EESTI PANK ANNUAL REPORT 2013

2014 APPENDICES 2013 31 ENDED DECEMBER YEAR FINANCIAL THE FOR PANK EESTI OF ACCOUNTS ANNUAL POLICY RESOURCES HUMAN AND ORGANISATION, AND GOVERNANCE REPORTING, PANK EESTI OF 2013 IN ACHIEVEMENTS AND ACTIVITIES ECONOMIES ESTONIAN AND AREA GLOBAL, THE DUTIES PANK’SEESTI KEY FOREWORD BY THE GOVERNOR OF EESTI PANK EESTI OF GOVERNOR BY THE FOREWORD CONTENTS Publications ofEestiPankin2013 Decisions oftheSupervisoryBoard ofEestiPankin2013 Decrees ofEestiPankin2013 oftheGovernor andorganisation,humanresourcesReporting, governance policy Investment offinancialassets sectors Compiling statisticsfortheEstonianfinancialandexternal Consultation andcooperationonissuesofeconomicpolicy Safeguarding financialstability Managing currency circulation andimplementation ofdecisions Participation inmonetarypolicydecision-makingthe The Estonianeconomyandfinancialsector environmentThe external Strategic focusofEestiPank for 2014–2018 Human resources atEestiPank andorganisation Governance Central bankaccountability partnershipsandpubliccommunications International Advisory functions Monitoring andeconomicanalysisatEestiPank Financial sectorpolicy Macro-financial supervision Cash Payment systems Implementing monetarypolicydecisionsintheeuro area andEstonia Monetary policydecisionsoftheEurosystem ...... 58 50 20 16 15 15 95 91 55 51 50 48 38 37 34 31 29 24 20 11 10 98 94 50 45 34 29 91 10 15 7 4 2

Eesti Pank Annual Report 2013 EESTI PANK'SEESTI MISSION: matters ofeconomicpolicy, andweproduce high-qualitystatistics. assessment ofthestateandoutlookeconomy, onimportant weadvisethegovernment of goodqualityandpromote asafeandefficient paymentenvironment. We giveanindependent Estonian financialsystembyhelpingtosetpolicyforthesector. We ensure thatcashis central banks ofthe euro area and implementing it in .We maintain thestability of the nia. We keeppricegrowth moderate,settingacommonmonetarypolicytogetherwiththeother to thesustainabledevelopmentofEstonianeconomyandincreased prosperity forEsto As thecentralbankofRepublicEstoniaandamemberEurosystem, wecontribute - 3

Eesti Pank Annual Report 2013 fragmented but inflationary pressures remained low. For this reason the , like the like Bank, Central European the reason this low.pressuresremainedFor inflationary but fragmented quitewere markets creditareaeuro as complicated quite was 2013 in environment policy monetary The has risen. eurothe for outlook areathe in confidence increasedgenerally has but demand countries, domestic and acrossuneven was Growth 0.4%. by shrank still it whole a quarter,as second year the the in for though eurothe 0.3%areahalf, modest grew a a economy and by year a almost for declined Having stabilising. The global economy grew at a moderate rate in 2013 and the euro area economy showed clearer signs of PANK BY OFEESTI FOREWORD THEGOVERNOR advance thedomesticeconomy. together,and we contribute work to setting the single monetary policy of the areaeuro area and provideeuro top quality advice to the of banks central the and Bank Central European the where Eurosystem, the in role effective and active an takes Pank Eesti field. each in knowledge available best the together bring must bank the this clearly,do presented to be and must and analysis thorough on based be must the bank monitoring the of assessments and in advice sector.decisions, banking The the stability and economy,policy economic operational and capacity analytical sufficient has it ensure must Pank Eesti they couldbeusedtobalancetheeconomyinevent of risksbeingrealised. government budget should be brought into nominal surplus as soon as possible and reserves built up, as general the that advised also bank policy.The fiscal short-term its planning in balance nominal the and events, expenditure or income one-off and effects cyclical without balance, structural the both observe market andthedifficulty in2013to of assessingthecyclicalposition,EestiPankadvisedgovernment slowing of economic growth, may also have an effect on public finances. Given the situation in the labour labour thegiven costs labour growthin the fast excessively the in 2013 in seen weremainly in which of signs market, Imbalances market. labour the is Estonia in growth economic for factor key second The years andinvestmentinproduction capitalandhumanare crucialifproductivity istobeimproved. export markets.Maintaining export capacity is thekey challenge for theEstonianeconomyin the coming in competitiveness lose will Estonia as growth, for economy the of capacity the back hold to start will it of this sort is not sustainable however. If wages continue to rise rapidly and external demand to remain low, mand, which was primarily based on rising household incomes, and through this by consumption. Growth much smaller than had been expected even only a year earlier, and so growth was driven by domestic de was year.demand the External for 0.8% totalling and quarters the acrossspread unevenly growth nomic The Estonian economy in 2013 reflected the weakness and volatility in the external environment, with eco in decisionmakingmechanismswillhelpincrease theimpactofmonetarypolicy. measures in order to increase the stability of the economy and of financial markets. Greater transparency policy monetary about guidance forward clearer even use to started banks central the 2013 stability.In economy,the stimulate help pricewill of This maintenance reasonable terms. the facilitate ultimately and be passed on to the real economy and that good business projects be able to get funding from banks on aided a recovery in investment. It is important for the central banks of the euro area that low interest rates have rates interest low and growth price modest and levels, low record at remained have rates interest central banks in many other advanced countries, continued with an accommodative monetary policy. Key - - 4

Eesti Pank Annual Report 2013 commercial banks stopped using the local retail payments system run by Eesti Pank once SEPA was op EuroreducedSingle was the Areawhen Payment somewhat (SEPA) The2014. early in operating started Eesti Pank’s responsibilities for financial stability have increased, but our role in payments and settlements to ensure financialstability. EestiPank’s responsibilities inmacro-financial supervisionare alsowidening. helpwill that duties new have will areaeuro the of banks central the all that means which area,euro the in banks supervising for responsibility over take to preparing financialis Bank Central Europeanin The supervision. role important more a globe the around banks central given has crisis financial recent The for 2014, which is 2.5% smaller than that for 2013, without the costs of cash handling, which can vary can which handling, cash of costs the without 2013, for that than smaller 2.5% is which 2014, for budgetPank Eesti the in reduction the in evident was efficiencyincreased The efficient.more ganisation or the make to order in budgeted and planned is work how changed bank’smanagement the 2013 In markets ofmore countriesthanbefore. bondsovereign the in money investing and portfolio investment the to equities like classes asset further levels. Eesti Pank has reacted to changes in the operating environment and has spread its risks by adding lowvery to fallen have creditratings high with sovereignbonds on whereinterestrates markets financial the in situation the from challenges new facing been has and investor conservative and long-term a is banks of the Eurosystem in investing the foreign reservescentral of the other European Central with Bank. The central works bank and Fund Guarantee the of portfolio investment the manage to agreement an freedom of action and ensure that it has sufficient capital to cover any possible losses. The bank also has The Eesti Pank reserves underpin confidence in the monetary system of the euro area, guarantee the bank Eesti Pank’s netequityasaratiotoriskassetstheaveragelevelofcentralbankseuro area. sory Board decided to continue in 2014 with the current profit distribution strategy, which aims to increase Supervi the that important very was it why is this and banks, central the of equity average the on based be remembered that the Eurosystem’s monitoring of the risks associated with its single monetary policy is shouldit time same the At area.euro the of banks central the of any of smallest the of one is risk policy assets of central banks and their risks. The ratio of Eesti Pank’s net equity to the assets carrying monetary conse quences of the economic crisis, and they have supported economies but at the the same time increased the ease to years recent in elsewhere and in taken been have measures Extraordinary next togointocirculation willbetheten-euro notefrom 23September2014. and accounted for more than 52% of the five-euro notes in circulation in Estonia by the end of 2013. The circulation,enter to series new the of first the provedfeatures.five-eurobecame security The banknotes im and design updated an with banknotes euro of series second the to changeover the for time long a forway under been have Preparations counterfeiting. against protected and quality appropriate the of is cash that and circulation, for available arereserves cash sufficient and met is coins and banknotes euro payment and store of value. Eesti Pank and the other banks of the Eurosystem make sure that demand for of means a as role popular,important more an become retains have cash payments electronic Although to anewlevelasitmakespossiblethesmoothermovementofpaymentsaround Europe. treat marketparticipantsequally. SEPA tookthefunctioningofasingleEuropean marketforsettlements it that and economical and secure be landscape payments European the with integrated is that market erating, andsoourrole inpaymentsischanging.ItimportantforEestiPankthatanEstonian - - - - - 5

Eesti Pank Annual Report 2013 we have gained so far will require an effort from all of us and we need to stand ready as households, as ready stand companies andanationtorespond flexiblytochangesintheeconomy.to need we and us of all from effort an require will far so gained have we Estonian, European theand global economies to demand constant risks vigilance and assessment The and keeping whatyet. laurels on resting of question no be can there and hard-earned, was success the economy,Estonian the for and Pank Eesti butfor both one successful difficultbut a was 2013 year The in 2013than2012,asthebankemployed233people. averageon Pank Eesti at employees year.equivalent to full-time year fromgreatlyfewer four wereThere Governor of Eesti Pank, of Eesti Governor Ardo Hansson Ardo 6

Eesti Pank Annual Report 2013 economy. EestiPankexpertsanalyseandmakeforecasts fortheEstonianeconomyandtakepartin Estonian the only affect that issues of and whole a as Eurosystem the affect that processes the of both neededis together.analysis working Eurosystemhigh-quality reason the this of For banks central the all by jointly taken are implemented be to policy monetary single the for needed decisions The area. euro the of policy monetary single the setting in participates Pank Eesti Eurosystem, the of bank central a As decisions of implementation and Eurosystem the in decision-making in 1. Participation PANK’S DUTIES EESTI KEY framework for it, and by working with market participants. It is the responsibility of Eesti Pank as overseer legalthe designing in participating environmentby payment the of development the supports Pank Eesti for settlingsecurities. Eesti Pank is working with the other central banks of the Eurosystem on the TARGET2-Securities platform TARGET2,by offered possibilities Tothe funds. widen of transfers interbank secure and fast for used is TARGET2-Eesti settlement system, which is a technical platform for executing monetary policy and which Payment systemsare acentralpartofthefinancialinfrastructure ofaneconomy. EestiPankmanagesthe ate qualityandprotected againstforgery. banknotes and coins is met and sufficient cash reserves are maintained, and that cash is of the appropri the notesandcoinsoflegaltendereuro area. EestiPankmakessure thatdemandforeuro Together with the other central banks of the euro area and the European Central Bank, Eesti Pank issues high-quality currency tomeet demand,andthatpaymentsystemsfunctionreliably andwithoutfaults. Eesti Pank'sgoalinmanagingthecirculation ofcurrency istoensure thatthere isasufficient amountof 2. Managing currency circulation Participation inmonetarypolicydecision-makingtheEurosystem andimplementationofdecisions chapter the in found be can this on information Further carrying outmonetarypolicyoperations. deposits. in take andcounterparties as banks and of soundness financial the assessing means loans policy monetary Implementing issue which banks, commercial the with bank central the of transactions the through enacted is policy Monetary system. financial the through businesses and households to on The decisions of the central bank about the price of money and how much of it there should be are passed This isincompatiblewithhighvolatilityinprices. purchasingpower.stable currencywith a using calculations and transactions make can households and economy.the of companiesensuredevelopment that to stable job the our to is contributes It Pank Eesti to givesupportexpertsandmanagersfrom thecentralbankindiscussionsofeconomicpolicy. bank is to provide information that can be used in decisions on monetary policy and financial stability, and analysis, research andforecasting fortheeuro area economy. Thepurposeofeconomicresearch atthe - 7

Eesti Pank Annual Report 2013 3. Safeguarding financial stability financial Safeguarding 3. Managing currency circulation chapter the in found be can this on information Further recommendations make where necessaryforhowthesystemscouldfunctionbetter. to and requirements international meet systems payment the how assess to able, up to date and impartial information that is used in analysis, forecasting and policy setting, and is and setting, policy and forecasting analysis, in used is that information impartial and date to up able, quality,reli good supplies bank central the statistics, official of compiler a As account. financial the for and sectors external and financial Estonian the for statistics the compiling for responsible is Pank Eesti sectors and external financial Estonian the for statistics 5. Compiling Consultation andcooperationonquestionsofeconomicpoli chapter the in found be can this on information Further Eurosystem asawhole. theand Estonia both for speaks Pank Eesti where media, the with and organisations international within Successful consultation and cooperation requires regular communication within the Eurosystem and also policy,economic deciding in ment decisions.financial making in households and companies by also and countries and international institutions. Analysis and research by the central bank are used by the govern otherin researchbanks with central works institutions, and government the advises Pank Eesti end, this It is Eesti Pank's job to support stable and sustainable economic growth in Estonia and the euro area. To 4. Consultation and cooperation on questions of economic policy Safeguarding financialstability chapter the in found be can this on information Further pervision. su banking organising in Pank Eesti to duties additional give will which Bank, Central European by and Baltic states and Estonia. In 2014 the euro area will start a single supervisory mechanism headed Nordic the Europe, from organisations with cooperation close requires stability financial Maintaining framework forcrisismanagement. bank also designs policies for the financial sector by helping write the law governing it and developing the the systemicriskstofinancialsectorandsettingappropriate policiestomanagethoserisks.The assessing and analysing by supervision macro-financial through stability financial maintains Pank Eesti in order tomaintainpricestabilitythatthefinancialsystemfunctionwell. policymonetary its successfully implement to bank central the of ability the for and economy the of ning Eesti Pank backs up the functioning of the financial system as a whole. It is necessary for the smooth run cy - - - - 8

Eesti Pank Annual Report 2013 6. Financial asset investment sectors Compiling statisticsfortheEstonianfinancialandexternal chapter the in found be can this on information Further and worksindevelopingnewstatisticalmethodologies. released publicly. Eesti Pank also helps compile statistics for the European economic and monetary union Investment offinancialassets chapter the in found be can this on information Further in afewmore bondmarkets indevelopedworldcountries. Eesti Pank has reacted to these changes by diversifying levels. its risks low via additional historically asset classes to and investing fallen have bonds sovereign rated higher on rates interest where environment an in challenges new facing currently is and investor conservative and long-term a is bank central The denominated securityportfolio. ECB’s reserves and currently works closely with Suomen Pankki in managing a share of the ECB’s dollar- the of management the in participates actively sector.Pank public Eesti the of reserves long-term other also bank The reserves. currency has an agreement to manage the investment portfolio of the Guarantee Fund and is prepared foreign to invest national the manage and preserve to obligation legal a has Pank Eesti assets. its invest and maintain to needs it independent, financially be to bank central the For 9

Eesti Pank Annual Report 2013 ees Hwvr hr rmie ucrany rud h otok o goa eooi got. Financial growth.markets reacted quite economic strongly in May global to the signals for by the US Federal outlook Reserve that it the would start tapering around uncertainty remained there However levels. policy accommodative in order to revive their economies, and monetary policy rates stayed at record low monetary kept countries advanced larger the of banks central The been. had it than weaker somewhat half of the year in advanced countries, while economic activity was strong in developing countries, though Growth in the global economy continued at a moderate speed in 2013. The economy stabilised in the first ENVIRONMENT THE EXTERNAL ECONOMIES ESTONIAN AND AREA EURO THE GLOBAL, 1 International Monetary Fund (IMF). World Economic Outlook, October 2013. October Outlook, Economic World (IMF). Fund Monetary 1 International throughoutyear.decline the to continued sector non-financial the to issued loans of be mainly was This stock the and market credit area euro the in reflected been yet not has confidence in improvement The of middle the in 2014 were good. exiting Portugal for prospects the and significance, symbolic of was 2013 of end the at programme support its from exit successful Ireland's level. sustainable a to debt sovereign bring to takenbeen have measures policy economic as and programmes, aid their of targets the meet to striven indicates thatconfidenceisgraduallyreturningtothemarkets asthecountriesfacingdifficulties have This crisis. debt area euro the during markedly risen having difficulties, budget by afflicted countries of Tensions eased in European financial markets and interest rates continued to fall on the sovereign bonds level of2008despitetheoutlookforgrowth improving somewhat. the continuing reduction in corporate investment. Investment in the euro area in 2013 was 15% below the was economy declining the to contributor major A 0.4%. by shrank still economy area euro the whole a as 2013 For demand. external and environment external the in improvement an by also and somewhat, corded. The economy was supported by a recovery in domestic demand as general confidence improved had lastedforsixconsecutivequarterscametoanendinthesecondquarterasgrowth of 0.3%wasre that decline economic the and 2013, of half first the in expected as stabilised economy area euro The inflation willremain lowglobally inthenextfewyears. countries following a reversal in capital flows led to stronger inflationary pressures. The IMF forecasts that developingother many in currencies of depreciation the while China, in modest remained it markets; ing year,the of half second differentin moved Inflation years. for low very directionsbeen having develop in thein rise to inflation led bank central the by wheretaken Japan, steps being firm exception the only the countries, advanced all almost in slowed Inflation unemployment. of levels high of because and activity economic of weakness the to response in capacity of underutilisation the of because extent larger a to Inflation continued to slow around the world, which was partly because commodity prices were lower, and (IMF) estimatingglobalgrowth at3.6%for2014 point to faster growth in economic activity than has been seen so far, with the International Monetary Fund markets was more pessimistic than before. Although confidence indicators and several economic figures developingslightly,growthin up for picked outlook economies the advanced while growthin recoveryin The extent. an to changed had economy global the to risks the year the of half second the By ditions. uncertainty ledtohighervolatilityinfinancialmarketsandsomethingofadeteriorationfinancingcon increased where economies, emerging affected mainly news The easing. quantitative of programme its 1 , theriskshavenotdisappeared. 10 - - - -

Eesti Pank Annual Report 2013 but while it reached almost 27% in countries with the highest unemployment rate like Greecelike Spain,rate and unemployment highest the with countries reachedin it 27% while almost but labour markets. The unemployment rate in the euro area stood at a recordin high of 12.1% in the middle of 2013, large particularly were Differences area. euro the in countries different between substantially quitevaried still balance economic of indicators the and crisis economic recoveryfromthe of speed The side restrictions, particularlyincountriesmore caught inthecrisis. supply by affected also was market credit the markets financial in improvement the Despite unchanged. relativelyremained stock loan household the while decline, to continued stock loan corporate the cause ensured that the annual growth of private consumption remained over 4%. Investment activity was low in and incomes, household rising on based primarily was which demand, domestic by driven was Growth boost will Estonian growth to2.6%in2014. Europe in recovery the that 2013 December in forecast Pank Eesti and 0.8% by grew GDP whole,a as year the macroeconomicFor its years. subsequent forecasttwo the growthand for 2013 for became clear demand that was external significantly smaller than expected, and Eesti Pank had to lower it year the During environment. external the of volatility and weakness the quarter,reflecting to quarter from alternating decline growthand GDP with 2013, in irregularpath an followed economy Estonian The The Estonian economy SECTOR FINANCIAL AND ECONOMY THE ESTONIAN money marketsandfinancialmarkets,whichwouldagainincrease doubtanduncertainty. international in developments negative possible from come outlook economic the surrounding risks The 2015. by 1.5% to rise will growth that and 2014 in 1.1% by grow will areaeuro the in economy the that sible for financing conditions in the non-financial sector to improve. The European Central Bank pos forecasts it make will markets financial of normalisation and a and demand policy monetary external accommodative An in exports. growth improving and demand domestic in recovery gradual a from support with accelerate will growth and continue to forecast is economy areaeuro the in growth in recovery The 2014 and1.3%in2015. for the euro area will remain modest in the coming years, and average inflation is expected to be 1.1% in The European Central Bank forecasts that the annual growth in the harmonised index of consumer prices pressures.price modest imposed aggregates monetary in growth The area. euro the in 1.1% averaged of the year also pulled inflation down. Inflation excluding the more volatile components of food and energy Prices grew less quickly mainly because of falling energy prices, while the decline in food prices at the end 1.5%, which is below the European Central Bank's target for the medium term of below, but close to, 2%. was2013 in rate inflation average the and growthremainedmodest, as remainedlow Euroareainflation at closeto12%. European Central Bank forecasts that unemployment in the euro area will remain high in the The coming market. years labour the in situation the of stabilisation a indicated already year the of months last the in typically a lag in the reaction of the labour market to an improvement in economic activity, data published is there Although lowest. the is unemployment Germany,where and Austria in 5% to close remained it 11 -

