The financial results of Eesti Pank allowed it to rebuild its financial buffers



The Supervisory Board of Eesti Pank approved the annual report for 2023 of the central bank, which recorded that Eesti Pank had revenues of around 113 million euros and expenses of 25.6 million euros. The central bank made zero profit in the financial year, as the income earned in 2023 was used to rebuild substantially the financial buffers that had been called into use in the previous year.

“The Supervisory Board recognised the good work of Eesti Pank that allowed the risk provision buffer that was used in 2022 to be largely restored. This is responsible behaviour and avoids the need to rely on support from the state during difficult financial years”, said Chair of the Eesti Pank Supervisory Board Urmas Varblane.

The financial result for 2022 was also zero, but in that year Eesti Pank made a loss of 150 million euros on its securities portfolio because of the sharp rise in interest rates. The central bank covered this loss in 2022 from the buffers that had been built up from the profits of earlier years to cover financial risks.

Eesti Pank earned profit from its investments of 98 million euros measured at market prices in 2023, though the profit for investment recorded in the accounts was 39 million euros. The difference arises because accounting rules do not take account of profit earned from rises in prices of securities that have not yet been sold. Eesti Pank earned a further 52.5 million euros in 2023 from the joint monetary policy transactions of the central banks of the euro area. The central bank gained another 25 million euros or so in profit in the accounts from substantially reducing the reserve held as a provision for exchanging kroons. This provision covers the obligation to exchange Estonian kroons for euros. The amounts of Estonian kroons that have been exchanged in recent years have been small and are getting smaller each year, as people hold onto their kroons as souvenirs, while some of the former currency will have been lost or destroyed. Accounting rules consequently require the reserve intended to back the liability for exchanging kroons to be reduced. Eesti Pank continues to exchange kroons for euros and will do so without limit of time.

Eesti Pank decided this spring to restore a large part of the risk provision buffer that was used last year by transferring 87.2 million euros to it. The risk provision provides the first line of defence, but the central bank has additional reserves on top of it to ensure its financial operations. Eesti Pank’s equity at the end of 2023 stood at more than 660 million euros in total. “Eesti Pank’s operations are built on a financially sound foundation. The financial results of the central bank can of course fluctuate over the years, but overall we have managed to maintain our capital at a level that can cover the financial risks arising from the Eesti Pank balance sheet, which is more than 14 billion euros in size”, said Governor the central bank Madis Müller.

The main priority for Eesti Pank as a central bank of the euro area is to fight against inflation. The European Central Bank makes its monetary policy decisions with the aim of keeping inflation in the euro area stable and low. The Governing Council of the European Central Bank raised interest rates very sharply to bring down the recent very high rates of inflation in the euro area. A side-effect of doing this was that a lot of the central banks in the euro area made a loss in 2022. The main focus of the central banks in the euro area is on tackling inflation, and so earning a profit is a secondary consideration for them, whether that profit comes from investment or from other activities. The general approach of central banks is to build sufficiently large financial buffers for themselves that they can cover any potential losses.

The Eesti Pank annual report for 2023

For further information:
Viljar Rääsk
Head of Communications
Eesti Pank
6680 745, 5275 055
Email: [email protected]
Press enquiries: [email protected]