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Bank of Estonia

Coordinates: 59°25′58″N 24°44′57″E / 59.432778°N 24.749167°E / 59.432778; 24.749167
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Bank of Estonia
Eesti Pank
Head office at Estonia puiestee 13 in Tallinn, erected 1935 on a design by architects Eugen Habermann and Herbert Johanson[1]
Head office at Estonia puiestee 13 in Tallinn, erected 1935 on a design by architects Eugen Habermann and Herbert Johanson[1]
HeadquartersTallinn
Coordinates59°25′58″N 24°44′57″E / 59.432778°N 24.749167°E / 59.432778; 24.749167
Established24 February 1919; 105 years ago (1919-02-24)
Ownership100% state ownership[2]
GovernorMadis Müller (2019-)
Central bank ofEstonia
Reserves300 million USD[2]
Succeeded byEuropean Central Bank (2011)1
Websitewww.eestipank.ee
1 The Bank of Estonia still exists but many functions have been taken over by the ECB.

The Bank of Estonia (Estonian: Eesti Pank) is the Estonian member of the Eurosystem and has been the monetary authority for Estonia from 1919 to 2010, albeit with a long suspension between 1940 and 1989, issuing the Estonian kroon.

Name

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Like other central banks, the Bank of Estonia refers to itself in its native language even in English-speaking contexts.

History

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Former building of the bank of the Credit Society of the Estonian Knighthood at Estonia puiestee 11 in Tallinn, now home of the Museum of the Bank of Estonia[1]
Former building of the State Bank of the Russian Empire at Estonia puiestee 13, now part of the Bank of Estonia head office complex; site of the Estonian Declaration of Independence[1]

Interwar period

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The bank was established on 24 February 1919 by the provisional government of Estonia following the independence of Estonia. In 1921, Eesti Pank was made the national bank and given the duty of printing the Estonian mark.[3][4]

The Bank of Estonia was restructured under the conditions of the stabilization loan coordinated by the Economic and Financial Organization of the League of Nations. A new version of the Statutes was approved in 1927, according to which Eesti Pank became an independent note-issuing central bank with limited functions. The main tasks of the bank remained to guarantee the value of the money through currency circulation and through the arrangement and regulation of short-term credit volume. Through the sale of government securities, the bank became a true joint-stock bank.

A foreign loan of GBP1.35 million (27.6 million kroon) supplemented the foreign currency reserves, of which Eesti Pank received GBP 1 million. The gold and foreign currency reserves of the State Treasury were also transferred to the central bank. The fixed capital of the bank was increased from 2.5 million kroon to 5 million kroon. The sizes of the issues in relation to the reserves backing the kroon were determined. Long-term loans that had become illiquid were transferred to the Long Term Loan Bank, founded specifically for the purpose of releasing Eesti Pank from this burden.[5]

Upon the Soviet invasion of 1940, the Bank of Estonia was closed by the occupying authorities.[6]: 4  Its operations were taken over by the State Bank of the Soviet Union, which introduced the Soviet ruble as legal tender.

Reestablishment and aftermath

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The Bank of Estonia was re-established on 1 January 1990, following Soviet legislation of November 1989 that granted the Baltic Republics a degree of policy autonomy. The new institution, however, could not act as a central bank since Estonia was still part of the ruble zone and the State Bank of the USSR kept its branch in Tallinn. It developed an autonomous capacity for policy expertise, however, and also a commercial business of its own by taking over the Estonian operations of Vnesheconombank which gave it experience in managing foreign assets.[6]: 4  The Bank of Estonia also attempted to take other steps within its ability for the liberalisation of the economy and in order to make the transition to a market economy: it began organising currency auctions, publishing quotations of the number of rubles in circulation, and issuing licenses for foreign payments and settlements. It also attempted to regulate the fledgling Estonian banking sector. Settlements were still performed through Moscow, however, the local clearing centre being still part of the Soviet State Bank infrastructure. When Estonian independence was restored in August 1991, the Bank of Estonia still had only about 25 staff.[6]: 6 

Following independence, the Bank of Estonia finally took over the former Soviet Stater Bank branch and was acknowledged as the legal successor of the interwar central bank of the Republic of Estonia. The British government subsequently agreed to return its gold reserves still held in the UK. The restoration of the membership of Eesti Pank in the Bank for International Settlements was accompanied by the restoration of its rights to the gold and other assets deposited there. Reserve felling areas from the State Forest Fund worth 150 million dollars were also included in the balance sheet of Eesti Pank as an additional foreign currency reserve (although the latter had more a moral and an emotional value for the general public than a practical one).

The new banknotes (the second kroon) reached Estonia in April 1992. The Estonian kroon was pegged to the German Deutschmark to ensure stability. The German Bundesbank was informed of this. The Estonian kroon was declared the sole legal tender in circulation and Eesti Pank the only regulator of monetary relations in Estonia. Within three days, 1500 rubles were exchanged to krooni for each resident natural person at the rate of 1 kroon = 10 rubles. Almost the entire amount of rubles in circulation in Estonia was exchanged to kroons at the same rate (deposits, money held by enterprises, etc.). The rate was considered under-priced by many opponents, but it actually corresponded to the market rate of that time. Time and the later course of events have indisputably proven the correctness of the choice made. All the laws and other legal acts planned for the beginning of the monetary reform came into effect. Eesti Pank began to publish daily exchange rates of the Estonian kroon against the most important foreign currencies.

Prior to the introduction of the euro, TALIBOR (the TALlinn Interbank Offered Rate) was a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Estonian wholesale money market (or interbank market in Estonian kroons). TALIBOR was published daily by the Bank of Estonia, together with TALIBID (Tallinn Interbank Bid Rate).

TALIBOR was calculated based on the quotes for different maturities provided by reference banks at about 11.00 am each business day by disregarding highest and lowest quotation and calculating arithmetic mean of the quotations.

Adoption of the euro

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With the introduction of the euro on 1 January 2011,[7] the Bank of Estonia became a member of the Eurosystem or the system of Eurozone central banks that of that collectively set and implement the zone's monetary policy. Some of the functions of the bank were taken over by the European Central Bank. Other functions, as well as membership to the European System of Central Banks remained.

Chairmen

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See also

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References

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  1. ^ a b c "The buildings of Eesti Pank". Eesti Pank. 28 September 2012.
  2. ^ a b Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek.
  3. ^ Bank of Estonia. "SOME FACTS FROM THE HISTORY OF EESTI PANK AND ESTONIAN FINANCE". Archived from the original on 7 July 2004. Retrieved 13 May 2010.
  4. ^ "Major Banks". A to Z World Culture. 2023. Retrieved 20 February 2023.
  5. ^ 1927–1930 Central bank and monetary reform as a precondition for a strong economy
  6. ^ a b c Andres Sutt, Basil B. Zavoiceo, & Adalbert Knöbl (2002), The Estonian Currency Board: Its Introduction and Role in the Early Success of Estonia's Transition to a Market Economy, Washington DC: International Monetary Fund{{citation}}: CS1 maint: multiple names: authors list (link)
  7. ^ "Estonia ready for euro". European Commission. 12 May 2010. Archived from the original on 15 May 2010. Retrieved 12 May 2010.
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