Eesti Pank Annual Report 2013 Estonia was again among the few countries in the euro area, where employment continued to increase.to continued employment where area, euro the in countries few the among again was Estonia theearlier salesincomefrom emissionsquotas. from funded projects the of scale large the by boosted was investment and levels record reached investment was lower than in 2012, when support fromGeneral government the budget porate sector and even there it was narrowly based and related to large individual infrastructure projects. cor the from came investment in GDP.growth as the rate All same the about at increased investments the first half of the year but started to increase in the second half and for the year as a whole fixed capital of short-term loans was driven by the trade sector, where the recovery in domestic demand increased the turnover the in Growth 2.4%. only by grew loans long-term of stock the investment, new little was there and transactions refinancing were loans such of proportion large a as but loans, long-term of the turnover in was growth main The 2%. to slowed had growth its year the of end the by year,and the of half firstgrewthe portfolio morein loan quickly corporate The 2012. in than moreout took loans households and companies both as 2013 in 1.3% by grew sector non-financial the of portfolio leasing and loan The sector financial Estonian The the was burden smallest intheeurodebt area. the and experts, of estimates the in surplus in remained cycle economic the for remained close to balance in 2013, there budgetremained a government small deficit. general The structural the budget position Although adjusted position. fiscal the worsened had that years crisis the during taken decisions of consequences the by dominated was government general the of position fiscal The a netlenderincreased by theendofyearto7%GDP. from loans of abroadstock grew moreThe year.slowly during the the year than for debt-related investments abroad,GDP and Estonia's of position as 1% averaging standards, Estonian by deficit small tively rela a maintained payments of balance the in account current the meant levels activity investment Low the harmonised index of consumer prices, as calculated using the Eurostat methodology, stood at 3.2%. in growth Average down. inflation pushed also euro the of strengthening a while environment, external thefrompressures coming price in reduction a was inflation back holding factor main The inflation. core year to close to 2%. The fall in inflation was broad-based and was seen in energy and food prices and in age point. Inflation stood at 3.8% during the first half of the year, but it dropped in the final months of the electricity prices had a major impact on the consumer price index and boosted it by around one percent Higher 30%. almost by rose households for prices electricity so and states, Baltic the in reduced rarily tempo was electricity of supply the when time a at opened market electricity the and changed quotas emissionin energy.trading for for prices rules growthin EuropeanUnion faster The by for accounted be of the euro area. More than half of the difference between inflation in Estonia and that in the euro area can Inflation continued to fall in Estonia in 2013, but it remained higher on average than in the other countries labour andthreatening thecompetitivenessofexportingsector. qualified of shortage growing a of notice giving companies, of profitability the reduced costs labour unit developments in the labour market were not as balanced as before. Increased wage pressures and higher The unemployment rate fell to close to the natural rate of unemployment, calculated at around 8.6%, but 12 - - - -

Eesti Pank Annual Report 2013 the bankingsectorfellto104%. ofratio Figuredeposit (see to increasingyear loan portfolio, the the loan over 1), the 5.1% than by faster grew households and companies Estonian of deposits the year.As the throughout low remained which year.the over 0.9% by growonly to though started again, folio interestloan by rates,aided was Lending housing loans, and almost one fifth more were taken than a year earlier. As a result, the housing loan inport was growth fastest The less. used were loans card credit and overdrafts only and products, credit all nearlyrecoveryof a use saw the Households in total. in 4.5% by shrank stock loan corporate short-term however,sectors other themost and in fell financing short-term for need The capital. operating for need tests carried out twice a year showed that the banking sector has sufficient capital buffers to cope with cope to buffers capital sufficient has sector banking the that showed year a twice out carried tests stress The funds. own 1 Tier the only with requirement all adequacy capital 10% and the meet to able earned, were banks profit the from support with further increased sector banking the in Capitalisation previous yearandreturnonassetsfellto1.6%. the dividendsfrom subsidiariesare excluded,theprofit ofthebankingsectorwas9%smallerthanin growth in the loan portfolio, while deposit growth at the same time led to a fall in the cost of resources. Ifand rates marginal higher to due increase to started income interest year the of half second the in but before,year a than less interestlow,7% base rates was banks interestof net income FigureWith the 2). (see fell risk credit as loans written-down in reduction a from 9% and subsidiaries from dividends from came which of 28% 2013, in profit net in million 444 of total a earned Estonia in operating Banks in theportfoliowere restructured oroverdue, whichwas2.3percentage pointsfewerthanayearearlier. loans the of 3.1% total In restructured. loans of number the in reduction a by helped also was banks of portfolio dropped by 1.3 percentage points to 1.9%. The improvement in the quality of the loan portfolio that the value of loans overdue for more than 60 days fell by 173 million euros, and their share of the total The strengthened financial position of the non-financial sector and write-offs of uncollectible loans meant - 10% 20% 30% 40% 50% 60% 10% Figure 1. Annual growth in loans and deposits in the non-financial sector in Estonia in sector non-financial the in deposits and loans in growth 1. Annual Figure 0%

2004

2005 annual growth in the loan portfolio loan the in growth annual

2006

2007

2008

2009 annual growth in deposits

2010

2011

2012

2013 13 -

Eesti Pank Annual Report 2013 ability to earn profits mean that they will be able to remain solvent even if they are hit by unexpected by hit are they losses, andtorebuild theircapitalbuffersif later. even solvent remain to able be will they that mean profits earn to ability their and banks the of capitalisation high The forecast. are that those than conditions economic worse

EUR million sector banking the of Profitability 2. Figure * excluding dividend income and one-off financial income financial one-off and income dividend * excluding - - - - 200 400 600 800 800 600 400 200 0

2000

2001

2002 loan losses profit* net

2003

2004

2005 assets on return dividend income

2006

2007

2008 one-off financial one-off income 2009

2010

2011

2012

2013 - - - - 0% 1% 2% 3% 4% 4% 3% 2% 1% 14

Eesti Pank Annual Report 2013 etary policyoftheeuro area andontheother dutiesoftheEurosystem. MonetarypolicyintheEurosystem meetings of the Governing Council of the European Central Bank, where decisions are taken on the mon twice-monthly the in participated has Pank Eesti of Governor the euro, the using started Estonia Since policy the Eurosystem of decisions Monetary IMPLEMENTATION AND EUROSYSTEM OF DECISIONS PARTICIPATION IN MONETARY POLICY IN THE DECISION-MAKING PANK IN 2013 OFEESTI ACHIEVEMENTS AND ACTIVITIES extended period of time.” time.” of period extended an for levels or lower at present to rates remain key the interest ECB expects Council 2013:4 July Governing "The conference, 4 press ECB year. one up to for fixed rates 3 Interest close but below, of area euro the of (HICP) Prices term. medium Consumer the to, 2% of over Index Harmonised the in growth annual as Bank Central European the of Council Governing the by defined is stability Price policy. monetary covers which Union, European of the Functioning the on Treaty 1 of the 127 section in article out is set This area. euro in the stability price is to maintain policy monetary of Eurosystem the objective primary 2 The transmission of functioning the support to and banks area euro for liquidity sufficient ensure to ures On top of its traditional monetary policy measures, the Eurosystem continued with its non-standard meas the monetarypolicytransmissionmechanismvariedgreatly from countrytocountry. of efficiency the though 2013, throughout households and companies for rates interest loan their lower to banks led markets financial the of normalisation the and rates interest base in reduction The come. to time some for accommodative remain will policy monetary Bank's Central European the that realised markets financial and guidance forward the following declined rates interest market money in volatility levels for an extended period of time due to the subdued outlook for inflation and economic growth cisions in July, to indicate that European Central Bank key interest rates would remain at present or lower European Central Bank used forward guidance for the first time in communicating its monetary policy de the dynamicsofeconomicindicatorsormonetaryaggregates. Councilofthe Inresponse, theGoverning to linked directly not are that shocks external to susceptible more developments policy monetary future remainedlow, increasedvolatility beforetheir noticeably though summer. the forexpectations made This market interest rates Changes inkeyinterest rates andexpectationsoffuture interest ratesare passedontoshort-termmoney of theEurosystem time, the European Central Bank found that inflation expectations were in line with the price stability target were lowered because the weakness of economic activity had reduced inflationary pressures. At the same interest rate on the deposit facility remained unchanged throughout the year at 0.00%. Key interest rates The0.75%. and 0.25% to points basis 25 further a wereloweredby rates both November in and 1.00% to points basis 50 by facility lending marginal the on rate interest the and 0.50% to points basis 25 by economic and monetary union. In May it lowered the minimum bid rate on its main refinancing operations the under levels lowest-ever their to Eurosystem the of rates interest policy monetary the lowered Bank general the lower to aimed uncertainty andinsecurityintheeuro area economy. and CounciloftheEuropean Central TheGoverning accommodative was Eurosystem the of policy monetary the 2013 In a as whole belowbutcloseto2%ayear.area euro the in increases price consumer keeping means which stability, price maintain to aims 2 . http://www.ecb.europa.eu/press/pressconf/2013/html/is130704.en.html 3 , which generally followed the European Central Bank interest rates in 2013 and 2013 in rates interest Bank Central European the followed generally which , . 4 . The 15 - - -

Eesti Pank Annual Report 2013 banks to make it easier for market participants to execute financial transactions using different curren different using transactions financial execute to participants market for easier it make to banks Bilateral currency swap transactions are made between the euro area and non-euro area national central lateral formonetarypolicyoperationswere easedduringtheyear col eligible on rules the area, euro the in sector non-financial the to lending support to way this in and November full allotment CounciloftheEuropeanchannels. TheGoverning CentralBankdecidedinMaytoextenditsfixedrate 9 See 9 See 8 See 2013". in framework collateral Eurosystem "The section the see framework, collateral the in changes the on more 7 For pr131108_2.en.html 6 See operations. refinancing main of rate bid minimum to the equivalent is that rate interest 5 The (see Table 1). years recent in changed not has Eurosystem the in operations policy monetary for framework main The framework policy monetary Eurosystem's The Estonia and area euro the in decisions policy monetary Implementing the confidenceofbanks increaseto and measure precautionary a as China of Bank People's the with agreement swap currency bilateralthree-year a establish to decided Bank Central European the of Council Governing the October limits expiry no with arrangements standing into converted were Switzerland and States United the one year, but in October the arrangements with the central banks of Canada, the United Kingdom, Japan, of maturity a had earlier arrangements stability.swap financial currency to These contribute to and cies, Table 1. The Eurosystem's monetary policy framework in 2013 in framework policy monetary Eurosystem's 1.Table The 3. Reserverequirement Marginal lendingfacility Deposit facility 2. Standingfacilities Structural operations Fine-tuning operations Longer-term refinancing operations Main refinancing operations 1. Openmarketoperations http://www.ecb.europa.eu/press/pr/date/2013/html/pr131010.en.html http://www.ecb.europa.eu/press/pr/date/2013/html/pr131031.en.html http://www.ecb.europa.eu/press/pr/date/2013/html/pr130502_2.en.html 6 A. Mainelements . In order to facilitate access by euro area credit institutions to the financing of the Eurosystem 5 lending, initially until the summer of 2014 and then until July 2015 following the decision indecision the following 2015 July until then and 2014 of summer the until initially lending, . 9 . Outright MonetaryTransactions (OMT) Securities marketprogramme (SMP) 2. Supportforsovereign bondmarketsunderstress The Covered BondPurchase Programmes (CBPPandCBPP2) accepted ascollateral Easing oftheeligibilitycriteriaforcollateralassetsandextensionrange Currency swapagreements withleadingnon-euro area centralbanks Refinancing operationswithextendedmaturity Fixed ratetenderprocedures withfullallotment 1. Easingofrefinancing conditions . . B. Non-standard measures and and http://www.ecb.europa.eu/press/pr/date/2013/html/ 7 . 8 . In 16 - -

Eesti Pank Annual Report 2013 mainly focusedonmakingitsimplerandeasiertounderstand. collateral as used differentbe to assets sufficientof lateral sufficientand quantity quality. ofcurrentrange The wide a allows framework collateral col eligible have must it that is operations creditEurosystem's the in participate to bank a for condition One institutions. credit by use for available funds liquid the decrease or increase to bank central the by initiatedare operations market Open initiative. own their at overnight bank central the at money positing de or bank central the from money borrowing by facilities standing the of use make institutions Credit 10 See 10 See Figure 3 shows the changes in volume and the structure of the Eurosystem's monetary policy operations. had fallensteadilyduringtheyearbutstartedtoincrease againinthelastmonthsof theyear. of November to the end of the year was a maximum of 0.25%. The volume of main refinancing operations their target amounts in several auctions at the end of the year. The last successful bid rate from the middle liquidity injected into the markets through the securities market programme (SMP) proved unable to reach monetary policyoperations,asthefine-tuningoperations that theEurosystem uses tomopuptheexcess otherin reactions to led year the during liquidity in change The euros. billion 265 at operations financing re long-term the before was it where to declined had it 2013 year.of the end during the significantly By euros,billion 440 than repaid.been had repaymentsEurosystemThe the in liquidity excess the lessened out of 800. By the end of the year, 43% of the total amount borrowed under the two operations, or more weekly auctions. The first repayments amounted to 198 billion euros and 634 counterparties participated banks were given the chance to repay the three-year refinancing operations of 2011 and 2012 early at the euros at the end of 2013. There were no remarkable events billionin monetary 287 policy to operations 2012 in 2013, of thoughend the at euros billion 447 from year,declining preceding the in were they what half around were Eurosystem the in banks of accounts current the on held amounts The 2013. in twice lowered were facility lending marginal overnight the on rates interest the year,and previous the in than modestly more used were facility lending marginal overnight the and facility deposit overnight the Both 2013 in Eurosystem the of operations policy monetary and facilities Standing lar observationofit.Furthereligibilitycriteriawere alsoaddedforcounterparties. Greater attention than before was focused in 2013 on the financial soundness of counterparties and regu The announcementofthisprogramme calmedmarkets,achievingtheinitiallyintendedeffect. 2012. of programme Transactions(OMT) Monetary Outright the is used actually not but announced been has efficient operationofthemonetarypolicytransmissionmechanism.Theonlynon-standard measure that since thecrisisinorder toalleviateitandimprove theliquidityofcredit institutions,andtosupportthe and during taken been have that measures non-standard contains still framework policy monetary The http://www.ecb.europa.eu/paym/coll/html/index.en.html 10 . Developments in the collateral framework in recent years haverecentyears in framework collateral the in Developments . . 17 - - - -

Eesti Pank Annual Report 2013 12 See 11 See from certainassetclassesbetter. bonds covered used own and assets non-marketable and marketable on ensure the principle of equal treatment is followed to and Eurosystem the within practice the harmonise to was change the of aim The 2015. collateralMarch 1 until eligible as considered are use own for entity linked closely a by or counterparty the by sued is bonds bank government-guaranteed result, a As collateral. as bonds bank government-guaranteed used own of use the on limit single a set Bank Central European the of Council Governing the March In were madeinthecollateralframework2013. largest fall from the previous year was in the non-marketable assets. As in previous years, some changes claims and deposits with creditcentral of banks. The form remainderthe was in spread assets across non-marketable various was marketable it assets. Theof 23% and 2012, of end the at trillion 2.5 been ing hav 2013, of end eurosthe trillion at 2.2 Eurosystemat the stood by held collateral eligible of value The 2013 in framework collateral Eurosystem's The maturity. By the endof2013,totalsizetwoprogrammes hadshrunkto57billioneuros. to held also are CBPP2) and (CBPP Programmes Purchase Bond Covered the under purchased Bonds SMPportfolio shrankto178.8billioneuros. the year the During euros. billion 3.5 by portfolio the reduced SMP,which the under held bonds sovereignof maturity before days 30 Ireland by buyback the in participate did Eurosystem the However hold thesecuritiesitacquired undertheSMPtomaturity. for the Outright Monetary Transactions (OMT) programme in September 2012, though the Eurosystem announced willwere parameters technical the as terminated was (SMP) Programme Market Securities The - - Figure 3. Changes in volume in the Eurosystem's monetary policy operations 2010–2013 operations policy monetary Eurosystem's the in volume in Changes 3. Figure 1 1 1 1 1 EUR billion 1 - - - - , , ,0 ,0 ,6 , 2 8 6 4 2 2 4 6 8 2 4 http://www.ecb.europa.eu/press/pr/date/2013/html/pr130322.en.html http://www.ecb.europa.eu/press/pr/date/2013/html/pr130927.en.html 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 01/20 1 0 07/20 1 0 fine-tuning (-) fine-tuning SMP+CBPP 01/20 1 1 07/20 deposit facility long-tern refinancing 1 1 01/20 11 . In September it was decided to change the haircuts 1 2 . . 07/20 1 2 current accounts main refinancing 01/20 12 , tomanagetherisksarising 1 3 07/20 1 3 01/20 ------0 2 4 6 8 1 1 1 1 1 1 2 8 4 6 0 0 0 0 ,0 , , ,6 1 4 2 , ,0 0 0 0 0 0 0 0 0 2 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

18 EUR billion - -

Eesti Pank Annual Report 2013 refinancing operations. The deposit facility, which Estonian counterparties had used quite actively in earlier tonian counterparties did however make use of the chance to repay early the loans taken in the three-year buffers, meaning that local banks are not very dependent on the liquidity supplied by the central bank. Es been that the bank groups use centralised liquidity management and the has local banks years had sufficientrecent liquidity in take-up low the for reason main The 2013. facility,in lending marginal overnight the The Estoniancounterpartiesdidnotusethemonetarypolicycredit operationsoftheEurosystem, including Eesti Pank's monetary policy operations to maturitybyEestiPank.In2013,nofurtherpurchases ofbondswere made. purchased undertheCovered BondPurchase Programme andtheSecuritiesMarketProgramme are held used as collateral and deposits placed with the central bank are also used as additional collateral. Bonds are bonds Various counterparties. and bank central the between operations credit outstanding the all of sessment of collateral, the adjusted market value of all the aggregated collateral must cover the total value and the individual assets in the collateral pool are not earmarked for individual transactions. In the daily as collateral pool in the central bank. This means that the collateral is not linked to a specific credit operation decreased at the end of the year. Some counterparties of Eesti Pank use intraday credit and have set up a counterparties Estonian by deposited amounts the tightened, general in conditions liquidity As 4). Figure higher than in the previous year at between 300 and 900 million euros and averaged 706 million euros (see mum bid rate of 0.25% that applied from November. The amounts deposited in these auctions were sharply morereachingmaxi frequentlyever year the the of end the at but year the of start the at 0.01% at stable year, the during remaining lot a changed auctions these in rate bid successful final The auctions. deposit as weekly conducted operation tuning fine the using so do but bank central the at money depositing in interested be to continue Banks 0%. was it on rate interest the as 2013, in all at used barely was years A positive value indicates addition of liquidity, a negative value indicates absorption of liquidity liquidity of absorption indicates value anegative liquidity, of addition indicates value A positive Figure 4. Eesti Pank's monetary policy operations 2012-2013 2012-2013 operations policy monetary Pank's Eesti 4. Figure

-1,050 EUR million -1,150 -650 -450 -850 -550 -950 -350 -250 -750 -150 -50 50

31/01/2012

29/02/2012

31/03/2012 deposit facility 30/04/2012

31/05/2012

30/06/2012

31/07/2012

31/08/2012 fine-tuning operations 30/09/2012

31/10/2012

30/11/2012

31/12/2012

31/01/2013 28/02/2013

31/03/2013 longer-term refinancing operations

30/04/2013

31/05/2013

30/06/2013

31/07/2013

31/08/2013

30/09/2013

31/10/2013

30/11/2013

31/12/2013 ------100 0 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100

EUR million 19 - - -

Eesti Pank Annual Report 2013 Eesti Pank is responsible for ensuring the security of the payment systems in Estonia and for making sure policy andthesmoothfunctioningofcurrency circulation thatpaymentsystemsoperateefficiently. monetary of implementation stability,the financial and economic of maintenance the for important is It Payment systems CIRCULATION CURRENCY MANAGING monetary policytransactionsoftheEurosystem (seeFigure 5). per day. The mainfactorsaffecting thechangesinvalueTARGET2-Eesti are paymentsrelated tothe payments 308 of average an with 2013, TARGET2-Eestiin in payments of number total the of 73% for increased payments because of banks have started to use the number system more for client The payments, lower.and client payments accounted 16% was value total the but 2012 in than higher 15% was paymentsof number the meaning euros, billion 1.1 of value total a with 2013, in payments 417 of erage Transfer System and 18 credit institutions were members of it in 2013. TARGET2-Eesti settled a daily av TARGET2-Eesti ispartofTARGET2, theTrans-European AutomatedReal-timeGross SettlementExpress ESTA, the settlement system for domestic retail payments. Eesti Pank closed ESTA down on 31 January 2014. and TARGET2-Eestipayments, 2013: large-value in for inter-banksystems two payment managed Pank Eesti Pank Eesti of systems Payment with theFinancialSupervisionAuthorityandMinistryofFinance. in the Payment Committee of the Estonian Banking Association and its working groups, and works closely this, and it works in the Eurosystem and various other committees international and working groups, and achieveto forums several up set has bank environment.The payment the develop to helps and systems theoversees systems, payment of functioning efficient the to contributes Pank Eesti cost. reasonable at exposureandrisk minimum with participants system of needs the meets that way a in function they that

