Financial stability means the smooth functioning of financial intermediation under both normal and unexpectedly adverse circumstances.
Safeguarding the stability of the financial system is one of the key functions of Eesti Pank under the Eesti Pank Act. The central bank oversees the functioning of the financial system as a whole, while individual financial institutions and markets are supervised by the Estonian Financial Supervision Authority.
Eesti Pank safeguards financial stability in three primary ways.
- Through macroprudential supervision by analysing and assessing the risks to financial stability and taking appropriate policy measures;
- By designing policies for the financial sector and participating in preparing the key legal acts regulating the financial sector;
- By securing the safety net for the financial sector.
- Analysis of financial stabilityEesti Pank regularly analyses the functioning of the financial system and gives an opinion on financial stability, or how the banks are coping in general and what possible risks they may face.
- Macroprudential policyThe financial system needs to be strong and able to stand up to risks. This is why Eesti Pank has taken various measures such as requiring additional buffers from the banks and setting restrictions that the banks must adhere to when issuing mortgages.
- Crisis managementEven when preventative work has been done well, failures can arise in the banking system at speed, passing on into the economy and potentially causing wider damage in society. Eesti Pank, the Financial Supervision Authority and the government work together to resolve financial crises.
- CooperationEesti Pank works closely with partners in Estonia, within the European Union and with Finland, Sweden and Denmark as the home countries of the banks operating in Estonia to ensure financial stability.
- Single banking supervision in EuropeCentral supervision of the largest banks in the euro area helps make sure that the banks are all analysed and assessed in the same way and that the risk assessments use a similar base. This then helps make all of the banking sector in the euro area more credible.
- Financial Stability ReviewThe Financial Stability Review is the main output of the financial stability analysis conducted by Eesti Pank. The review includes also the central bank’s assessment to financial stability and covers related policy measures. The Financial Stability Review is published twice a year.
- Financing of the EconomyThe review of financing and lending in the non-financial sector covers banking and leasing statistics, financial accounts analysis and credit supply and demand. It is published once a year.
- The Structure of the Estonian Financial SectorThe Structure of the Estonian Financial Sector discusses factors that affect the architecture and design of the financial sector in Estonia. It provides a background for understanding the development trends and risks described in the Financial Stability Review.