The Board of Eesti Pank keeps the reserve requirement ratios at the present levels

The Board of Eesti Pank resumed today discussion on Stage II of the monetary policy operational framework reform. On 31 October last year the Board decided that according to the regulation in effect from 1 March 2003, different reserve ratios across categories and maturities of eligible liabilities are applied, like in the Eurosystem. Today the Board decided to keep the reserve ratio for long-term liabilities, with maturity of over two years, and for repurchase agreements on the level of the reserve ratio for short-term liabilities, i.e. at 13%.

The Board decision is related to the objective of Stage II of the monetary policy operational framework reform, to adapt the framework of the Estonian reserve requirement system smoothly to that of the Eurosystem.

Since the technical reform of the monetary policy framework has to be in accordance with the activities of Eesti Pank in ensuring stability of the monetary system, the adjustment of reserve requirement system has to take place gradually while also considering the current situation of the Estonian economy. Maintaining conservative approach enables to advance with the modification of the monetary policy framework according to the principles outlined in the reform strategy, and according to the stabilisation process of the Estonian economy.

On 31 October last year the Board decided to differentiate reserve requirement ratios across categories and maturities of eligible liabilities. It was also decided that the existing net debt to foreign credit institutions shall be replaced with a gross claim, i.e. the claims to foreign banks cannot be deducted from the liabilities to foreign banks. Subordinated liabilities and government lending and counterpart funds shall be also included in the reserve requirement base. So far the uniform reserve ratio of 13% was applied to the whole reserve base.

Stage I of the monetary policy operational framework reform lasted until June 2001 whereupon the Estonian credit institutions were allowed to invest up to 50% of their reserve requirement into high quality liquid debt securities tradable on international markets.

The principles of the Estonian monetary policy and fixed exchange rate shall remain unchanged until the accession to the European Economic and Monetary Union.