EUR million average) (daily systems settlement and payment Pank's Eesti through made Payments 5. Figure 1 2 1 2 , , ,0 ,0 5 5 5 0 0 0 0 0 2 0 0 0 0 0 0 0 0 2 2 0 0 3 2 0 0 4 TARGET2-Eesti turnover (left scale) (left turnover TARGET2-Eesti scale) (left ESTA turnover 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 total number of payments (right scale) scale) (left turnover RTGS EP 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 0 2 4 6 8 1 1 1 0 0 0 0 0 2 4 ,0 ,0 ,0 ,0 0 0 0 ,0 ,0 ,0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 -

Eesti Pank Annual Report 2013 through ESTA in2013was1345euros, whichis19euros more thanintheprevious year. payments was 5% higher than in 2012 and the value was 6% higher. The average size of payments made ments with a total value of 142.3 million euros were settled through ESTA in 2013, meaning pay the 105,781 number of ofaverage daily A 2013. of end the at members 15 ESTAhad system payment retail The GET2 and TARGET2-Securities as part of the preparations for the launch of TARGET2-Securities in June 2015. The main event in TARGET2 in 2013 was the development of the liquidity management interface between TAR 13 See Emergency Act (RT 2009, 39, 262) §34(8). 39, 2009, (RT Act Emergency 13 See financialimportant oversee standardsto and international with fully comply operates it systems payment the that guarantee to bank central a as Pank Eesti for call practices best requirementsand International systems settlement and of payment Oversight working withEestiPanktoprepare appropriate measures forcontinuousoperation. dependent on an information system in a foreign country. As a result the banks providing vital services arenotare that means and ways using service vital the of operation continuous the ofensure to providersservices vital require that force into came Act Emergency the to changes 2014 January 1 On culation. issued descriptionsandrecommendations forcontinuousoperationsofpaymentservices andcashcir also and branch, Estonia PLC Finland Bank Nordea branch, Estonia A/S Bank Danske AS, Swedbank cash circulation andservices payment of operation continuous the "organise" to requiresPank Act Eesti Emergency The in emergencies payments Interbank European retail paymentsystems. pan- through go to started banks Estonian between payments interbank down, closed ESTAwas After services are generallyprovided bytheprivatesector. Pank decidedtocloseESTA andstopproviding aretail paymentsservice.Intheeuro area, retail payment receive sufficient support from the market participants. As a result of the choice made by the banks, Eesti price asthebidsbyotherretail paymentsystemsoperatinginEurope however, andtheproposal didnot on competitive as not were procurement the in bid winning the in conditions The well. as debits direct SEPAallowed have would system the and time, the at price the than less third one was proposed they priceThe future. the in settlements faster even meant have ESTAcould as and fast as been have would system payment its as procurement, public the won had STET that announced was it 2013 January In that wouldsuittheEstonianmarket. preparedwas ESTA,update to procurementpublic a started retailand a find serviceto payment 2012 in negotiations didnotsucceedinfindingapartnerthatsuitedallthemarketparticipantsandsoEestiPank local partner so that Eesti Pank could stop managing the retail payments system for the private or sector. The international an find to 2010 in negotiations started jointly participants market and Pank Eesti ESTA of closing The 13 . Eesti Pank named the following banks as providers of vital services: AS SEB Pank, SEB AS services: vital of providers as banks following the named Pank Eesti . 21 - - -

Eesti Pank Annual Report 2013 a whole, the average availability of both TARGET2-Eesti and the ESTA retail system was 100%, which iswhich TARGET2-Eesti ESTA100%, both the was of and system availability retail average the whole, a as year the In settlements. the of functioning the interrupted or stability financial to threat a posed have could that arose incidents No 2013. in incidents major any without worked TARGET2-Eesti and ESTA Pank andthesecuritiessettlementsystemoperatedbyEstonianCentralSecuritiesDepository. ESTAwerethe 2013 in TARGET2-EestiEestiPank and by Eesti operated by systems overseen payment infrastructure.Infrastructuresmarket financial of ficiency, operation the of compliance legal reliabilityand ef the improve to is oversight of aim primary sector.The private the by operated infrastructure market 14 Committee on Payment and Settlement Systems and Technical Committee of the International Organization of Securities Commissions. Securities of Organization International the of Infrastructures”. Market Financial for Committee "Principles 15 CPSS-IOSCO Technical and Systems Settlement and Payment on 14 Committee (SEPA). 2013 theforumfocusedonhelpingtoimplementrequirements oftheSingleEuropean PaymentArea interestof tives groups infrastructureand affected,Infromsector; companies. some public including the representa services; payment of users institutions; credit Estonian are forum the of members The tion. forum is led by Eesti Pank, working closely with the Ministry of Finance and the Estonian Banking Associa its adjustment to changes in the international payments market through the Estonian Payment Forum. The Eesti Pank supports the balanced and sustainable development of the Estonian payment environment and environment payment of the Development ary 2015. The security requirements apply to providers of payments services and must be implemented by 1 Febru these requirements. withcompliance of assessment the for guidelines secureand retailfor payments, forum Pay SecuRe the Overseers and supervisory bodies produced requirements for the security of internet payments as part of systems wasprepared. the adoptionofrequirements forpaymentsystemsandthesinglemethodologyassessing CCP,terparties, forup drawn was European regulationBank repositories,the A Central trade of TR. and coun central depositories, securities central systems, settlement securities for principles CPSS/IOSCO ciples CPSS/IOSCO the of adoption the was 2013 in Eurosystem the in priorities oversight the of One settlement platformTARGET2-Securities. securities pan-European the joins it when 2017 in X-stream using start to planning is Estonia solution. changing from their current securities settlement and registry system to the new X-stream CSD technical continues assessment in 2014.Theoverseeralsomonitored The theprogrammes oftheBalticcentralsecuritiesdepositoriesfor requirements. the satisfies it whether establish to orderset securities in the system of tlement assessment an started Pank Eesti 2013 In 2013. in incidents major any without operated also Depository Securities Central Estonian the by operated system settlement securities The better thantherequired 99.4%forESTA and99.7%forTARGET2-Eesti. 15 forfinancialmarketsinfrastructure asrequirements foroversight.The Eurosystem adoptedthe 14 prin 22 ------

Eesti Pank Annual Report 2013 had to meet the SEPA conditions from February 2014. This meant that all domestic account numbers account domestic all that meant This 2014. February from conditions SEPA the meet to had eurosin debits direct and transfers credit SEPAall regulation),(the 260/2012 No (EU) Regulation Under (SEPA) Area Payments Euro 2014 Single -the 1February from Changes tional User Group of TARGET2-Securities and also works closely with the Financial Supervision Authority. Na Estonian the and groups, working its and Experts System Payment of Council Estonian the through banksthe with together systems payment the of development coordinatesthe promotesand Pank Eesti launched in2015andEstonia willjoininthefourthwaveFebruary2017. bewill T2S 24. to T2S of depositories member of number the bringing T2S, join to wish their confirming agreementframework the Yorksigned New CSD of Mellon Bank the and depository Latvian the 2013 In cross border securitiessettlementeasier, cheaperandmore secure forinvestors. make and areaeuro the in settlement securities harmonise to up set being is T2S settlement. securities for platform pan-European single a project, TARGET2-Securities(T2S) the in participating is Pank Eesti TARGET2-Securities of theEstoniangovernment. These expert opinions are one of the inputs used by the Ministry of Finance in deciding the official position • • • 2013: in published Eesti Pank gave its expert opinion on the following legislative proposals from the European Commission environment payment the on impact amajor with proposals Legal all thebankclientsinEstoniahavebeengivenoneadditionalyearforchangeoveruntil1February2015. went changeover the and conditions SEPA smoothly. meet As somecompaniesneedextratimetomakechangesandpeoplegetusedusingtheIBAN, to systems their changed banks the 2014 February 1 On tion campaignranwell. participants were observed regularly and the efforts and cooperation of all parties meant that the informa Association, theMinistryofFinanceandFinancialSupervisionAuthority. Thepreparations ofmarket Banking Estonian the with Pank Eesti by coordinated was communications for plan single a and 2012 of end the at made be to SEPAstarted to transition the by brought changes the about Announcements standing order service,whichallowstheautomaticpaymentofinvoicestocontinue. decision by the banks to stop providing a domestic direct debit service and to replace it with an e-invoice ing payments using the new ISO 20022 XML messaging format. The change to SEPA in Estonia led to the were converted into the international form, the IBAN, and that banks and a lot of companies started mak regulation ofinterchange feesforcard-based paymenttransactions. market; domestic the on services payment regulating of adirective updating the account; payment to abasic access and accounts, payment of transfer the accounts, payment with associated fees of comparability the regulating directive a 23 - - -

Eesti Pank Annual Report 2013 Cash important thattheregulation comeintoforce before thechangeovertoT2S. make themmore efficient inthefragmentedEuropean Unionsecuritiesmarket.Forthisreason itisvery pean Commissionin2012anditshouldharmoniseholdingsettlementservicesforsecurities Central SecuritiesDepositoriesRegulation,CSDR.Theproposal fortheregulation camefrom theEuro theof draft progressthe softwareand on T2S the preparationof final werethe 2013 of events main The followed by500-euro noteson28%(seeFigure 7). Figure 6) and 50-euro notes also accounted for the largest share of the total value in circulation with 52%, coins. Of the notes issued, 36% were 50-euro notes, the largest share, and 31% were 5-euro notes (see in euros million 3.9 and banknotes in was euros million 135.7 which of euros, million 139.6 to 2013 of endthe increased by Pank Eesti Tableby (see issued euroPank cash of Eesti total to net The turned 2). re were euros million 1327.0 and institutions credit to euros million 1466.6 issued Pank Eesti 2013 In estimated. beonly can Estonia in circulation in cash euro of volume and value total the that means This individuals. and companies by Estonia to brought cash the and customers, their cash and the institutions credit meet of to demand Pank Eesti by issued cash the both includes Estonia in circulation in cash euro The by 500-euro noteson30.5%. circulation,in followedvalue total the of 36.4% circulationfor in accounted werethey 50-euroand notes 2012, and the number of them was some 5.2% larger. At the end of 2013, 42.2% of inall than 2013 the in higher 4.6% euroaround was circulation in banknotesbanknotes euro of value The euros. billion 912.59 of value combined a with circulating were banknotes billion earlier,15.69 year A euros. billion 956.2 of werebanknotes billion circulating16.51 euro 2013, the valueof in total areaend combined the a At with for circulation andauthenticity controls are met. requirementssuitability that and areaeuro the of standards quality common the to accordingprocessed Eesti Pank's role circulation.in organising cash circulationfor gives it responsibility needed for ensuring that resourcesnotes and coins arecash the of storage safe the for and Estonia in coins and banknotes euro for demand the satisfying for responsible is country,Pank area Eesti euro a of bank central the As opments anddailyconsumptionhabits. in society. Thedemandforcashandchangesinthestructure ofcashreflect socialandeconomicdevel ing share of electronic payments in the last decade. Cash is one of the symbols of stability and confidence Cash stillhasanimportantrole insocietyasameansofpaymentandstore ofvaluedespitetheincreas structure their and Estonia and area euro the in circulation in Banknotes 24 - - - -

Eesti Pank Annual Report 2013 2013 2012 2011 Table 2. Cash flows between Eesti Pank and credit institutions credit and Pank Eesti between flows Cash 2. Table Figure 6. Number of issued Figure 7. Value of euro banknotes issued banknotes 7. euro of Value Figure Year Issued byEesti 0.9% Total amount(EURmillion) 2 % Pank 1466.6 1441.1 1661.2 3 6 % 2 8 % Received by Eesti Pank 1327.0 1323.0 1045.5 1 1 5 % % 0.2% Banknotes Issued byEestiPank 4 % 2 % 41.9 43.8 45.0 5 2 % 4 % 1 Coins 5 % 9 3 Number (million) % 1 % 124.5 34.3 35.9 Banknotes Received byEestiPank 41.1 43.2 34.8 1 5 5 2 1 5 2 0 0 0 0 0 0 5 2 1 5 2 1 5 Coins

0 0 0 0 0 0 0 0 0

0 0 0

22.3 5.8 5.0 25

Eesti Pank Annual Report 2013 had remained in circulation. In 2013, 2.5 million euros worth of kroons in thatcash was kroonsreturned to Eesti Estonian Pank receive to continued bank central the cash, euro receiving and issuing as well As in coinswastwo-,thelargestshare. Of the coins issued, 26% were one-cent coins and 26% were two-cent coins, while 44% of the total value reflection ofthewaythatbanknotesandpeoplemovecomehere from othereuro area countries. a is which issued, been had than Pank Eesti by back received were notes 100-euro and 20 more lot A noted that the number of worn ten-euronoted thatthenumberofworn notesreturnedfrom circulation wasslightlyhigher. was it though good, very remain banknotes euro other for indicators Quality series. second the of notes and a half months, so a large proportion of the five-euro notes in circulation have been replaced with new for five-euro notes is short and they return to the central bank for cash processing after an average of two the central bank, and they accounted for 82% of the notes withdrawn and destroyed. The circulation cycle because five-euro notes from the first series were withdrawn from circulation when they were returned to mainly year last increased destroyed and withdrawn banknotes of number The 2012. in than more third one is which processing, during destroyed and circulation from withdrawn were banknotes euro million stroyed and those still fit for circulation released back into circulation. In 2013 a total of approximately 6.3 2012 (see Figure 8). During sorting, banknotes that are worn or have been damaged in incirculation processedare de number the to similar is which 2013, in processed were banknotes million 42.3 of total A All banknotesreturnedtoEestiPankare sortedwithfullyautomaticsortingmachines. analysisExpert and handling of cash 15.6466 EEKinunlimitedamountsandwithoutanylimitoftime. =EUR 1 of rate central the at euros for coins and notes kroon Eesti exchange will Pank Eesti only 2014 from but 2013, of end the until rate central the at and fees no with kroons exchange to continued SEB andSwedbank bank. central the to returned been yet not had kroonsthat in cash of eurosworth million 48.5 around still was there 2013 of end the At museum. Pank Eesti the and institutions credit through Figure 8. Distribution of euro banknotes sorted at Eesti Pank in 2013 in Pank Eesti at sorted banknotes euro of Distribution 8. Figure 3 1 .4 % 2 .6 % 2 1 .6% 0 .3 % 1 .1 % 2 7 1 .3 5 .7 % % 5 2 1 5 2 1 5 0 0 0 0 0 0 0 0 0 26 -

Eesti Pank Annual Report 2013 published information on the second series of banknotes and on their security features in regional and regional in features security their on and banknotes of series second the on information published five-euro notes of the first series are being steadily removed from circulation by central banks. Eesti Pank five-euro note was issued as the first of the new series. Both series of notes will remain in use initially but the 2013 May 2 On public. the to features security the and notes new the of design the showing time, On 10 January 2013 the European Central Bank unveiled the second series of euro banknotes for the first Banknotes coins and banknotes of production The 16 Currency Information System 2 System Information 16 Currency freely distributed newspapers and held 15 training seminars for cash handlers across Estonia. The central the counterfeit notes remained small, but in the second half of 2013 the number of registered counterfeits 200-eurovalue share500-euronominal The and 50-eurohigh among39%. and of notes for notes notes area and other EU countries apart from Estonia, with 20-euro notes accounting for 41% of the counterfeit eurothe in mostly circulation,fromremovedwere banknotes euro counterfeit 670,000 of total a 2013 In with anti-theftdevices,andatotalof3368banknoteswere affected. handlers cash by analysis expert in revealed were ink security with marked randomly banknotes sions, occa three On coins. 3123 and banknotes damaged 4999 analysed Pank Eesti from experts 2013, In from thecurrency informationsystemCIS2 for Data Exchange for Cash Services, DECS, between central banks, and has made it possible for reports Bank Central European the by requirementsset the meeting means system new the of Deployment trols. con and inventories cash simplified and risks, operational and risks more security efficient, dling reduced han cash for processes working the made has technology modern more and innovative the of Adoption that brings cash operations and data exchange about transactions together in a single accounting system. clients cash their and banks central of needs the for designed specially system IT an is SSP Cash 2013. September30 on place took system new the to transition the and system, logistics and accounting SSP) SharedSingle Cash preparationsnew continued (Cashthe Pank Platform of Eesti deployment 2013 In for Given how many banknotes and coins are in circulation, the number of counterfeits discovered is negligible. expert analysis. the by counterfeit as confirmed were banknotes kroon seven and 2012, in 161 from down discovered, werecoins euro counterfeit 152 year.previous2013, the In in than lower 5% was Estonia in discovered Two-euronotes. banknotescounterfeit of number The coins. counterfeit the of 86% for accounted coins 50-eurowere 27% further a while counterfeits, the of 29% for accounted which note, 100-euro the was encounterednote counterfeit common most the and 2013, in Institute Science Forensic Estonian the by conducted analyses expert the in Estonia in discovered were banknotes euro counterfeit 192 of total A coins. counterfeit euro coins were discovered in the countries of the euro area, and 68% of them were two-euro 175,9002013, In 4%. by fell coins counterfeit of number the while 2012, in than larger 26.2% was 2013 in circulation from removed banknotes euro counterfeit of number The rise. to started notes 10-euro of 16 tobesentautomaticallytheEuropean CentralBank. 27 - - -

Eesti Pank Annual Report 2013 23 September2014. fromnote ten-euro the be will circulation into go to series second the of note next The 2013. of end the by Estonia in circulation in those of 52% than more for accounted series new the from notes Five-euro introduced intoEstoniawithoutanysignificantdisruptions. and printed publications through an extensive network of partners. The second series five-euro note was email by material digital distributing notes, of series second the about handlers cash to explained bank 17 Estonia, the Netherlands, , Luxembourg, , , and Finland. and Slovenia Slovakia, Malta, Luxembourg, Cyprus, Netherlands, the 17 Estonia, collector coindedicatedtothe musicofRaimondValgre. silverseven-euro the was 2013 in shop the in sale on item popular most The occasions. 64 on analysis museum shop for exchanging kroons for euros, while worn or damaged notes or coins were submitted for in interest amongmuseumvisitorsfortheservicesofshopand1621peopleused the servicesof increasean therewas 2013 In bank. fromthe souvenirs and publications with along bought be can ucts prod numismatic and coins collector and exchange, for analysis expert to submitted be can cash aged dam or worn euros, for exchanged be can kroons Estonian where shop a has museum Pank Eesti The and atotalof7500thecoinswere mintedintheRoyalDutchMint. Lätt, Berbel by designed was coin collector silver The euros. seven of coin the of value nominal the and composer the of signature the Waltz, Saaremaa for score handwritten the of fragment a shows reverse the and 2013, year the and Estonia of Republic the of arms of coat the shows coin the of side obverse October,eurosin seven Valgre. of Raimond value of nominal music a the with to Thecoin dedicated tive Estonian composerandmusician.To commemoratethisdate,EestiPankissuedasilvercommemora much-loved and famous the Valgre, Raimond of birth the of anniversary 100th the saw 2013 year The Collector coins products and numismatic were ordered. The supply of coins for circulation was sufficient in 2013 at Eesti Pank and no additional circulation coins coins Circulation in 2014.Thefreshly printed neweuro notesare addedtothejointreserves oftheEurosystem. Pank also contributed to the production of the new series of ten-euro notes that will come into circulation euro noteslentforthechangeover totheeuro in2010,andmeetingitsannualproduction quota.Eesti the return to notes 20-euro printing by Eurosystem the to duties production banknote its fulfilled Pank of theeuro area Central Bank. Eesti Pank organises the production of its banknotes jointly with seven other central banks Each year the central banks of the euro area produce the number of euro banknotes set by the European subsequent yearstopresent theotherbanknotesofsecondseriesastheyenterintocirculation. in continue will campaigns information The features. security the about public general the and handlers cash teach to campaign information an planning is Pank Eesti and 2014, September of end the at area euro whole the in circulation enter will and features security effective more and design updated an has note The 2013. November in made was note ten-euro series second the about announcement first The 17 , which run a joint procurement for banknotes from accredited printers. In 2013 Eesti 2013 In printers. accredited from banknotes for procurement joint a run which , 28 - - -

