector business models based on alternative technology.
  3. We are in dialogue with Estonian financial technology companies that come directly into contact with the central bank, for example through settlements and payments, or whose business models we consider will have a major impact on financial stability in the long term.
  4. We work together with the Ministry of Finance and the Financial Supervision Authority to create an appropriate legal environment for financial innovation.
  5. If there is demand for it from among companies, we are ready to consider working directly with companies that can meet the requirements for using the settlement systems of the central bank.

Goal four

Eesti Pank is ready to carry out its duties in the event of a crisis.


It has become more necessary to focus on the ability of Eesti Pank and other financial market participants to carry out their core duties in the event of crises of varying levels of seriousness. Cyber-attacks on the financial sector have become more common and have made it necessary to improve the resilience of critical services. To ensure the business continuity of payment services it is important to apply security measures limiting cyber risks in all of the information systems providing critical services. It is of prime importance for Eesti Pank to ensure the security of the central bank’s information systems, as our ability to provide payment services to commercial banks relies on this. In providing oversight of payment and settlement systems, it is Eesti Pank’s job to assess the resilience of financial market infrastructure to cyber-attack. The Eurosystem has developed a strategy for cyber resilience to reduce the cyber risks to financial market infrastructure.

In the event of a banking crisis it is one of Eesti Pank’s jobs to provide extraordinary liquidity support for banks suffering liquidity problems. The procedures for this have been developed, but they have not yet been tested in a real crisis situation. They need constant testing and updating.

Maintaining the continuity of critical payment and cash services as defined in the Emergency Act should also be given more consideration, working together with the banks. Eesti Pank should be able to ensure that interbank payments operate even if the TARGET2 platform is not functioning. At the same time we should be ready for an unforeseen increase in the demand for cash in the event of a crisis, and must support the supply of cash to the public. In ensuring cash services we must consider what is happening in the market, including the decline in the share of purchases made in cash, the updated business models of banks for providing cash services, and changes in the cash transport market. We should also assess more thoroughly Eesti Pank’s ability to fulfil other critical roles of the central bank in an emergency, including joint work with other central banks in the euro area and in cases where everyday work in the buildings of Eesti Pank is restricted.

Expected results

  1. Eesti Pank is ready to react in various emergency situations and to ensure the business continuity of critical processes in the rooms of Eesti Pank or in an alternative location.
  2. Eesti Pank is able to ensure the functioning of critical payments and the supply of cash in Estonia in possible emergency situations.
  3. Eesti Pank as overseer has assessed how the card payment systems and systems overseen by other central banks meet the cyber resilience strategy of the Eurosystem.
  4. Eesti Pank works on cyber security with state institutions and companies from the financial sector and where necessary coordinates their operations in cyber risk management.

Actions and resources

  1. Procedures and alternative solutions have been agreed and tested with commercial banks and cash transporters so that cash services can be provided in an emergency.
  2. Procedures and alternative solutions have been agreed and tested with commercial banks so that critical payments will function in an emergency.
  3. Eesti Pank assesses the resilience of the Estonian card payment system to cyber-attack.
  4. Business continuity plans have been updated and tested to ensure that Eesti Pank is able to carry out its core functions in an emergency including in an alternative location.


Goal five

The investment activity of Eesti Pank ensures the financial independence of the central bank.


Eesti Pank’s investment in financial assets has been profitable in recent years. Fundamental changes in the benchmark portfolio, which is the main instrument for the investment decisions of the central bank, have been made quite frequently in response to the unusual market environment. Eesti Pank needs to define a distribution of investment assets over the long term that would be in line with its risk tolerance, and would make the management of the benchmark portfolio as a principal source of income more efficient.

Until the euro was adopted, Eesti Pank’s main source of financial risk was its reserves. When Estonia joined the euro area, additional risks came in the form of monetary policy risks, which are mostly shared between the central banks of the Eurosystem and which have increased sharply, especially in connection with the asset purchase programmes. By now the financial exposures from monetary policy may be considered to be bigger for Eesti Pank than the potential losses from the investment portfolio. Although the risks arising to the Eurosystem from monetary policy are measured centrally at the European Central Bank, Eesti Pank needs to assess more precisely and holistically the combined impact of various financial risks. If we understand the risks better, we are able to manage them more deliberately, by changing the structure of the reserves for example.

Expected results

  1. A distribution or allocation of strategic investment assets in line with risk tolerance has been approved by Eesti Pank, and ensures that the operating costs of the central bank will be covered in the long term by income from investment.
  2. Management of the benchmark portfolio is an efficient, reasoned and consistent process run by a team.
  3. The strategic distribution of the Eesti Pank investment portfolio between asset classes and the size of the invested portfolio take account of the risks on the central bank’s balance sheet that are independent of investment activity.

Actions and resources

  1. We make proposals to improve how the benchmark portfolio is put together and where necessary we change the structure of the portfolio.
  2. We develop an analytical model needed for assessing the financial risks of Eesti Pank and we regularly test its effectiveness.