The Eesti Pank reserves allow the central bank to remain independent of the government and ensure that it has sufficient capital to cover any possible losses. More broadly, the reserves help ensure confidence in the monetary system of the euro area and underpin the stability of the Estonian economy and financial system.
Eesti Pank had 371 million euros of investment assets at the end of 2016. The bank’s invested reserves had 66 million euros of investment in the sovereign bonds of euro area countries at the end of the year. The foreign currency reserve of investments outside the euro area stood at 303 million euros in 2016. The largest part of the foreign currency reserve was the 103 million euros held in US Treasury notes and bonds. The equity portfolio increased during 2016 to stand at 100 million euros at the end of the year. To diversify risks, a part of the reserves were invested in Australian and Canadian sovereign bonds.
All the central banks of the euro area countries have foreign reserves and the Eurosystem can use those reserves if needed to regulate its exchange rate policy.
Eesti Pank holds 8250 Troy ounces or 256.6 kg of gold.
When Estonia joined the euro area in 2011, Eesti Pank transferred assets to the foreign exchange reserve of the European Central Bank, and there is now a claim of 103 million euros against the European Central Bank in the balance sheet of Eesti Pank.
The structure of Eesti Pank’s investment assets (EUR million)
1 The size of the Eesti Pank reserves is restricted and limited by an agreement on net financial assets. The agreement has been signed between the central banks of the countries in the euro area and the European Central Bank. It sets out the rules and limits on financial assets not used for monetary policy that are used by national central banks for meeting their domestic responsibilities such as managing the central bank reserves. The net financial assets agreement is used to limit the ability of national central banks to create additional liquidity, in line with the goals of monetary policy. The amount of net financial assets depends on the size of both the assets and the liabilities on the balance sheet of the central bank. Further information on this can be found here and here.
In 2017, Eesti Pank had net financial assets of -141 million euros on average.