Eesti Pank Annual Report 2013 macro-financial supervisionanddefinedEestiPank'srightsdutiesincarryingmacroprudential poli ofaims the out set that Act Pank Eesti precisely,morethe this to in made responsibilitieswere changes ity andthedevelopmentdeploymentofmeasures toreduce systemicrisks.To clarifyEestiPank's stabil financial to risks of assessment and analysis both covers Macro-financialsupervision supervision. the oversees macro-financialto bank increasingattention ever pays it so and whole a The as system financial the of functioning Pank. Eesti of functions principal the of one is stability financial Safeguarding SAFEGUARDING FINANCIAL STABILITY banks andtoalleviaterisksstemming from thestructure ofthemarket. of behaviour pro-cyclical the curb to use can states member that measures supervisory macro-financial work agreed by the Basel Committee on Banking Supervision. The capital requirements directive sets out tive IV (CRD IV) that came into force at the start of 2014 and are themselves based on the Basel III frame based on the European Union's Capital Requirements Regulation (CRR) and Capital Requirements Direc largelyare changes planned The lending. requirementsfor and banks requirementsapplyfor capital additional to Pank Eesti allowing Act, Institutions Credit the to changes on Authority Supervision Financial theand Finance of Ministry the with worked bank measures.The various implementing for principles the develop to started Pank Eesti supervision, macro-financial its with results achieve to able better Tobe cooperation isneeded. cross-borderinter-institutionaland wide-ranging so and participants market individual of supervision for Pank hasa limited range of options, as it does not have authority for designing the taxation environment or EestiHowever realised. being them of impact negative the or risks of build-up the reduce to supervision macro-financial its in needed where measures takes Pank Eesti analysis, risk this Following estimates. these reach to used are assessment impact and analysis Expert realised. being risks of sector financial looking riskassessments.ItmapsoutthekeyinfluentialfactorsandestimatesimpactonEstonian forward contains which Review, Stability Financial the publishes and prepares Pank year,Eesti Twicea Macro-financial supervision joining thesinglebankingsupervision. the requirements for crisis management operations, and a single crisis resolution framework for countries out sets preparedthat being also is legislation Union European updated. regularlyproceduresare these and loans, such issuing proceduresfor internal of set a has bank The needed. if banks to loans liquidity management systemisequallyimportant.Inafinancialcrisis,EestiPankready toprovide emergency crisis effective an but system, financial the of functioning the for important is crises financial Preventing supervision. single the by affected countries the between coordinated be will measures supervisory macro-financial and process, making decision the in participate area euro the of banks central the all supervision, bank single of framework legal the Under too. Pank Eesti affect will Bank Central European the at supervision stabilitybankingsector. single financial start the to requirementson decision the placed financial The in ensuredand was that way the in changes several to led 2008 in started that crisis financial global The cies out. 29 - - - -

Eesti Pank Annual Report 2013 apply an additional 2% systemic buffer requirement to banks operating in Estonia in order to maintain the tointention its announced Pank Eesti 2013, October in Report Stability Financial the of presentation the Intoo. regulations new the under strongremain banks Estonian of capitalisation the that sector banking Estonian the of resilience the for important is It banks. the of position financial the harm could this and pected downturn in the economy could very quickly lead unex to an loan repaymentthat means problems risks in the external private to sector,system banking and economy Estonia's of openness relative the to December 2013, which was higher than the internationally standard 8% requirement. This was because At the request of Eesti Pank, a minimum capital requirement of 10% applied to banks from October 1997 banks that prevented them raising their capitalisation and could limit the lending that is needed for a for needed is that lending the limit could and capitalisation their raising them prevented that banks for profitability lower was resultmarkedly. The banks area euro the of assets the of quality the impaired hadthererecession quarter,earlier second the the but in grow to started areaeuro the in economy The in Estoniawere classedasmedium. euro area banking system, growth in Nordic real estate prices, and wage growth and real estate price rises low,as fromthestability risks financial while Estonian to risks of majority the classed Pank Eesti 2013 In risks systemic main The developing ananalyticalframeworkforcountercyclical measures were alsoexchanged. (NBMF), which brings together the heads of the central banks and supervisory authorities. Experiences of ForumMacroprudential Nordic-Baltic high-level the at 2013 in analysed wereregion the requirementsin supervisory of implementation the and exchanged were estimates risk Country-specific decisions. their making in cross-borderimpacts consider to need differentcountries in authority with institutions so and significant be can spillovers of impact the that means today integration of degree The strong. also is tor sec financial the of cross-borderintegration the and countries neighbouring of economies the to linked tion. Nordic-Baltic cooperation is particularly important for Estonia because Estonia's economy is closely au supervisory and banks central the thorities from theNordic andBalticcountries,ofotherpan-European organisations forcoopera together bringing network cooperation a of part is Pank Eesti fected bythesingleregulation andgoodpracticeforinformationannouncementsonthem. unaf instruments macro-financial for implementation of principles the on also and operations, banking European Union Capital Requirements Regulation (CRR) and Capital Requirements Directive IV regulating interim goals for macro-financial supervisory measures. The main development focus remained on the and reporting ofmoneymarket funds,thefundingofcredit institutionsandsupervisionoffunding, Alongside various analyses and positions, the ESRB published recommendations in 2013 on the activities the results oftheriskanalysis quarterlyinaRiskMap. makerecommendations if needed for reducing risks or the impact of thembeing realised. The ESRB publishesto and Union European the in stability financial to threats the assess to is ESRB the of job main The (ESRB). Board Risk Systemic European the of work the in participates it and them, for environment operating the designing in and groups financial cross-border and markets financial integrated of tivities ac and risks the evaluating in EuropeanUnion the in banks central national other with works Pank Eesti capital requirements attheirearlierlevel. 30 ------

Eesti Pank Annual Report 2013 the economy vulnerable to the risks from the real estate market. A fall in real estate prices could amplifycould prices estate real in fall A market. estate real the from risks the to vulnerable economy the makes which level, high very a to climbed has countries those in households of burden debt The tries. coun European other most in prices to contrast in years, five past the over loans from support with idly Real estate prices in the Nordic countries, Norway and Sweden in particular, have continuously risen rap biggest bankgroups inEstoniawouldonlybesmall. the of capitalisation the on this of impact the that showed Pank Eesti by done tests stress the though rise, could Estonia in loans problem of level the circumstances, these In growth. economic in recovery national supervisory authorities to carry out comprehensive assessment of the banks to get a sufficientlya get to banks the comprehensiveof out assessment carry to authorities supervisory national the with working is Bank Central European the role, supervisory direct its assumes it Before area. euro 2014. From then on, the European Central Bank will directly supervise systemically important banks in the The regulation on the mechanism was adopted in October 2013 and will come into effect on 4 November measures were takenin2013tosettheSingleSupervisoryMechanism,firstpillar, inmotion2014. Specific scheme. guarantee deposit the III pillar and Mechanism, Resolution Single the is II pillar banks, framework financial forMechanism Supervisory Single the is I pillar which in union, creatingbanking of a Union's aim the out set and European the strengthen to decided Council European the 2012 June In its jurisdiction. withinactivity this to contributes Pank Eesti position. a decide to has Estonia which on EuropeanUnion, thefromdirectives and regulations applicable directly the contains increasingly it and parties, several by work for the financial sector contains the national laws and regulations, which are generally drafted jointly This is done under a tripartite agreement, and work is coordinated by a joint commission. The legal frame Pank works with the Ministry of Finance and the Financial Supervision Authority in setting the legal frame. Regulation playsanimportantrole indefiningtheoperatingenvironment ofthefinancialsectorandEesti Financial sector policy housing loans bemaintained. to approach conservative current the that and continue will prices estate real in growth rapid thethat created be expectation no that important it considers Pank Eesti companies. of profitability and solvencythe on impact significant a have could wherethey level a to companies to increasecosts could smaller role than they did in the earlier muchreal estate a boom. Wage playing pressuresare have also banks strengthened and and this estate real of purchases financing for payments down larger used have iour and could increase long-term risks and the vulnerability of the financial system. However, households overly optimistic, and given low interest rates, this could lead to insufficiently considered financial behav If Estonian real estate prices continue to rise at the same rapid rate, it could lead expectations to become part oftheEstonianeconomy. largea of funding the throughon and them Estonia, in banks largest the on impact an have could banks over 90% of the Estonian banking market, meaning that a change in the financing conditions of the parent partners will damage the outlook for economic growth in Estonia. Secondly, Nordic banking groups have tradingNordic in economies the of Firstly,worsening channels. a main two through sector financial nian Esto the affect could countries Nordic the economy.in the developments fromin risks setback The any 31 - - - - -

Eesti Pank Annual Report 2013 In parallel with the preparation of the legal framework, the European Central Bank started drawing up a up drawing started Bank Central European the framework, legal the of preparation the with parallel In transferred. is supervision for responsibility the before done be to assessment comprehensible and transparent for necessary and appropriate is it believes Pank Eesti 2014. autumn in released be will assessment the of results The DNB. and SEB Swedbank, largest, three the are Bank Central European the of supervision operating in the euro area. The banks licensed in Estonia that will be assessed and pass under the direct groups banking 124 cover will assessment The banks. commercial the of financing the of picture clear low importantdecisionstobe takenquickly, andasinglecrisisresolution fundtobecreated. resolutionrequiressingle mechanism the al of efficientto functioning an up resolution set processbe to effective the that position the supports Pank Eesti handled. are institutions credit with problems whole when a as system the of functioning the alongside consideration into taken be state member each in system banking the of features individual the that important it considers and regulation, mechanism tion fund will be set up. Eesti Pank has worked with the Ministry of Finance in discussions on the single resolu resolutioncrisis single a and union, banking the joined have that countries for Europe-wide become will resolution Crisis mechanism. supervisory the of states member of markets banking the of sustainability thepreserve to order in insolvency of risk at are that banks handle will mechanism resolution single The removed. Discussiononthesepointscontinuedinthefirstquarterof2014. was period transition the of length the and level, target its reaches fund the before period transition the resolutioncrisis the for duringfunds funds of fromcollected collection fund the the of use the banks, the draft were clarified later. At ministerial consultations in December, the the of details part The of passed. the when regulationunion banking that the concernedof II pillar become will sector,which financial the for mechanismresolution crisis single a for regulation draft the disclosed Commission European the July In owners andcreditors and crisisresolution fundsshouldbyfinancedinadvancemarketparticipants. bank'sthe by covered be first should costs the whereby principles harmonised on based be should tion resolu crisis of financing the that is costs of division the on position Pank's Eesti balanced. are states the of obligations and rights the that ensure should management cross-bordercrisis of organisation the that discussions in Estonia for important been has It resolution. crisis efficient achieve and intervention early for pro-actively,allow crises to banking handling for rights and tools common defines which ment, to cost manage crisis for framework the Union-wide the of harmonisation the supported minimise has Pank Eesti taxpayers. and crises banking of impact systemic the reduce stability, financial maintain to order in difficulties financial facing banks for problems of Directiveresolution proper proposed for framework The a establishes 2013. December in EU the of states member the and Commission European the Parliament, European the by agreed was (BRRD) Directive Resolution and Recovery Bank draft The Supervision. that drew up the principles and standards for single banking supervision, and in the High-Level Group on Supervision Taskon Forcethe in were Pank Eesti from Staff supervision. with only dealing bank, the at departments specialised new four create to planned also is It Board. Supervisory the body, governing pervisory decisionmakingseparatefrom monetarypolicy, theEuropean CentralBanksetupaseparate su Tokeep entities. structural necessary the up setting and 2013 in supervision for methodology new 32 - - - - -

Eesti Pank Annual Report 2013 of depositguarantees. insurance systems and of the conditions foruse, and the elimination of differences and the pre-funding deposit of harmonisation the supported has Pank Eesti difficulties. into gets bank their if protected are they way what in and how investors and depositors for clarify should which days, seven to payouts for deadline the shortens and deposits guaranteed of definition the harmonises directive The points. basic the procedural process for the draft took time, and only at the end of 2013 was it possible to agree on the the European Union reached a joint position on it by summer 2011. Disagreements meant, however, that Preparations for additions to the Deposit Guarantee Schemes Directive began in 2010, and the Council of 33

Eesti Pank Annual Report 2013 of the Eurosystem and the bank's role as one of the main advisors of the government. The resultstheThe of government. the of advisors main the of roleone bank's as Eurosystemthe the and of Eesti Pankconductsmonitoringtosupporttheimplementationofdecisionsthatsetmonetarypolicy Monitoring Pank Eesti at analysis economic and Monitoring CONSULTATION COOPERATION AND OF ECONOMIC ON POLICY ISSUES used toproduce areview oftheestimatesbankschangesindemandandsupply forloans. in February 2013. Eesti Pank also participates in a quarterly Europe-wide survey of bank lending, which is the non-financial sector, and the impact of this on lending conditions. The Lending Review was published and what effect this has on demand for credit. It also analyses the ability of the banking sector to finance economy,the of financing themselvesfinanced households and companies Estonian how at looks which the of review annual an publishes Pank Eesti reason this For risks. be excessive smoothly,can without funded households and companies that economy the of development balanced the for important is It were publishedin2013,AprilandOctober. reviews market Twolabour market. labour the of development institutional the observe and labour, for aim to identify possible imbalances like price pressures early, assess the gap between supply and demand Eesti Pank has produced reports on the Estonian labour market and its prospects for years. These reports the economicsituation. months in 2013. Where necessary, deeper analysis of one or two specific areas was carried out to assess two every preparedwere economies neighbouring and economy Estonian the covering reports Working from EestiPankare involvedintheworkofmonetarypolicycommittee. tem, and to help all the central banks of the European Union coordinate their monetary policy. Two Eurosys the in expertspolicy monetary single the of implementation the support to is committee this of job The others. among ESCB the of committee policy monetary the for input an is work monitoring Pank's Eesti necessary, analyses are alsoprepared withanarrower focus. Eurosystem.Ifthe of decisions policy monetary the support to 2013 producedin be to started countries development. On top of these monthly reports, a twice-yearly review of monetary policy in non-euro area economy givesanassessmentoftheeuro area economyatagivenmomentandoftheriskstoeconomic euro area. Where necessary, problems in individual countries are also covered. The report on the external global economy and international financial markets, with an emphasis on thefactors that affectin inflation in developments the cover economy,which external the on reports monthly by supported is area euro ofEestiPankinmonetarypolicydecisionmaking fortheeconomies. TheparticipationoftheGovernor areaeuro and global the for cycle monitoring the set Eurosystem the within responsibilities Pank's Eesti Pank. monitoring andtheanalysisconductedaspartofitare oneinputfortheeconomicforecasting ofEesti 34 -

Eesti Pank Annual Report 2013 tem ofCentralBanksandtheCouncilEuropean Union,allthedepartmentsofEestiPankthatare In order to play a part in the work of the numerous committees and working groups of the European Sys competitiveness report wasreleased inMarch. first The exports. of perspective the from economy Estonian the in growth potential of assessment an provide to order in introduced was report competitiveness economy.A Estonian the of competitiveness focus tomore on started the longer term monitoring in 2013, with Pank's attention paid to Eesti the balanced development that and international meant Estonia and Europe in economy the of stabilisation The 19 Some of these were related to Eesti Pank's statistics on the financial and external sectors. For further information, see the chapters chapters the see communications”. public and information, partnerships further For "International and sectors. sectors” external and external and financial Estonian the for financial statistics the on "Compiling statistics Pank's Eesti to related were these of Some 19 stability”. financial “Safeguarding chapter the see stability, financial about 18 more For make sure thatitsconnectionsare uptodateandimprove theaccuracyofforecast. to forecast each before updated is EMMA environment. external the from impacts for channels transfer EMMA contains the most important connections between all the Estonian economic figures and the main Economic forecasting atEestiPankusestheEstonianmacroeconomic econometricmodelcalledEMMA. MPE, publishedinMarch andSeptember. exercise,projection macroeconomic the called forecasts conditional further two produces Bank Central Europeanthe Eurosystem, the of banks central the with preparedtogether forecast economic areaeuro omy andforeign tradein terms ofcommodityprices,interest ratesandexchangerates.Alongsidethe ensure consistency, the forecasts use shared assumptions for expected developments in the world econ Tostates. member individual the all reportsfromof the compiled is whole euroa areathe forecastas for aand BMPE, the for economy own its of outlook the on report a produces country each of bank central The Eurosystem. the of banks central other the and Bank Central European the with produced forecast BMPE, exercise, projection macroeconomic broad joint the of part as forecasts its prepared Pank Eesti the EstonianEconomyandMonetaryPolicy. onseries policy.the monetary areaeuroof and part wereforecastseconomy The Estonian the of points ahead to the current year and the next two years and gave detailed background information on particular looked December.They in one and June in one 2013, in forecasts economic two published Pank Eesti Economic forecasts commentaries onkeyeconomicindicators public made releasesregulararePank presentations.Eesti and commentaries throughpublic throughpressreleasesand work monitoring Pank's Eesti of results the publications, regular these to addition In since 2012theresults of the analysishavealsobeenpresented inpubliclectures. and website, Pank Eesti the on published are Review Market Labour and Review Lending Report, ness Review Stability forecast,Financial Policy Monetary and Economy Estonian The Union. Theresulting reviews are discussedinseparatemeetingsandseminars. directly or indirectly concerned with economic policy follow the institutional development of the European 19 . 18 , EstonianCompetitive 35 - - -

Eesti Pank Annual Report 2013 Although Eesti Pank produces forecasts as part of the joint process of the Eurosystem, separate ad separate Eurosystem, the of process joint the of part as forecasts produces Pank Eesti Although stability. price to risks and economy the of state the assessing for ECB the of Council Governing the by used is and making decision policy monetary for input important an is forecast area euro The groups. working responsiblefromforecasting,experts for and finances, arepublic Pank and Eesti modelling theseof part groupsworking contains committee policy monetary ECB's The committee. policy monetary the by ECB the at coordinated is countries member its and area euro the for forecasts economic of production The 20 See also the appendix "Eesti Pank's publications in 2013”. in publications Pank's "Eesti appendix the also See 20 ofEestiPank,Association. Thegeneralmeeting oftheAssociationelectedÜloKaasik,DeputyGovernor continued working closely with local scientific and research organisations through the Estonian Economic Enlarged Europe 2013“ under the leadership of Tallinn University of Technology in June. The central bank 2013 and helped organise the conferenceinternational on transition economies "Economic Challenges in in EconomicsandInnovationoftheUniversityTartu andTallinn UniversityofTechnology inAugust area. They also participated in the 16th doctoral summer school organised jointly by the Doctoral School ness Network, and the Household Finance and Consumption Network run by the central banks of the euro econometric modelling working group, the ESCB's Macroprudential Research Network and Competitive Researchers continued working with Estonian and foreign partners in 2013, and participated in the ESCB plied EconomicsandBusiness,waspresented scientificconferences. atinternational Ap of Journal the and Economics, European Eastern Economics, Applied including journals academic they have also been successfully presented internationally. In 2013 research was published in international and Pank Eesti by papers working in published researchare economic bank's central the of results The for model profitability and banks. risk credit the and area, euro the and Estonia of model equilibrium general economy,stochasticEstonian dynamic the the of model macro EMMA the to made were updates used, Totopics. other among analysed, was modelsEstonia economic in improve the mobility labour effecton in Europe, including Estonia, avoid cutting wages, and the reform of the employment contracts law and its operatingreasonscompanies the why into done Researchalso Estonia. was in mechanism transmission policyeuroareamonetary the of functioning the and states Baltic the in adjustment economic the 2012, The research nomic growth andthebusiness cycle.Nineresearch paperswere writtenonthesetopics. macroeconomic and banking models, monetary policy and financial sector research, and analysis of eco of system the of development were 2013 in research of areas main The bank. the within fordone research framework overall the sets which schedule, research a to done is research economic Pank's Eesti Economic research Commission andoftheOrganisationforEconomicCooperationDevelopment(OECD). European the of groups working forecasting the in participate also Pank Eesti from experts forecasts, Eurosystempreparingthe in work their of top On economy.2013. in considerednecessary not was This Estonian the of features specific the of account take to necessary if produced be can forecasts ditional 20 covered the , the fiscal performance of the European Union in 2000- in EuropeanUnion the of performance fiscal the crisis, Europeandebt coveredthe 36 - - - -

