The central bank is allocating a quarter of its profit from last year to the state budget
The Supervisory Board of Eesti Pank decided at its meeting on Tuesday to transfer a quarter of its profit from last year, or 0.9 million euros, to the state budget. The bank made a profit of 3.4 million euros last year.
The profit that Eesti Pank made in 2020 was less than an eighth of its profit of 2019, when it made 28.4 million euros.
“As the central banks of the euro area we have taken steps above all to keep lending conditions as favourable as possible for businesses and people during the pandemic. We saw that this would affect the profit of the central banks, but it was important to ease the impact of the crisis and support the recovery of the economy”, said Governor of Eesti Pank Madis Müller, who is also a member of the Governing Council of the European Central Bank.
When the uncertainty was particularly high at the start of the pandemic in spring 2020 and the terms that the Estonian government could borrow on were not yet known, the Supervisory Board of the central bank decided to allocate three quarters of Eesti Pank’s profit from 2019 to the state budget, which was the maximum amount allowed by law. The central bank usually allocates one quarter of its profit of the previous year to the state, and three quarters to increasing its own reserve capital.
The Supervisory Board this year took its decision on the profit on the grounds that in spring 2021 it is easier to estimate the impact of the pandemic on the state finances, and there is much less uncertainty. For this reason the Supervisory Board decided again to prioritise building up the financial buffers of the central bank so that it is able to carry out its tasks.
Eesti Pank wants to increase its financial buffers over the long term until they reach the same relative level as the average of the central banks in the euro area. At the end of 2020, this meant the level of the financial buffers needed to be raised by around 636 million euros to 1.9 billion euros.
Since 1992 Eesti Pank has allocated a total of 173 million euros to the state budget.
The next meeting of the Eesti Pank Supervisory Board will be on 4 May.