Eesti Pank Annual Report 2013 Belgian central bank on the role of multinational organisations in adjustments in employment; and Alari and employment; in adjustments in organisations multinational of role the on bank the central from Belgian Fuss Catherine programme; savings cost comprehensive their from lessons the on bank tral researchers.own bank's the fromcen by Bitāns Latvian two ForeignMārtiņš the and included speakers abroador Estonia from speakers guest by them of 10 2013, in given were seminars 12 of total A work. To augment the research by Eesti Pank staff, foreign experts were also invited to Estonia to talk about their and Research DepartmentatEestiPank,andTairi Rõõm,HeadoftheResearch DivisionatEestiPank. Economics the Randveer,of Martti Head were board the to elected members other the and Chair its as 21 See also the chapter “Safeguarding financial stability”. financial “Safeguarding chapter the also 21 See ownersbank's the coveredby be first should costs the crisis, banking a in that opinion the of wereboth In 2013 the main European Union topic of debate was the banking union. Eesti Pank and the government that existinginstitutionsandprocedures shouldbeusedasfarpossibleinsettingitup. the rules about fiscal balance. Eesti Pank and the government were in agreement about the Fiscal Council in always agreement, Eesti not Pank considered areit appropriate to cycle use both structural and economic nominal indicators in applyingthe of assessments As policy. fiscal for basis the as used forecasts of an independent Fiscal Council to ensure that budgetary rules are followed and to assess the economic One topic of discussion in 2013 was the development of the national budget framework and the creation realised. possible and reserves built up, as they could be used to balance the economy in the event of risks being as soon as surplus into brought be should budget government general the that advised also bank The the government to observe both the structural and nominal balance in planning its short-term fiscal policy. quence, EestiPanknotedthecomplexityofassessingcyclicalpositioneconomyandadvised conse In costs. labour in growth excessive the particularly market, labour the in appear to started ance imbal of signs growth, economic in slowdown the despite that showed 2013 in Pank Eesti by Analysis grated European monetary andeconomicunion. sector financial Estonian the of stability the in stability,and price ensuring on impact indirect or direct a has that everything covers economy,which the of development many important areas of economic policy. The bank's interest in on non-financial government questions the is to in advisor the principal balanced a as acts Pank Eesti tradition, by and Act Pank Eesti the Under functions Advisory award wenttoKasparOjasoo forhisworkonlong-termvalueinvestmentsinfallingstockmarkets. category studies master's The crisis. economic the in Estonia in outcomes market labour affected efits ben unemployment how on work her for Lauringson Anne to went studies doctoral for award The time. 11th the for awarded was prize the 2013 in and researchers economic Estonian young for prize annual researcheconomic the awardedin also part bank took itscentral experts again The visiting 2013. two in The Eesti Pank guest researcher programme continued to play an important role in the research work and tax evasionanditsscaleinEstonia,focusingontheindividualincomepaidwages. behind factors into research on Essex, of University the from student doctoral and researcher a Paulus, 21 andtheconstructionofamore inte 37 - - - - -

Eesti Pank Annual Report 2013 joint funds should not be allowed to encourage member states to take less responsibility for fiscal policy. kind of joint funds are created. Whether they are whatevercreated as followed, part of be the must banking union states or a member fiscal union, of the responsibilities and rights the balancing of principle The cover thewholeofEuropean Unionandare supported bymarket-basedmechanisms. that solutions of favour in both are government the and Pank Eesti balanced. are states the of sibilities respon and rights the ensure should costs resolution crisis cross-border of division The creditors. and 23 23 stability”. financial “Safeguarding chapter the also See 22 reserve management.In2010theBankofFinlandsupported EestiPankinthechangeovertoeuro, on Finland of Bank the with works Pank Eesti statistics. and systems stability,payment financial of ters Nordic-Balticthe of part is Estonia decades. IMF,two the than at constituency mat on together working Baltic countrieshaveplayedaspecialrole amongEestiPank'smostimportantforeign partnersformore Nordicthe andof banks central the organisations, international and Europeaninstitutions Besides Union partnerscanbefoundontheEestiPankwebsite on EestiPank'smaininternational ments (BIS) and the Organisation for Economic Cooperation and Development (OECD). More information Settle International for Bank the with works also bank the and members, its and (IMF) Fund Monetary al Eesti Pank's most important partner in global financial and economic policy cooperation is the Internation (ESCB), theCouncilofEuropean UnionandtheEuropean Commission. Pank staff are heavily involved in the work of the various bodies of the European System of Central Banks European CentralBankand thesteeringcommitteeofEuropean SystemicRiskBoard, ESRB.Eesti the of Council Governing the of member a as is maker decision a as Pank Eesti of Governor the of role national communications work was communication with European Union institutions. The most important inter Pank's Eesti in task largest the and euro, the using of year third its on embarked Estonia 2013 In International cooperation International partnerships and public communications Supervision Authority the financialsectorisdoneinajointcommissionbyEestiPank,MinistryofFinanceandFinancial and stability financial for framework legal the on Work meetings. such at represented also are Republic Economic Affairs andCommunications. ThePrimeMinister'soffice andtheOffice ofthePresident ofthe ofMinistry the and Finance of Ministry the with regularmeetings at moreare widely discussed questions try ofFinance,theEUSecretariatOffice, andtheForeign oftheGovernment Ministry.Minis Economicpolicythe with questions EU on work also Pank Eesti from Specialists attends. also Pank Eesti which council, coordination Union Europeaninter-ministerial the in debated mainly are issues Union European that decisionsalready takenandlegislationalready passed beenacted. tional framework for the European economic and monetary union, though both consider it vitally important institu the of development further the about debate a to open are government the and Pank Eesti Both http://www.eestipank.ee/en/eesti-pank/international-cooperation 22 . . 23 . 38 ------

Eesti Pank Annual Report 2013 Work with the European Central Bank Central European the with Work area intheLatvianmediaandatahigh-leveleuro conference. eurothe of membership of experience Estonian the discussed also staff Pank Eesti relations. public and covered all the work of a central bank from cash handling and monetary policy operations to legal issues required infrastructure with the Bank of in Latvia’s changeover to the euro. The bilateral cooperation and in 2013 Eesti Pank shared its own experience of membership in the Eurosystem and of setting up the index.en.html at found be can ECB the of Council Governing the by decisions Other 25 at found be can decisions policy 24 monetary ECB CouncilandtheGeneralofECB. the workofdecision-makingbodies,Governing the European Union. Staff from the central banks work in the committees and working groups to prepare prepareto 2013 in committees some in working started creationthe for forsupervision banking single of sub their and committees structures,18 which cover all the areas of work of a in central bank. Staff from banking supervision institutionsplace takes Banks Central of System European the within work The ECB, whereofEestiPankalsosits. theGovernor wording was coordinated with all the central banks of the EU and approved by the General Council of the final the and membership, area euro for criteria the of a fulfilment wroteLatvia's on ECB report convergence the special 2013 In Estonia. for important also were Act Pank Eesti the to changes and budget Estonianthe on preparingopinions in ECB the at work Pank's Eesti ECB. the at supervision banking gle CounciloftheECBpaidalotattentioninitsdiscussionstocreationIn 2013theGoverning ofsin and ontheotherdutiesofEurosystem of the Governing Council of the ECB, where decisions are taken on the monetary policy of the euro area area, the Eurosystem, in their daily work. The Governor of Eesti Pank attends the twice-monthly meetings most everybody at Eesti Pank works with the ECB and the central banks of the member states of the euro The European CentralBank,theECB,isEestiPank'smostimportantpartnerinEuropean Union.Al Table 3. Eesti Pank’s participation in the work of international organisations and institutions and organisations international of work the in participation Pank’s Eesti 3. Table Organisational DevelopmentCommittee Payment andSettlementSystemsCommittee Committee onControlling Information Technology Committee Financial StabilityCommittee Eurosystem ITSteeringCommittee Budget Committee Public RelationsCommittee Supervisory Board ofthesingle supervisorymechanism General CounciloftheEuropean CentralBank CounciloftheEuropeanGoverning CentralBank European SystemofCentral Banks . http://www.ecb.europa.eu/press/govcdec/mopo/2014/html/index.en.html 25 . http://www.ecb.europa.eu/press/govcdec/otherdec/2014/html/ Kairi Rätsepp,HelgaKäärik Mihkel Nõmmela,Kaire Torsus Helga Käärik,KairiRätsepp Ahti Roosa,JarmoInkinen Jaak Tõrs Ülo Kaasik,AhtiRoosa Kairi Rätsepp,HelgaKäärik Katrin Kask,IngridMitt Madis Müller Ardo Hansson Ardo Hansson . 39 24 - - -

Eesti Pank Annual Report 2013 27 More about the work of these institutions can be found at at found be can institutions these of work the about 27 More stability”. financial “Safeguarding chapter 2013, the in see work ESRB's the about more For 26 sion, andtheEuropean SystemicRiskBoard, ESRB,anditssubstructures Commis European the of groups working and committees numerous the groups, working and mittees com its and (ECOFIN) Council Affairs Financial and Economic Union's European the attends Pank Eesti Work with other European Union institutions Irving FisherCommitteeonCentralBankStatistics Board ofGovernors Settlements Bank forInternational European BankingAuthority Board ofSupervisors Advisory Technical Committee General Board European SystemicRisk Board Nordic-Baltic Monetaryand FinancialCommittee Board ofGovernors MonetaryFund International Financial MarketsCommittee Economic PolicyCommittee Organisation forEconomicCooperationandDevelopment Balance ofPaymentsCommittee Committee onMonetary, FinancialandBalanceofPaymentsStatistics European Commission Economic andFinancialCommittee Economic andFinancialAffairs Council(informal) Council oftheEuropean Union TARGET2-Securities Board SEPA High-LevelMeeting,SEPA HLM High-Level Group onSWIFTandCLSissues High-Level Group onPaymentSystems Legal Committee Market OperationsCommittee Statistics Committee AuditorsCommittee Internal Risk ManagementCommittee RelationsCommittee International Monetary PolicyCommittee Accounting andMonetaryIncomeCommittee Human Resources Conference Banknote Committee http://www.eestipank.ee/en/eesti-pank/international-cooperation 26 Mihkel Nõmmela Madis Müller Kaire Torsus, AiriUiboaid Madis Müller Kadi Kapral,Marek Feldman Janno Luurmees,Toivo Kuus Jaanus Kroon, AinPaas Alnek Henn Oit,Viljar Kaari Kumari,OliverTamm Raoul Lättemäe,EvelinTamla Martti Randveer, PeeterLuikmel Liivi Teder, KairiRätsepp Kadi Kapral,RiinaPadar-Leppiman Rait Roosve,MargotLuukas Jaanus Kroon Ardo Hansson Jaak Tõrs, JanaKask Jana Kask Ardo Hansson Madis Müller Ardo Hansson Jana Kask Martti Randveer, IlmarLepik Jaanus Kroon Jaanus Kroon Madis Müller Ardo Hansson , 27 . . 40 - -

Eesti Pank Annual Report 2013 framework for the financial sector,legal and the single regular review of a state finances. Eesti Pank staffof were involveddevelopment the were issues key the 2013, In attend. Finance of Minsters only which Experts from the Ministry of Finance work with Eesti Pank to prepare for the regular meetings of ECOFIN, mechanism. resolution bank a and system supervisory single a include would which Union, European the in stability most important topic of discussion for Eesti Pank was the creation of a banking union to ensure financial In April and September 2013 of the Eesti Governor Pank attended the informal meetings of ECOFIN. The makers, peoplefrom thefinancialsector, researchers attendedtheconference. andjournalists cooperation givendevelopmentsinthefinancialsectorand changesinregulation. More than200policy cross-border and markets financial Nordic and Baltic of integration the to related challenges the on ily with the Swedish central bank and the IMF in December 2013. The high-level conference focused primar jointly organised conference international an was relations international Pank's Eesti in event major One the loaninterest oflowincomecountries. sustainability of lending. Estonia received 690,099 SDRs, which was contributed ofto a reasonsfund for subsidisingfor 2013 in members the among distributed was gold selling from IMF the by earned SDRs profit billionprogrammes.1.75 lending of financing for used been have Windfall funds quota Estonia's of IMF.the of operations euros)the million finance (6.9 to SDRs quota million fromits Six funds use to able is and position external strong a has that states member IMF the of one been has Estonia 2012 Since as thenewMissionChief. of the governments home countries of the banks operating in Estonia. In 2013 theThomas Dorsey took over and banks central the authorities, supervision financial the with cooperation enhance to important Tostability,is competitiveness. financial it improvingensure of importance the and term medium the for frameworkfiscal createa to need the emphasised IMF the environment.However external fromthe risks werebanks stronger,the thelessen to helped all this and good, sufficientcapitalisation was and liquidity of sheets stronger.balance even The become had sector financial the that found they and sound be to part of the monitoring work done jointly by the IMF and Estonia. The IMF found Estonian economic policy Marchaswerein 2013 statutes held IMF the of IV Article under consultations policy economic Full-scale memberstates iscalculated. the for quotas the of size the how on continued Discussions supervision. macrofinancial and restructuringthe sovereignon of discussions measures,debtin policy also monetary and non-traditional exit to how on and policy monetary non-traditional of effects the on discussions comprehensive the in growth.economic and stability economic and financial global supporting on and crisis, joinedPank Eesti in countries advising on fromfocused primarily was stemming 2013 in liabilities IMF the of financial attention The the membership. Estonia's bears and IMF the at interests Estonia's represents Pank Eesti Work with the International Monetary Fund pean Councilonthetopicsoffuture oftheeuro area andthebankingunion. in thedelegationandpreparationsofEUEuro formeetingsofheadsstateandgovernment 41 - -

Eesti Pank Annual Report 2013 practices in statistics and attend the forum on Central and Eastern Europeanpractices instatisticsandattendtheforumonCentralEastern monetarypolicy. best develop help Pank Eesti from Experts supervision. and management sector financial and tinents, issuesofmonetarypolicy,international thestateofeconomiesandfinancialmarketsindifferent con on held are discussions where banks, central of heads the of meetings working and (BIS) Settlements ofEestiPankattendsthemeetingsBoard oftheBankforInternational The Governor ofGovernors Development and ration Work with the Bank for International Settlements and the Organisation for Economic Coope 29 See also the appendix "Eesti Pank's publications in 2013”. in publications Pank's "Eesti appendix the also See 29 accountability”. bank "Central on section the also 28 See tion” websiteinterfaceormail. ques a “Ask the remainderemail, the by and were telephone which by of 1808 inquiries, 2720 of total a requestedbe receivedcan bank Information the Pank. 2013 Eesti In to phone. inquiries or email mail, by directsend to possible is it website the on published information and publications various to addition In Pank websitefourtimesduringtheyear. Eestithe on published were Banks Central of System European the of work the and economy areaeuro the on reports Major month. every website its on bulletin monthly ECB's the to foreword the published Central Bank on monetary policy, the single supervisory Europeanmechanism, and the euro from banknotes. releasesEesti pressPank also27 published bank the so and Estonia, and area euro the on impact Eurosystem, it is important for Eesti Pank to pass on information about decisions that could have a direct were issued on the latest economic figures and various other reviews and analyses four times with two reviews of the financial sector and two economic forecasts. A further 22 commentaries legal dutytoreport important economicpolicyissues.Releasesofinformationare more extensiveandmore frequent thanthe various about and activities its about announcements comprehensive and regular releases Pank Eesti ment inEstoniaandtheeuro area andinachievingfinancialstability. develop economic sustainable and stable maintaining in help great a is policy monetary bank's central the for support Public markets. the in events on impact direct a have banks central of decisions the as actions of the central bank, the more successfully the Eurosystem, including Eesti Pank, can do its work, ments, taking a bank loan and much more. The better the public and market participants understand the invest making estate, real selling or buying about decisions people's affect then can which whole, a as indirectly in managing public and corporate expectations for the economy in Estonia and in the euro area helpcommunication and relations Public goals. strategic other achieving in and areaeuro the in stability The public relations activities of Eesti Pank support the central bank in its primary role of maintaining price relations Public financial sectorandstatistics. Pank experts sat on committees and working groups in 2013 Eestithat covered economic (OECD), policy,Development policy and for the Cooperation Economic for Organisation the with work their of part As 28 demands. During the past year, the bank issued its opinion on the Estonian economy 29 . As a member of the 42 - - - - -

Eesti Pank Annual Report 2013 there were a lot of new questions about changing Estonian kroons into euros. Eesti Pank made a publica made Pank Eesti euros. into kroons Estonian changing about questions new of lot a werethere currencyeconomic indicators. Many of the enquiriesconcerned exchange rates and at the end of the year As ever there was a lot of interest in the statistics published by Eesti Pank and the time series of the main in February2014tomakethemSEPA compliant. systemssettlement and payment the to changes planned the about questions of Therelot werecoins. a collector and commemorative issue to plans about enquiries were there year the throughout and note five-euro new the of circulation into entry the in interested most wereyear, enquirers the of start the At school, but there are also younger schoolchildren and kindergarten groups. During the year more than more year the During groups. kindergarten and schoolchildren younger also are there but school, basicof year final their in schoolchildren of aregroupsday. these each of held areMany museum the of tours pre-booked two of average year.An the during tours such taking people 6000 over popular,with seum alsohostedexcursions,visitsandeconomicslectures, andguidedtoursofthe museumremained mu The environment. payment the in changes productivity,industry,the and banking and wages the in and economy the in developments on year,mainly the during given were lectures 27 successfully,and varied programme that covers these topics in more depth. In 2013 the series of public lectures continued a has also museum the provides, it that overview general the Besides functions. and role bank's central money asapartoftheEstonianculturalheritage.Themuseum alsoprovides adetailed introduction tothe The mainrole oftheEestiPankmuseumistomaintainandcherishhistory PankandEstonian Eesti Pank Museum form forradioandtelevisioninterviews. in Russian and English. Spokespeople from the bank provided over 240 comments in writing or in spoken occasions topical economic issues were publicly explained in presentations or articles, some of them also 84 on while bank, the from experts and managers with interviews longer 22 published and statements, and releases press 128 issued presentations, and conferences press 11 held bank central the 2013, In about therole ofcashand theneedforit. the second series five-euro banknotes. In the final months of the year there were discussions in the media of circulation into release the about also SEPA,and to related environment payment the in changes the aboutlot a talked media The clients. private of savings and deposits the in particularly Estonia, in sector banking the in interest of lot a was there year the Throughout growth. wage and growth economic both the outlookfor growth inthe Estonian economyand the impactofdevelopments in thelabour market on of interest for the media from various angles, and in the second half of the year the media went deeply into continued to be discussed on and off throughout the year. The whichEstonian economy was audit, a permanent topicfund VEB the of results the regarding journalists from attention particular drew Pank Eesti year the of start year.previousthe the At in than more 1000 almost is which positions, policy economic its and Pank Eesti of work referencingthe 2013 in media Estonian the in released or published were ies commentar Pank Eesti to links and items news TV and radio stories, news articles, written 5100 Some Media relations and public appearances the centralrateof15.6466andwithnocommissionfee. announcement that from 2014 it will only be possible to exchange kroons for euros in the central bank at 43 - -

Eesti Pank Annual Report 2013 were put up nine times across Estonia during the year, six times in schools, twice in small settlements and Eurosystem""The and Euro" the to Mark the from Money "Estonian exhibitions travelling Pank Eesti The bols oftheEstonianWar ofIndependenceandoneonLatvianmoney. sym and badges service the on one exhibitions, temporary two hosted museum Pank Eesti the 2013 In have visitors andpractisingEstonian. started tocomethemuseumforpurposeoflearning that was surprise pleasant A museum. Pank Eesti refurbished the visited people 19,000 once inamuseum. 44 -

Eesti Pank Annual Report 2013 In 2013 the bank succeeded in carrying out all its statistical duties to the European Central Bank, the Bank, Central European the to duties statistical its all out carrying in succeeded bank the 2013 In and economicpolicymaking. statistics, which are an input for economic analysis, forecasting, macro and financial stability assessments macroeconomicother and payments of monetary,balance publishes financial, and compiles Pank Eesti SECTORS COMPILING STATISTICS EXTERNAL AND FINANCIAL FOR THE ESTONIAN statistics attheEuropean CentralBank. such data. The information fromcollecting these surveys will be an of input in the further development be of new areas ofwould cost the what and are, data these significant how data, user-defined additional collect to feasible was it whether on information get to out carried were surveys These consuming. time themmade this and companies, insurance and institutions credit like agents reportingfrom collected be to inputs data needed them of some but smaller were surveys other The 2014. in published and pleted com be will manual The countries. different in institutions financial monetary of statistics sheet balance compiling of practice the describing manual a Practices, National of Survey the was largest The banks. The European Central Bank organised several large surveys which needed the help of the national central countries amongstthemselvesbecausethere isnodifference betweenthedatamodelsused. reduces the burden of data transfer on central banks, as the recipients of data can exchange statistics on it easiertodisseminatestatisticaloutputsandrelatedorganisations metainformationtointernational new international data exchange format, SDMX, the Statistical Data and Metadata Exchange. This makes a of adoption the towards taken were steps changes methodological for preparations these Alongside of collectingthedatarequired forthebalanceofpayments. ment for credit institutions to declare cross-border payments and meant that a new way had to be found require the lifted which 2014, February 1 on Area) Payments Euro SEPA(Single the to transition the of decrees of the Governor of Eesti Pank will change. Some of the changes in reporting were a consequence by institutions creditrequiredfrom reports the all almost as reporting, to changes on started work 2013 of half first the In Bank. Central European the of regulations statistics updated and new the in reflectedare which statistics, of users of needs additional the to respond statistics sector financial for changes procedures and structures for compiling statistical outputs that meet international standards. The biggest the in and introduced, sources data new and modified were forms reporting statistical the as inputs the sector counts. statistics methodology Adjusting to requiredthe the external new international changes in Manual, 6thEditionandtheupdatedSNA2008ESA2010standards forthesystemofnationalac all areas of statistics. The changes for sector external statistics come from the new Balance of Payments central bank put a lot of effort and resources into preparing for this in 2013. The changes will the affectso and almost2014 in force into come will methodologies statistical international to changes Wide-ranging Eesti Pank. the chapter, Figures 9 and 10, give more information on the volume and use of the statistics collected by of end the at figures two The programme. statistical official the under tasks statistical its of all did bank the and disseminated, and compiled successfully equally were statistics domestic Estonian ganisations. Settlements, Eurostat or Monetary Fund, the Bank for International and other international International 45 - - - -

Eesti Pank Annual Report 2013 in future similar research could be done using only administrative sources of data. If it is shown that thisthat shown is it If data. of sources administrative only using done be researchcould similar future in whether considering also is Analysis interviews. the from data the complement to used were data these Estonian CentralSecuritiesDepository, Krediidiinfo, thelandregister andlifeinsurancecompanies, registers andothersources liketheTaxnational andCustomsBoard, creditvarious institutions,leasecompanies,the from parallel in collected were Data Pank. Eesti from order an to Estonia Statistics by 2013 of quarter second the in interviewed were Estonia in Households Bank. Central European the by coordinated is and area euro the of states member the across methodology same the uses survey The Eesti Panktook part forthefirst time intheeuro area Household Finance andConsumption Survey, HFCS. and supervisoryreporting. sion aiming to find a unified way of classifying institutional units in administrative registers and in statistical discus the in joined Depository Securities Central Estonian the and Systems, Information and Registers of Centre the Authority, Supervision Financial The entities. reporting to accessible units institutional on coordinating on was methodological models, 2013 setting a in joint vision for focus classification of main institutional units, the and making informationand continued Estonia Statistics with cooperation Close European SystemofCentral Banksforsecuritiesstatistics. the by used CSDB, Database, Securities Centralised the of quality the improve to order in management quality data into put was effort Morerequirements. ECB with line into brought were SHS, Statistics, ing Hold Securities the and payments of balance the for statistics investment portfolio the as securities, for for solutions IT collecting andprocessing dataandimprovingprocesses. Thishasmainlyaffected itsinternal statistics developing continued Pank Eesti duties, of list increasing ever its with cope it Tohelp be publishedin2015. willsurvey 2013 the resultsof future.The in bank the for savings significant mean will it then possible, is

thousands of clicks website Pank Eesti the on published statistics of Use 9. Figure 2 2 1 1 5 0 5 0 5 0 0 0 0 0 0 2 0 1 1 2 0 1 2 2 0 1 3 46 - -

Eesti Pank Annual Report 2013 Figure 10. disseminated Statistics to international organisations figures disseminated during the year, million 0 0 0 0 0 1 1 .0 .2 .4 .6 .8 .0 .2 2 0 0 8 ECB 2 0 0 9 E u r o s t a t 2 0 1 0 other ( other O E C 2 0 D, 1

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Eesti Pank Annual Report 2013 from the diversification of its investments in a range of asset classes. This allows for better risk diversifi risk better for allows This classes. asset of range a in investments its of diversification the from benefitto able is it horizon, investment long a has Pank Eesti As term. long the reservesover of ervation pres the guaranteeing while income moderate stable earn to is reserves the investing of objective The independence ofthebankandensure thatithassufficient capitaltocoveranypossiblelosses. The EestiPankreserves underpinconfidenceinthemonetarysystemofeuro area, guaranteethe ASSETS OF FINANCIAL INVESTMENT 30 More information about the investment process and risks can be found on the Eesti Pank website website Pank Eesti the on tary-policy/investment found be can risks and process investment the about information More 30 Eesti Pankcontinuestohold8250ouncesor256.6kgofgold. (see Figure 11). euros at the end of the year. A small part of the reserves was also invested in Australian sovereign bonds Notes, anequivalentof102millioneuros. Theequityportfolioincreased during2013tostandat36million eurothe area euros.million 160 at stood foreignthe of majority The currency reserve TreasuryUS in was outside investments currencyforeign The 2013. of end the at there investment of euros million 195 with countries, area euro of bonds sovereign in were reserves invested Pank's Eesti of majority the 2013 In Assets Investment of Structure The portfolio isreviewed andadjusted tomatchtheappropriate risklevelatleastonceeveryquarter. benchmark The markets. financial global in situation the on it basing portfolio, benchmark the of level risk is used for measuring the performance and risks of investments. The Executive Board of Eesti Pank sets the The risk level accepted by Eesti Pank and the expected return are reflected by the benchmark portfolio, which portfolio isprimarilyinvestedintheliquidmoneyandcapitalmarketsofadvancedcountries investment The investments. the on return expected the in made being concessions any without cation Figure 11. The structure of Eesti Pank's investment assets (million euros) (million assets investment Pank's Eesti of 11. structure The Figure (bonds in euros), Estonian currency reserves in . 1 9 5 gold ,

8 shares,

3 6 bonds in foreign currency, 125 currency, foreign in bonds http://www.eestipank.ee/en/mone 30 . 48 - - -

Eesti Pank Annual Report 2013 The main drivers of rising bond yields during the year, especially in the US, were a growing economy,growing a were US, the in especially year, the during yields bond rising of drivers main The while thereturnsonbondsinportfoliowere slightlynegative. equities,from came 2013 in returns Positive 12). Figure (see markets money from return the than higher waswhich 0.91%, of return a implying frominvestments earned euroswas million 3.2 of total a year the As attheendof2013,EestiPank'sportfolioinvestmentassetsstood357millioneuros investments on Return 31 Not including gold and income from gold. euros attheendof2013. ment services were provided to the Guarantee Fund, whose investment portfolio amounted to 192 million In 2013 Eesti Pank continued working with the public sector as it has for many years. Full asset manage sector public the to provided services management Asset mandates allowtheexecutionofstrategiesviaderivative instruments. managersareAsset Management.Theexternal allocatedaportionoftheoverallrisklimitandoverlay Nomura and Management, Portfolio Informed BlackRock, PIMCO, with mandates four had Pank Eesti investmentmanagersalsohavearolepoints. External inactivemanagementandattheendofyear As a result of active management, the actual portfolios outperformed the benchmark portfolio by 1.4 basis measures. As a result bond yields rose and increased easingdemand for quantitative riskier asset the classes, including equities.tapering start to decision FOMC consequent the and markets labour improving 0 1 2 3 4 5 6 7 8 Figure 12. Return on foreign exchange reserves and returns on money markets money on returns and reserves exchange foreign on Return 12. Figure % % % % % % % % % 2 0 0 4 2 0 0 5 2 0 0 6 2 investment assets investment 0 0 7 2 0 0 8 2 0 0 9 money markets 2 0 1 0 2 0 1 1 2 0 1 2 31 2 0 . During 1 3 49 -

Eesti Pank Annual Report 2013 on its activities. As the independent central bank of the Republic of Estonia, Eesti Pank has to explain to has Pank Eesti Estonia, of Republic the of bank central independent the As activities. its on report to institution public every requires society democratic modern a time, same the stability.At price The independence of the central bank is an indispensable part of a monetary system that aims to maintain accountability bank Central POLICYRESOURCES ORGANISATION, AND GOVERNANCE HUMAN AND REPORTING, POLICY RESOURCES HUMAN ORGANISATION, AND AND GOVERNANCE REPORTING, 33 See also the chapter "Compiling statistics for the Estonian financial and external sectors". external and financial Estonian the for statistics "Compiling chapter the also See 33 2013”. in publications Pank's 3"Eesti Appendix also See 32 website inthestatisticssection Pank Eesti the on published then are statistics These regulations. applicable the within them process to responsibility,of andareas its within fall that statistics payments of balance monetary,and lect financial The central bank has the right and the duty under the Eesti Pank Act and the Official Statistics Act to col ough analysis is provided in regular publications on thelatesteconomicdataanddevelopments in press releases andcommentsmore thor ing its activities and the economy of Estonia and the European Union.” Eesti Pank publishes its comments It is stated in § 21(5) of the Eesti Pank Act that “Eesti Pank shall periodically publish information concern economic informationfrom EestiPank. tem. Both specialists and members of the public need to be able to get regular, detailed and good-quality Trustworthiness and transparency of the central bank are vital for a successfully functioning monetary sys of public economicRegular policy presentation and economic data positions Chair oftheSupervisoryBoard ofEestiPankresponded totheseinterpellations. Board, and the other, submitted by Supervisory4 Riigikogu members on 25 June the 2013 the concerned VEB fund. The of activities the concerned members Riigikogu 15 by submitted 2013 April 14 on One Pank.BoardEesti Supervisory of the to interpellations two submitted Riigikogu the of members 2013, In expressed aninterest. the central bank's positions on economic policy and its areas of work when factions in the Riigikogu have to discusskeyquestionsofeconomicdevelopment.EestiPank'sleadershavemadepresentations on and processes economic of understanding bank's the explain to Committee Finance Riigikogu the with comments to questions posed by Riigikogu members. Managers and staff from Eesti Pank regularly meet providesand parliament the of members andwith explanations meetings has bank central the Riigikogu, Eesti Pankhasadutytoreportannualpresentation totheRiigikogu.OntopofGovernor's to Riigikogu the Accountability Central bankaccountabilityandindependenceare twocounterbalancingprinciples. representatives. elected their and public Estonian the to policy economic on positions and opinions its 33 . 32 , all of which are accessible from the Eesti Pank website. 50 - - - -

Eesti Pank Annual Report 2013 Board of Eesti Pank and then presented together with the auditor's opinion to the Riigikogu. The Governor Supervisorythe approvedby reportis annual The accounts. annual the with together Act Pank Eesti the of (4) 31 § under report annual the in published is work Pank's Eesti of review annual detailed more A the EuropeanconstitutionofESCBandECBinarticle15.1. Union,whichconcerns Treatythe fromto comes Protocol4 publish No Treatythe Europeanand on Union ofFunctioning the on review of the quarterlyeuro area wide-ranging economy and the activities a of the European publishes System of Central Pank Banks. This duty toEesti countries, area euro other the of banks central the Like statute-eesti-pank ( §9 Act 34 A more detailed description of the responsibilities of the Eesti Board Pank on Supervisory these issues can be found in the Eesti Pank • • • • • • • for responsibility has Board Supervisory The they haveatermofoffice offiveyears. and Riigikogu the of proposal the at Chair the by appointed areBoard Supervisory the of members The from theSupervisoryBoard's theRiigikoguconcerning activities. interpellations to responds and board, the represents enacted, are decisions its that ensures meetings, Board,Supervisory itsthe chairs of work the organises Chair The PresidentRepublic. the the of of posal pro the at Riigikogu the by years five of term a for office to appointed is Board Supervisory the of Chair The members. seven and Chair a has which Board, Supervisory the is Pank Eesti of body highest The Pank Eesti of Board Supervisory the of responsibilities and Membership Board ofSupervisory Eesti Pank Governance and organisation monetary policyandthefinancialsector. and economy Estonian the about and budget and Pank’sactivities Eesti about basis regular a on bers mem Board Supervisory the inform Governors Deputy and Governor The bank. central the of activities Under § 8 of the Statute of Eesti Pank, the Supervisory Board of Eesti Pank exercises supervision over all Pank Eesti of Board Supervisory the to report to Duty of EestiPankpresents thecentralbank’s annualreport atahearingheldbytheRiigikogu. by theSupervisoryBoard approved strategy distribution profit the and law by required as Pank Eesti of profit the Distributing Authority Supervision Financial of the Board Supervisory of the members the Appointing Audit Internal of the Head the and Pank of Eesti Governors Deputy the Appointing Republic of the President to the Pank of Eesti Governor for acandidate Nominating Riigikogu to it the submitting and report annual Pank Eesti the Approving budget Pank Eesti the Supervising Pank of Eesti Statute the Approving https://www.riigiteataja.ee/ akt/123122011013?leiaKehtiv https://www.riigiteataja.ee/ ). 34 : ) and the Statute of Eesti Pank §8 ( §8 Pank Eesti of Statute the and ) http://www.eestipank.ee/en/eesti-pank/ 51 - -

Eesti Pank Annual Report 2013 Finance may attend meetings within the provisions of Article 130 of the Treaty on the Functioning of the of TreatyFunctioning the the of on 130 Article of provisions the within meetings attend may Finance attendtheSupervisoryBoardDeputy Governors meetingsandhavetherighttospeak.TheMinisterof and Bank, the of Governor The Chair. the by decided otherwise unless closed, are Board Supervisory the of meetings year.The a times eight least at necessary,but whenever meets Board Supervisory The Supervisory Board commentsonthestrategicdevelopmentplan,mission,andcore tasksofEestiPank. economy, monetary policy and financial sector of Estonia and on the Eesti Pank budget and spending. The The EestiPankSupervisoryBoard receives regular informationfromofEestiPankonthe theGovernor draft ofthestrategicdocumentdescribingdevelo pment plan,missionandcore tasks. The Supervisory Board heard a review of Eesti Pank's strategic development plan and was presented the same strategyoftransferringupto25%theprofit tothestatebudgeteachyear. the with continue to decided and Pank Eesti of strategy distribution profit the reviewed also Board The presenteding oftheyearGovernor adraftbudgetfor 2014. During the year the Board heard regular reviews of the Eesti Pank budget for 2013, and at the final meet ofEestiPankpresentedGovernor itatahearingheldbytheRiigikogu. theand approvedRiigikogu Boardthe reportthe The sent to 2012. for reportGovernor proposedthe by The Supervisory Board heard a review of Eesti Pank's financial results for 2012 and approved the annual budget the supervising and report annual Pank Eesti the Confirming under MartLaar, andthere wasoneadditionalworkingseminar. times four and Chair as Männik Jaan under times four 2013, in times eight met Board Supervisory The Mart Laar'smandateasChairrunsuntil12June2018. The authorityofthesixthSupervisoryBoard ofEestiPankranuntil25February2014. from 13June2013theChair appointedbytheRiigikoguwasMartLaar. and Männik Jaan was 2013 June 12 on ended mandate his until 2008 June 13 fromBoard the of Chair memberoftheSupervisoryBoardalternate from 26January2010. anValdo as Randpereappointed Riigikogu The suspended. was Pank Eesti of Board Supervisory the of membership his 2009 June 4 on Finance of Minister as appointed was Ligi Jürgen Varblane.When mas TõnisListra, Enn Ligi, Jürgen TõnissonIreneKull, Liina Kallo, Palts, wereKalev members its and Ur and The sixth Supervisory Board of Eesti Pank was appointed to office by the Riigikogu on 18 February 2009 2013 in Pank Eesti of Board Supervisory the of Activities European Union. 52 - -

Eesti Pank Annual Report 2013 Internal audit Internal his termofoffice cametoanend. replaceto from2013 Authority ValdoJuly Supervision Board 1 Financial pervisory the of Randpere when Su the of member as Adamson Aivo appointed Board the bank, the of Governor the of proposal the At The SupervisoryBoardauditorofEestiPankfrom appointedJannoKaseasinternal 8March 2013. tooffice Appointments The Chair and members of the Board took an active part in public discussions of various economic subjects. The Board heard areview ofthereal estate owned byEestiPank. nated theprovision ofconsumerloanstoemployees. termi which bank, the of employees to loans consumer granting for conditions the repealed Board The bility, andareview ofthestatepublicfinancesanddraftbudgetfor2014. sector in the euro area, two reviews and forecasts for the Estonian economy, two reviews of financial sta At its meetings, the Board heard reports from the of Governor the bank on the economy and the financial The SupervisoryBoard heard anddiscussedtheriskmanagementreport. activities Other designed byTaavet Kohal,astudentattheEstonianAcademyofArts. music of Raimond Valgre was designed by the painter Berbel Lätt, and the coin for the Sochi games was GamesinSochi.The coin dedicatedtothethe participationofEstonianathletesinOlympicWinter to themusicofRaimondValgre andthedesign andnominalvalueofteneuros ofthecollectorcoinfor The Board approved thedesignandnominalvalueofseveneuros forthesilver collectorcoindedicated proval ofdesigns. ap the and coins commemorative and coins collector for values nominal and subjects of selection the The EestiPankSupervisoryBoard heard, discussedandapproved thegeneral principlesfortherules coins Collector swered questionsfrom membersoftheRiigikoguaboutauditVEBfund. an Board the of Chair as Laar Mart and Board, Supervisory Pank Eesti the of work the about Riigikogu Boardthefromrespondthe of questions to of members to Chair as Riigikogu the attended Männik Jaan and implicationsoftheVEBfundauditatmeetingSupervisoryBoard. resultsthe of discussion a was there and fund VEB the of audit the of review separate a receivedBoard ap proved a and new work 2013 schedule for for 2014 and department heard audit reports on internal the work the of the internal of audit department. schedule The work the changed Board Supervisory The 53 ------

Eesti Pank Annual Report 2013 ernors were Ülo Kaasik and Madis Müller. The Governor of Eesti Pank is, by virtue of office, the Chair the office, of virtue by is, Pank Eesti of Governor Müller.The Madis and Kaasik Ülo Gov were Deputy ernors the and Hansson Ardo was Governor the 2013 in and Governors, Deputy and Governor the of consists Board Executive The Pank. Eesti of work the manages Board Executive Pank Eesti The Pank Eesti of Board Executive The Figure 13. Eesti Pank Organisation Chart as at 31.12.2013. at as Chart Organisation Pank Eesti 13. Figure Deputy Governor Economics and Technology Information Department Department Department Department Ülo Kaasik Research Financial Statistics Supervisory Board Chair MartLaar Ardo Hansson Governor International and Public Relations Administration Department Settlement Systems Financial Stability Deputy Governor Infrastructure Internal Audit Payment and Department Madis Müller Department Department Department Department Cash and Financial Markets 54 -

Eesti Pank Annual Report 2013 changes were made to the organisation of work at the bank and to the management system. In Febru In system. management the to and bank the at work of organisation the to made were changes importantPank’sseveral Eesti and of Boardoffice Executive in new year full first the was 2013 year The Pank Eesti of organisation work and system management the of Development other things. under theEuropean SystemofCentralBanks,andgeneralmanagementEestiPank'sactivities,among of the Executive Board, who has exclusive authority over banking policy, how the bank executes its tasks average of11.2years. an for Pank Eesti for worked had they and 43.7 was 2013 in employees Pank Eesti of age average The average, there were 233full-timeequivalentemployeesatEestiPankin2013,downfrom 237in2012. On 2012. in as number same the Pank, Eesti at working employees 240 werethere 2013, of end the At employees of Number to bank the achieve itsmaingoals,andtomotivatethestaff andremunerate themcompetitively.for needed employees the develop and recruit to is policy resources human Pank’s Eesti Human resources at Eesti Pank auditors. systems ofthebankisassessedregularlyandexternal byboththeinternal management risk the of organisation activity.The of continuity the ensure to and processes bank's the to interruption possible any of impact the reduce preparedto been have services for plans Contingency and managementbodiesoftheEuropean SystemofCentralBanks. committees the through area euro the of whole the for management risk to contributes Pank Eesti real. remainrisks external several but stable is level risk internal the that show risks of analysis and Reporting strategic planning,budgetingandmanagementreporting processes. can have on the bank's work to achieve its goals. To that end, risk management has been integrated into events unforeseen that effect negative the reduce to aims management Risk framework. single a in led Risk management at Eesti Pank covers all the processes of the bank and allows various risks to be tack Risk management more openandtransparent andspeedingthedistributionofinformationaboutdecisions. decision-making making management, of processes working the in made were changes Fundamental and flexibleaspossible. by bringingsimilarareas togetherunderunifiedmanagementandmaking support servicesasaccessible moremade been has differentefficientwhole of a work as the bank and coordinatedbetter departments the of organisation The completed. were 2012 in started been had that changes structural the 2013 ary 55 - -

Eesti Pank Annual Report 2013 In 2013,79.1%ofEestiPankemployeeshadcompleted higher education. and policy. ing in the year. Training was most popular in 2013 in management, central banking, and economic theory employees or 79% of the staff took part in training. On average each employee received 5.2 days of 190train and payroll the of 1.8% to equal is which 2013, in euros 139,400 totalled costs development Staff training and Development in 2012. fromeurosup month1528 2013, a in eurosstaff month 1605 these a was for salary average The Union. Where necessary they participate in some working groups of the European Central Bank or the European English.written and spoken good and professionalexperience of three years least degree,at Master's a have to required is Pank Eesti at working bank's specialist the mid-level A of specialists. professional 85% are employees but staff, service the to managers top the from everyone covers figure This 2012. in euros 1913 from up 2013, in euros 1990 was holidays, national during and holidays during night, at overtime,working for pay additional and pay holiday including Pank, Eesti at salary monthly average The In totalthemembersofExecutiveBoard ofEestiPankwere paidsalaryof255,573euros in2013. euros5500 was salary Kaasik's Ülo euros6500 month.was a salary ler's Governor Deputy and month a ArdoIn 2013Governor Hanssonreceived asalaryof8100euros MadisMül amonth,DeputyGovernor Board.Supervisory the by set are Governors Deputy the and Pank Eesti of Governor the of salaries The Supervisory Board in2013 was105,838euros. board received 1022.59 euros a month. The the total of sum members paid in other compensation and to compensation members in of the month Eesti a Pankeuros 1661.70 received Board Supervisory the of chairman the 2013 In work. their for compensated were Board Supervisory Pank Eesti the of Members Remuneration trian centralbank,theÖsterreichische Nationalbank. In 2013 one employee of Eesti Pank was on short term secondment to the ECB and one was at the Aus Table 4. Number of employees at Eesti Pank on 31.12.2013. on Pank Eesti at employees of Number 4. Table Number ofeffective employmentcontracts other, organisationandstudying includingsecondmenttotheECBorotherinternational leave on maternity of whichsuspendedcontracts Number ofemployees Total 240 254 14 6 8 Men 103 99 4 0 4 Women 141 151 10 56 2 8 - - -

Eesti Pank Annual Report 2013 a nationalvolleyballtournament. basketball friendly match against the Finnish central bank a and teams entered a basketball tournament for also bank workers and was There chess. and tennis badminton, running, cross-country basketball, skiing, for banks central European the by held events sporting in Toosikannuparticipated in players and pervision Authority. During the year, a winter sports event was held in Kääriku and a summer sports event Su Financial the and Pank Eesti from members 245 had club sports Pank Eesti the 2013 of end the At club culture the and club sports The was conductedbyPeeterPerens in2013andthedancegroup wasledbyMärtAgu. were 28 singers in the choir and 16 dancers in the dance group, and three people were in both. The choir Eesti Pank and the Financial Supervision Authority are part of the culture club and at the of end Employees group. of dance a 2013 and therechoir chamber a has club culture Pank Eesti the 2013 January Since 57 -

Eesti Pank Annual Report 2013 assets andliabilities,equityfinancialperformanceofEestiPank. accounting principles generally accepted in Estonia. The Annual Accounts give a true and fair view of the the with accordance in up drawn been have guidelines ECB by regulated not are that Accounts Annual the of 26.4 Article on Statute oftheEuropean SystemofCentralBanksandtheEuropeanbased CentralBank rules the with accordance in up drawn been have Accounts Annual The financial yearended31December2013. The Executive Board recognises its responsibility for the Annual Accounts of Eesti Pank for the PANK BOARD OFEESTI EXECUTIVE 2013 31 DECEMBER ENDED BY THE YEAR FINANCIAL APPROVAL FOR THE ACCOUNTS OF THEANNUAL amending Guideline ECB/2010/20 on the legal framework for accounting and financial reporting in the European System of Central Banks. Central of System European the in reporting financial and accounting for framework legal the on ECB/2010/20 Guideline amending (ECB/2010/20); of (recast) Banks ECB 201121 Guideline December (ECB/2011/27) of and ECB 102012Guideline December (ECB/2012/29), 1 Accounts. Annualthe signed day that on Pank BoardEesti Executive of the of members the Marchall 21 2014, On differ from theestimatesofExecutiveBoard. Annual Accounts.Thefinaloutcomeoftheeconomictransactionsreflectedthe intheAnnualAccountsmay of preparation of date the at as risks and intentions its Pank, Eesti about available information the areonestimates based These period. accounting the during expenses and income and date accounting theat as Pank Eesti of liabilities and assets affectingthe determinants the of provideBoardestimates to The preparation of the Annual Accounts in conformity with the above requirements requires the Executive Madis Müller Ülo Kaasik Ardo Hansson ECB Guideline of 11 November 2010 on the legal framework for accounting and financial reporting in the European System of Central Central of System European the in reporting financial and accounting for framework legal the on 2010 11November of Guideline ECB Member oftheExecutiveBoard ofEestiPank Deputy Governor Member oftheExecutiveBoard ofEestiPank Deputy Governor Chairman oftheExecutiveBoard ofEestiPank, Governor

1 . Thepartsofthe 58

Eesti Pank Annual Report 2013 BALANCE SHEETASAT 31DECEMBER2013AND2012 The notesonpages6–31formanintegralpartoftheAnnualAccounts. TOTAL ASSETS Sundry Accrualsandprepaid expenses Off-balance-sheet instruments revaluation differences Otherfinancialassets Tangible fixedassets Other assets OtherclaimswithintheEurosystem (net) Netclaimsrelated tothe allocationofeuro banknoteswithintheEurosystem Claimsequivalenttothetransferofforeign reserves Participatinginterest in the European CentralBank Intra-Eurosystem claims Othersecurities Securitiesheldformonetarypolicypurposes Securities ofeuro area residents denominatedineuros Other claimsoneuro area credit institutionsdenominatedineuros denominated ineuros Lending toeuro area credit institutionsrelated tomonetarypolicyoperations Claims onnon-euro area residents denominatedineuros Claims oneuro area residents denominatedinforeign currency assets Balanceswithbanks,securityinvestmentsandotherexternal Receivablesfrom theIMF Claims onnon-euro area residents denominatedinforeign currency Gold andgoldreceivables ASSETS

Item 18 17 16 15 14 13 12 11 10

8 7 6 5 4 3 2 1 9 31/12/2013 4,274,120 1,852,294 1,412,993 3,451,361 306,003 496,626 135,535 219,650 103,153 190,623 10,841 40,184 84,115 11,612 20,161 41,019 82,921 5,000 2,251 7,188 8,070 959 217 thousand euros 31/12/2012 4,281,724 1,766,471 1,446,009 3,398,491 373,251 564,723 133,715 215,561 103,116 191,472 13,900 21,144 81,846 10,405 12,639 22,421 44,941 82,895 9,845 2,714 8,737 927 217 59

Eesti Pank Annual Report 2013 The notesonpages6–31formanintegralpartoftheAnnualAccounts. TOTAL LIABILITIES Profit fortheyear Reserves Capital Capital andreserves Revaluation accounts Provisions Sundry Accrualsandincomecollectedinadvance Off-balance-sheet instruments revaluation differences Other liabilities Counterpart ofthespecialdrawingrightsallocatedbyIMF Depositfacility Current accounts(includingcoverfortheminimumreserve system) denominated ineuros Liabilities toeuro area credit institutionsrelated tomonetarypolicyoperations Banknotes incirculation LIABILITIES Liabilities tonon-euro area residents denominatedinforeign currency Liabilities tonon-euro area residents denominatedineuros Liabilities toothereuro area residents denominatedineuros Fixed-termdeposits

Item 27 16 26 25 24 23 22 21 20 19 31 30 29 28

31/12/2013 4,274,120 1,417,059 2,251,816 211,100 172,817 383,917 470,000 455,000 492,059 88,605 69,296 11,863 23,483 18,300 85,474 2,991 9,766 140 15 0 thousand euros 31/12/2012 1,010,000 1,527,860 2,149,154 4,281,724 60 517,860 211,100 147,237 358,337 34,107 13,679 11,500 82,711 86,153 72,232 18,950 3,073 9,737 369 15 0

Eesti Pank Annual Report 2013 The notesonpages6–31formanintegralpartoftheAnnual Accounts. 2013 PROFITANDLOSSACCOUNTFOR2012 Profit fortheyear Operating expenses Other operatingexpenses Banknote production services Depreciation oftangiblefixed assets Administrative expenses Staff costs Total netincome Other incomeandexpenses Other expenses Other income Net result ofpooling monetary income Income from equityshares andparticipatinginterests Net incomefrom feesand commissions Fees andcommissionsexpenses Fees andcommissionsincome Net result offinancialoperations,write-downsandriskprovisions Provisions forforeign exchangerate,interest rateandcredit risks Write-downs onfinancialassets Realised gainarisingfrom financialoperations Net interest income Interest expense Interest income

Item 34 33 32 42 41 14 40 39 38 37 36 35

2013 -17,418 -11,758 28,960 40,718 23,483 40,901 12,362 -7,192 -6,800 -2,727 -1,794 -2,281 -4,940 -7,845 2,335 5,176 -141 -558 -115 759 900 836 951 thousand euros 2012 -16,242 -11,500 34,107 50,349 24,402 29,741 38,929 -7,807 -1,244 -9,188 -2,258 -5,160 -7,859 1,336 1,336 1,884 4,937 -106 -965 793 899 0 0 61

Eesti Pank Annual Report 2013 accounting principlesgenerallyacceptedinEstonia. the with accordance in up drawn been have guidelines ECB by regulated not are that Accounts Annual the of 26.4 Article on Statute oftheEuropean SystemofCentralBanksandtheEuropeanbased CentralBank rules the with accordance in up drawn been have Accounts Annual The General Principles ACCOUNTING IN POLICIES THE USED ANNUAL ACCOUNTS PANK OFEESTI ACCOUNTS ONTHEANNUAL NOTES amending Guideline ECB/2010/20 on the legal framework for accounting and financial reporting in the European System of Central Banks. Central of System European the in reporting financial and accounting for framework legal the on ECB/2010/20 Guideline amending (ECB/2010/20); of (recast) Banks ECB 201121 Guideline December (ECB/2011/27) of and ECB 102012Guideline December (ECB/2012/29), 2 Financial assets are initially recorded at their acquisition cost, which is the fair value of the amount paid for under conditionsthatare potentiallyunfavourable. liver cash or any other financial assets to another entity or to exchange financial assets with another entity de to obligation legal a is that liability any is liability financial A arefavourable. that potentially conditions under entity another with assets financial exchange to right contractual a entity,or another from assets A financialassetisanythatcash,oracontractual righttoreceive cash or anyotherfinancial Financial assets and liabilities losses canbemeasured reliably. or gains resulting the and liability a or asset an of value or cost the and transferred; been have liabilities economic benefit will flow to or from Eesti Pank; almost all of the risks and rewards related to assets and futureassociated any that probable is it when Sheet Balance the in recognisedare liabilities and Assets and liabilities Assets following accountingprinciples. the in explained cases in except basis, cost historical the on prepared been have Accounts Annual The currency). Theassetsand liabilities related tothemonetarypolicyare recorded onseparaterows. other(euro,currency and area)non-euroarea,(euroresidency by groupedare items Sheet Balance The The AnnualAccountshavebeenprepared inthousandsofeuros unlessindicated otherwise. of theAnnualAccountsEestiPank,givenbank'srole asthecentralbank. No Cash Flow Statement is included as it does not provide significant relevant information to the readers Pank anditsintentionsrisksasatthedateofpreparation oftheAnnualAccounts. Eestiabout available information the on arebased estimates These date. sheet balance the at as period minants affecting the assets and liabilities of Eesti Pank and income and expenses during the accounting The preparation oftheAnnualAccountsrequires theExecutiveBoard toprovide estimatesofthedeter ECB Guideline of 11 November 2010 on the legal framework for accounting and financial reporting in the European System of Central Central of System European the in reporting financial and accounting for framework legal the 2010on 11November of Guideline ECB 2 . Thepartsofthe 62 - -

Eesti Pank Annual Report 2013 Financial assets recorded at adjusted acquisition cost are written down if the recoverable amount of an of amount recoverable the if down written are cost acquisition adjusted at recorded assets Financial Financial assetsrecorded atmarketvalueare revalued oneverybalancesheetdate. a liabilitysettledbetweenknowledgeable,disinterested andwillingpartiesinanarm’s lengthtransaction. on the type of the asset or liability. Market value is the amount for which an asset could be exchanged, or dependingcost amortised or cost acquisition the value, market the on based is liabilities and assets cial finan measurementof Subsequent question. in liability financial the receivedfor amount the of value fair the financial asset in question. Financial liabilities are initially recorded at their acquisition cost, which is the The exchangeratesappliedon31December2013and2012 were asfollows: British poundsterling)convertedintoeuro asat31December2013. the and yen Japanese the euro, dollar,the US (the currencies major four of rates exchange the of sum currencies. To revalue Eesti Pank’s holdings of SDRs, the value of the SDR was calculated as the weighted The special drawing right (SDR) of the International Monetary Fund (IMF) is defined in terms of a basket of exchange assetsandliabilitiesisperformedonacurrency-by-currency basis. the recording date. The revaluation of on-balance-sheet and off-balance-sheet instruments and of foreign vailing on the balance sheet date. Income and expenses are converted at the exchange rate prevailing on preforeignrate in currenciesexchange denominated euros the areliabilities to at and converted Assets basis. Thesereceivables also affect theforeign currency positiononadailybasis. denominated inforeign currency andthepremiums ordiscountsare calculatedandrecorded onadaily arising from salesare alsocalculatedonthetradedate.Theinterest accruedon financial instruments and saleofforeign currency affect thenetforeign currency positiononthetradedate;realised results off-balance-sheet entries are reversed and transactions are recorded on the Balance Sheet. The purchase date, settlement the On date. trade the on accounts off-balance-sheet in recordedare currency foreign theexceptionofspottransactionsinsecurities,financialinstruments denominatedinWith currency foreign in transactions of Recording are recorded asanexpenseoftheaccountingperiodinProfit andLossAccount. together.assets all measuredimpairedfor is be to expected areassetsnot that financial Write-downs of sured for each object separately. The impairment of financial assets that are not individually significant and asset is likely to be smaller than its carrying amount. The impairment of significant financial assets is mea SDR JPY GBP USD

31/12/2013 0.8942 144.72 0.8337 1.3791 31/12/2012 0.8579 113.61 0.8161 1.3194 63 - - -

Eesti Pank Annual Report 2013 Securities the exchangerateofeuro againsttheUSdollaron31December2013. the price in euro per fine ounce of gold, which, for the year ending 31 December 2013, was derived from currency revaluation differences for gold. Instead, a single gold valuation is accounted for on the basis of Gold is valued at the market price prevailing at the year-end. No distinction is made between the price and Gold collected inadvance”. income and “Accruals under Sheet Balance the on basis accrual an on recorded is ity.payable Interest fair value, i.e. securities are recorded as assets on the Balance Sheet and the repurchase sum as a liabil Repurchase transactions (sale/repurchase transactions) are recorded as collateralised loans taken at their Reverse transactions amortised overtheremaining lifeofthesecuritiesonastraight-linebasis. Premiums ordiscountsarisingonpurchased securitiesare recorded aspartofinterest income andare or marketprice. curity orongoldattheyear-end, theaveragecostofthatitemisreduced totheyear-end exchangerate gains onothercurrencies orsecuritiesgold.Intheeventofanunrealised lossonanycurrency orse account. Unrealised losses onanyonecurrency orsecurityongoldare not nettedagainstunrealised if, attheyear-end, they exceed previous revaluation gains registered inthecorresponding revaluation assets” financial on “Write-downs under Account Loss and Profit the in recorded are losses Unrealised under “Revaluationaccounts”. SheetBalance the arerecognisedon but Account, Loss Profitand the to taken arenot Unrealisedgains losses are calculatedbyreference totheaveragecostofasset. of foreign exchange,goldand securitiesare takentotheProfit andLossAccount. Suchrealised gainsand crual basis regardless of when cash was received or paid. Realised gains and losses arising from the sale Income andexpensesare recorded intheProfit andLossAccountduringtheaccountingperiodonanac recognition Income ued atamortisedcostsubjecttoaEurosystem impairmentframework. areval securities, held-to-maturity as areclassified which purposes, policy monetary for held Securities 2013 were used. December 31 on prices mid-market 2013, aDecember 31 ending on year the date, For basis. security-by-security sheet balance the on prevailing curve yield the of basis the on or prices mid-market the at Marketable securities (other than those classified as held-to-maturity) and similar assets are valued either 64 - - - -

Eesti Pank Annual Report 2013 Investment in shares is recorded at market value if it can be assessed reliably. The assessment of the of assessment reliably.The assessed be can it if value market at recorded is shares in Investment shares in Investments reverse repurchase transactionsare notrecorded ontheBalanceSheetofEestiPank. prepaid expenses”andinterest incomeintheProfit andLossAccount.Securitiesusedascollateralfor and “Accruals under Sheet loansBalance the on basis collateralised accrual an on recorded is as receivable Interest granted. recorded are transactions) (purchase/resale transactions repurchase Reverse bank decidesonthesizeand useoftheprovisions, using areasonable estimate of thebank’s exposure. for foreign exchangeraterisk,interest raterisk,goldpriceriskandcredit risks.Themanagementofthe Given the nature of the operations of a central bank, Eesti Pank may set up provisions on the balance sheet risk price gold and risk credit risk, interest rate, exchange foreign for Provisions reliably. Othermaintenanceandrepair costsare recognised asexpensesatthetimetheyare incurred. that Eesti Pank will derive future expected benefits from the asset and the cost of the asset can be measured probable is it when assets fixed as are recognised asset fixed of items for incurredexpenditure Subsequent software withhighacquisitioncostandvaryingusefullife. The need to differentiate between software depreciation rates arose due to the introduction of application straight-line basisovertheestimatedusefullivesofassetsatfollowingrates a on depreciatedare assets fixed Other assets. depreciable not areculture and art of objects and Land ed asfixedassetsontheBalanceSheet.Prepayments forfixedassetsare alsorecorded asfixedassets. utility systems of buildings, IT hardware, software, and other assets with long-term useful lives are record related to bringing assets to the location and condition necessary for their intended use. Land, buildings, directlyexpenditure other and price purchase the is which cost, acquisition their at recordedare assets Fixed assets are assets with a useful life over a year and an acquisition cost in excess of 3200 euros. Fixed assets Fixed fulfilled. Dividendincomeisrecorded asincome fortheperiod. been have sale of conditions all after Account Loss and Profit the in recordedare shares of sale the on assessing their value reliably. In this case shares are recorded at their acquisition cost. Profits and losses market value of shares is not reliable if they are not actively traded and there are no alternative methods for Other fixedassets Software Hardware Utility systemsofbuildings Land andbuildings

2013 15–50% 7–20% 20% 10% 3% 65 -

Eesti Pank Annual Report 2013 Off-balance-sheet instruments Authority inrelation toitscurrent accountheldwith Eesti Pank. vices provided by Eesti Pank and acquisition of current assets, and a liability to the Financial Supervision The BalanceSheetofEestiPankcontainsaclaimontheFinancialSupervisionAuthorityinrelation toser Claims andliabilitiestotheFinancialSupervisionAuthority subscribed capital key to the NCBs’ share of that total. that of share NCBs’ to the key capital subscribed 4 3 location key al banknote the with accordance in month each of day working last the on banks central Eurosystem the comprise together which banknotes euro banks, issue Eurosystem, central national area euro the and Bank Central European The inBanknotes circulation date are disclosedintheNotes. sheet balance the on liabilities and assets of condition the affect not do that events Importantpost-balance-sheet date. sheet balance the on liabilities and assets of condition the affect materially or periods compilation of the Annual Accounts but are related to transactions during the accounting period or earlier of date the and date sheet balance the between occur that events for adjusted are liabilities and Assets Events Post-Balance-Sheet their non-realisation. probabilityofthe than Bank the of management the by consideredrealisationlower is their probability of antees and other liabilities which may, under certain conditions, become liabilities in the future, though the guar commitments, include and Accounts Annual the on Notes arerecordedthe liabilities in Contingent liabilities Contingent ation date. using observable market prices and rates and the discount factors from the settlement dates to the valu methods, valuation accepted generally on based is swaps rate interest of and securities in transactions open interest rate futures contracts are recorded in the Profit and Loss Account. The valuation of forward of margin variation the in changes Daily basis. item-by-item an on revaluedare instruments rate Interest and losses. are includedinthenetforeign currency positionforthepurposeofcalculatingforeign exchangegains swaps and other currency instruments involving an exchange of one currency for another at a future date,exchange foreign of legs forward instruments, forward exchange foreign namely instruments, Currency Decision of the ECB of 13 December 2010 on the issue of euro banknotes (recast) (ECB/2010/29), OJ L 35, 9.2.2011, L35, OJ (ECB/2010/29), (recast) p. 26. banknotes euro of issue 2010 the on 13 of ECB December the of Decision Banknote allocation key – the percentages that result from taking the ECB’s share in the total euro banknote issue and applying the the applying and issue banknote euro total the in share ECB’s the taking from result that percentages the – key allocation Banknote 4 . 3 . The total value of euro banknotes in circulation is allocated to the to allocated is circulation in banknotes euro of value total The . 66 - - - -

Eesti Pank Annual Report 2013 circulation also gives rise to remunerated intra-Eurosystem balances. These claims or liabilities, which liabilities, or claims These into balances. puts intra-Eurosystem actually remunerated to it rise that gives banknotes also circulation euro of value the and key allocation banknote the with cordance ac in bank central Eurosystem each to allocated banknotes euro of value the between difference The bank isdisclosedunderthebalancesheetliabilityitem“Banknotesincirculation”. central Eurosystem each to allocated banknotes of share The ECB. the of key capital the in weightings their to according banks central Eurosystem the to allocated been has 92% remaining the and culation, cir euroin of banknotes value total the of share8% a of allocated been has EuropeanBank The Central in circulation and arising from securities purchased under the Securities Market Programme (recast), OJ L 6, 11.1.2011, L6, OJ (recast), Programme Market p35. Securities the under purchased securities from arising and circulation in 8 2010. to June 2008 July from was this Pank Eesti For State. 7 6 9.2.2011, L35, OJ (recast)(ECB/2010/23), p. 17. euro the is currency 5 Councilmayalsodecide totransferallorpartoftheECB’sThe Governing incomearisingfrom securities profit forthatyear. the extent necessary to ensure that the amount of the distributed income does not exceed the ECB’s net toretained be should circulation in ECB’sbanknotes eurothe on of necessary,income part if or and, all ECB’ssecuritiesthe SMP fromof arising part income or all whether decides Council Governing the year theof end the Before banknotes. euro of handling and issue the with connection in ECB the by incurred in circulation may be reduced in accordance with Council any to decision charge by coststhe Governing of the following year in the form of an interim distribution of profit banks in the same financial year it accrues. The European Central Bank distributes this income in January Eurosystemcentralthe to full in due be shall Programme(SMP) Markets Securities the purchasedunder arises from the 8% which share of euro banknotes allocated to ECB, the ECB, and the ECB’sthe income arising fromof securities income seigniorage the that decided has ECB the of Council Governing The ECB the of distribution profit Interim and isdisclosedunder“Netinterest income”. ECBthe of accounts clearedthroughthe is balances these on expense and interestincome The capital. on banknotes is allocated fully in proportion to the Eurosystem central bank’s paid-up shares in the ECB’s are reduced in annual stages until the first day of sixth year after the cash changeover year when income ECB’sthe under period that during them to allocated been have would that key.capital adjustmentsThe culation of each Eurosystem central bank in the reference period ments are effected bytakingintoaccountthedifferences betweentheaveragevalueofbanknotesincir adjust The Eurosystem. the in banks central the of positions income relative the in years previous from changessignificant avoid orderto in are euroadjusted banknotes of allocation fromthe arising balances From thecashchangeoveryear on accountingpolicies). to the allocation of euro banknotes within the Eurosystem” (see “Intra-Eurosystem balances” in the notes interest bear Decision ECB/2010/24 of 25 November of 2010 on the interim distribution of the income of the European Central Bank on euro banknotes banknotes euro on Bank Central European the of income the of distribution interim the on 2010 of November 25 of ECB/2010/24 Decision The reference period is the 24 months that start 30 months before the day on which euro banknotes become legal tender in the Member Member the in tender legal become banknotes euro which on day the before months 30 start that months 24 the is period reference The Cash changeover year refers to the year in which the euro banknotes are introduced as legal tender of a Member State. aMember of tender legal as introduced are banknotes euro the which in year to the refers year changeover Cash Decision of the ECB of 25 November 2010 on the allocation of monetary income of the national central banks of Member States whose whose States Member of banks central national the of income monetary of allocation 2010 the on 25November of ECB the of Decision 5 , are disclosed under the sub-item “Intra-Eurosystem balances: net claims/liabilities relatedclaims/liabilities net balances: “Intra-Eurosystem sub-item the under disclosed are , 6 until five years following the cash changeover year the intra-Eurosystem 7 8 and the average value of the banknotes . The ECB's income on euro banknotes 67 - - - -

Eesti Pank Annual Report 2013 Intra-Eurosystem claimsarisingfrom EestiPank’s participatinginterest intheECBare reported under Intra-Eurosystem balances under “Incomefrom equityshares andparticipating interests”. risks. The amount distributed to the Eurosystem central banks is disclosed in the Profit and Loss Account pricegold credit and interestrate, rate, foreignexchange provisionfor a circulationto in eurobanknotes purchased undertheSecuritiesMarketProgramme and ifnecessaryallorpartoftheECB'sincomeon Eurosystem (net)”or“Other liabilitieswithintheEurosystem (net)”. thewithin claims “Other under disclosed and position liability or asset net single a as Sheet Balance the areprofiteurosEurosystemNCBs interim in to as denominated presenteddistributions such balances in intra- other TARGET2,fromand arising ECB the towards NCBs area euro of balances Intra-Eurosystem ECB.the towards position bilateral net single a only with NCB each leaving basis, daily a on ECB the to assigned are balances bilateral These banks. central EU of TARGET2accounts the in balances bilateral TARGET2– theTrans-European in AutomatedReal-timeGross SettlementExpress Transferprimarily systemandgiveriseto settled are transactions intra-ESCB The euros. in money bank central in settled are that Union European the in payments cross-border from primarily result balances Intra-Eurosystem within theEurosystem” (see “Banknotesincirculation” inthenotesonaccountingpolicies). relatedeuroclaims/liabilities of “Net allocation under the liability to banknotesor asset single net a as ed Intra-Eurosystem balances arising from the allocation of euro banknotes within the Eurosystem are includ reserves”. the Eurosystem are denominated in euros and reported under “Claims equivalent to the transfer of foreign Intra-Eurosystem balances arising from the transfer of foreign reserve assets to the ECB by NCBs joining “Participating interest intheEuropean CentralBank”. 68 -

Eesti Pank Annual Report 2013 Changes inthevalueofEestiPank’s goldreserves are asfollows: RECEIVABLES GOLD AND 1–GOLD ITEM SHEET ONTHEBALANCE NOTES tions Plan(FTP)of5,000,000SDRs.Estoniahasparticipated intheIMF’s FTPsince2012. increasethe reservein Estonia’sdue to was 2013 position in IMF’sin the participation Financial Transac The reserve positionintheIMFcomprisesnetamountofquotaandNo.1 account.The quota oftheRepublicEstoniawas93,900,000 SDRs. recorded underassetsontheBalanceSheetandisequaltocountry’s quota.Attheend of 2013the IMF each for member determining established its participation (subscription) been and voting power has in the IMF.quota IMF.A Participation in the the IMF isin Estonia of Republic the represents Pank Eesti IMF the in position Reserve other operations. various and transactions loan conducting for state member IMF each for generated is account SDR An IMF the in account SDR The Receivables from theIMF are theSDRaccountinIMFandreserve position intheIMF. IMF THE FROM 2–RECEIVABLES ITEM Total IMFsecuritiesaccountandNo.1(liabilities) ParticipationintheIMF Reserve positionintheIMF SDR accountintheIMF Market value(thousandeuros) Revaluation (thousandeuros) Ounce marketvalue(euros) Gold (ounces)

31/12/2013 31/12/2013 8,250.171 871.22 7,188 104,929 -90,188 84,115 14,741 69,374 0 31/12/2012 thousand euros 31/12/2012 8,250.171 1,261.18 109,471 -99,933 10,405 81,846 72,308 9,538 366 69 -

Eesti Pank Annual Report 2013 in equitiesdenominatedUSdollarsofeuro area residents. Item 4 reflects bank balances in foreign currency with credit institutions in the euro area and investments FOREIGN CURRENCY IN DENOMINATED RESIDENTS AREA EURO ON 4–CLAIMS ITEM foreign reserves were bondsoftheUnitedStates. investedmainlyinthelow-riskgovernment investments denominatedinUSandAustraliandollarsofnon-euro area residents. In2013,EestiPank’s Item 3 reflects bank balances in foreign currency with credit institutions outside the euro area and security ASSETS EXTERNAL OTHER AND INVESTMENTS WITH BANKS, SECURITY 3ITEM – BALANCES Total Current accounts Equities Total DKK NOK CHF NZD SEK JPY CAD GBP AUD USD Total Current accounts Reverse repurchase transactions Fixed-term deposits Securities

31/12/2013 31/12/2013 31/12/2013 40,184 35,578 135,535 119,891 135,535 111,502 4,606 23,247 1,577 4,713 9,354 141 142 420 18 53 2 2 8 31/12/2012 31/12/2012 31/12/2012 thousand euros thousand euros thousand euros 133,715 100,718 133,715 133,030 21,844 21,144 15,347 5,014 6,139 5,797 269 196 108 18 44 38 2 3 7 70

Eesti Pank Annual Report 2013 sion ECB/2011/17 of 3 November 2011 on the implementation of the second covered bond purchase programme (OJ L 297, L 16.11.2011, (OJ 70). p programme 10 purchase bond covered second the of implementation the 2011 on November 3 of ECB/2011/17 sion 9 bonds, Item 8 reflects securities acquired by Eesti Pank within the scope of the purchase programmes for covered PURPOSES POLICY MONETARY FOR HELD 8–SECURITIES ITEM Item 7reflects thebalanceswithbanksofeuro area credit institutionsdenominatedineuros. DENOMINATED IN EUROS INSTITUTIONS CREDIT AREA EURO ON CLAIMS 7–OTHER ITEM NCBs attheirowndiscretion. has been excluded by the Council Governing of the ECB for specific collateral which can be accepted by sharing risk that noted be should It sufficient. not is counterparty the by provided collateral the of lution Losses can only materialise if both the counterparty fails and the recovery of funds received from the reso 30 June2013was0.25582%andfrom 1July2013itwas0.2559%. the by full Eurosystem central banks in proportionin to the prevailing ECB capital sharedkey shares. Eesti Pank’sare sharematerialise, as at to were they if operations, policy monetary from risks any ESCB, Pank holds5millioneuros oflong-term refinancing transactions.UnderArticle32.4oftheStatute The total Eurosystem holding of monetary policy assets amounts to 752,288 million euros, of which Eesti MONETARY POLICY OPERATIONS DENOMINATED IN EUROS TO RELATED INSTITUTIONS CREDIT AREA EURO TO 6–LENDING ITEM ments denominatedineuros ofnon-euro area residents. invest security and area euro the outside institutions credit with euros in balances bank reflects 5 Item DENOMINATED IN EUROS RESIDENTS AREA NON-EURO ON 5–CLAIMS ITEM Total CHF NZD NOK JPY SEK AUD CAD GBP USD Decision ECB/2009/16 of 2 July 2009 on the implementation of the covered bond purchase programme (OJ L 175, 4.7.2009, p 18) and Deci and 18) p 4.7.2009, 175, L (OJ programme purchase bond covered the of implementation the on 2009 July 2 of ECB/2009/16 Decision Decision ECB/2010/5 of 14 May 2010 establishing a securities markets programme (OJ L124, (OJ 20.05.2010, p8). programme markets asecurities ECB/2010/5 14 of 2010 May establishing Decision 9 andpublicdebtsecuritiesacquired inthescopeofSecuritiesMarketProgramme (SMP).

31/12/2013 40,184 37,441 1,100 247 502 750 12 32 92 8 31/12/2012 thousand euros 21,144 18,843 1,591 217 194 283

8 1 0 7 10 71 - - -

Eesti Pank Annual Report 2013 ITEM 9 – OTHER SECURITIES 9–OTHER ITEM bond purchase programmes. impairment losses were recorded for the other securities purchased under the SMP and the two covered year.the noof Furthermore, end the recordedat were losses impairment no reason this For flows. cash future estimated the in changes of evidence no was there that 2013 of end the at available information tries that had issued bonds. The ECB Council Governing considered these indicators and found from the coun to IMF the or EU the by given assistance financial the of terms the of breach a was third the and of interest or principal, the second was the partial restructuring of the Irish government bonds in February, repaymentthe breachin was contract first of The 2013. of occurredcourse which the indicators in ment CounciloftheECBidentifiedthreeIn theSMPimpairmenttestatendof2013,Governing impair are tests impairment Annual conducted onthebasisofinformationavailableandestimatedrecoverable amountsasattheyear-end. policies). accounting the on notes the in “Securities” (see impairment to pro purchase bond covered subjectbasis cost amortised an on arevalued and the securities held-to-maturity as areclassified grammes and Programme Market Securities the under purchased Securities tion totheprevailing ECB capital keyshares. of SMP securities, if they were to materialise, are shared in full by the Eurosystem central banks in propor Eesti Pankholds274millioneuros. UnderArticle32.4oftheStatuteESCB,anyrisksfrom holdings The total Eurosystem central banks holding of SMP securities amounts to 178,836 million euros, of which the SMP andthetwocovered bondpurchase programmes onaregularunder basis. held securities the with associated risks financial the assesses Council Governing ECB The the ECBdecidedtoterminateSMP. of Council Governing the 2012 September 6 On redemptions. to due was 2013 in item this in reduction ties marketsandtorestore theproper functioningofthemonetarypolicytransmission mechanism.The securi debt area euro the of segments certain of malfunctioning the mitigate to order in securities debt privateand public areaeuro buy to able were NCBs and ECB the 2010, May in initiated SMP the Under expand lendingtocustomers.TheCBPP2endedon31October2012. financing conditionsforcredit institutionsandcompaniestoencouragecredit institutionstomaintainand the NCBs of the euro area purchased covered bonds issued in the euro area in euros in order to easethe Under the second covered bonds purchase programme (CBPP2) launched in October 2011, the ECB and 11 11 Item 9reflects investmentsinsecuritiesdenominated euros byeuro area residents. Total CBPP2 SMP See the ECB press release of 6 September 2012 for the technical details of the monetary policy transactions. policy monetary the of details 2012 technical the for 6September of release press ECB the See

31/12/2013 306,003 274,086 11 31,917 31/12/2012 thousand euros 373,251 340,996 32,255 72 - - - - -

Eesti Pank Annual Report 2013 capital keywasadjustedasshowninthefollowingtable. the ESCB, the joined bank central Croatian the and 2013 July 1 on Union European the joined Croatia When years. five every adjusted is which and Statute, ESCB the of Article 29.3 in out set is which ing, ESCB are the sole subscribers of the capital of the ECB. Subscriptions depend on the capital key weight the Statute of the European System of Central Banks (ESCB) states that the national central banks of the of Article 28 (ECB). Bank EuropeanCentral the in Pank Eesti interestof participating reflects the 10 Item 10ITEM – PARTICIPATING IN THE ECB INTEREST Total Bank ofEngland Sveriges Riksbank Banca NaţionalăaRomâniei Narodowy BankPolski Magyar NemzetiBank Lietuvos bankas Latvijas Banka Hrvatska narodna banka Danmarks Nationalbank Česká národní banka Българска народнабанка Suomen Pankki–FinlandsBank Národná bankaSlovenska Banka Slovenije Banco dePortugal Oesterreichische Nationalbank De NederlandscheBank Central BankofMalta Banque centraleduLuxembourg Central BankofCyprus Banca d’Italia Banque deFrance Banco deEspaña Bank ofGreece Central BankofIreland Eesti Pank Deutsche Bundesbank Nationale BankvanBelgië/BanquedeBelgique (Bulgarian NationalBank)

subscriptions from 1 January2009 Capital key % 100.0000 18.9373 14.5172 12.4966 14.2212 8.3040 1.9649 1.1107 0.1790 2.4256 2.2582 2.4645 4.8954 1.3856 0.4256 0.2837 1.4835 1.4472 0.8686 1.2539 0.6934 0.3288 1.7504 1.9417 3.9882 0.0632 0.1747 0.1369

subscriptions from Capital key 1 July2013 % 100.0000 18.7603 12.4570 14.1342 14.4320 8.2533 1.9483 1.1111 0.1780 2.4176 1.4754 1.4539 0.8644 1.2456 0.6881 0.3270 1.7636 1.9370 3.9663 0.0635 0.1739 0.1333 2.2612 2.4449 4.8581 1.3740 0.4093 0.2742 0.5945

73 -

Eesti Pank Annual Report 2013 The subscribedandpaidupcapitalcontributionsofthenationalcentralbanksare asfollows: paid forthereserves, revaluation accountsandtheriskprovisions oftheECB63,652,996euros. in proportion to its share in the subscribed capital of the ECB. This item also recognises the total amount quiring the central bank to pay a part of the reserves, revaluation accounts and risk provisions of the ECB ESCB’sthe of eurore48.2 area,the Pank, Article joined Eesti Estonia to When apply to started Statute Total1 Subtotal –non-euro area nationalcentralbanks Bank ofEngland Sveriges Riksbank Banca NaţionalăaRomâniei Narodowy BankPolski Magyar NemzetiBank Lietuvos bankas Latvijas Banka Hrvatska narodna banka Danmarks Nationalbank Česká národní banka Българска народнабанка Subtotal –euro area nationalcentralbanks Suomen Pankki–FinlandsBank Národná bankaSlovenska Banka Slovenije Banco dePortugal Oesterreichische Nationalbank De NederlandscheBank Central BankofMalta Banque centraleduLuxembourg Central BankofCyprus Banca d’Italia Banque deFrance Banco deEspaña Bank ofGreece Central BankofIreland Eesti Pank Deutsche Bundesbank Belgique Nationale BankvanBelgië/Banquede (Bulgarian NationalBank) 29 December 10,760,652,403 capital from Subscribed 1,344,715,688 1,530,293,899 2,037,777,027 3,231,370,113 1,562,145,431 7,529,282,289 893,564,576 211,436,059 119,518,566 261,010,385 242,997,053 265,196,278 526,776,978 149,099,600 159,634,278 155,728,162 134,927,820 188,354,460 208,939,588 429,156,339 2010 18,798,860 14,731,333 19,261,568 45,797,337 30,527,971 93,467,027 74,614,364 35,381,025 6,800,732 €

Paid-in capital 30 June2013 1,344,715,688 1,530,293,899 2,037,777,027 7,650,458,669 7,529,282,289 893,564,576 211,436,059 119,518,566 261,010,385 121,176,379 134,927,820 188,354,460 208,939,588 429,156,339 18,798,860 14,731,333 19,261,568 58,580,454 19,754,137 74,614,364 35,381,025 until 9,112,389 9,944,860 5,591,235 1,717,400 1,144,799 5,986,285 5,839,806 3,505,014 6,800,732 €

10,825,007,070 capital from Subscribed 1 July2013 1,348,471,131 1,530,028,149 2,030,803,801 3,295,337,827 1,562,265,020 7,529,669,242 893,420,308 210,903,613 120,276,654 261,705,371 244,775,060 264,660,598 525,889,668 148,735,597 159,712,154 157,384,778 134,836,288 190,909,825 209,680,387 429,352,255 18,824,687 14,429,734 19,268,513 44,306,754 29,682,169 64,354,667 93,571,361 74,486,874 35,397,773 6,873,879 € Paid-in capital 1 July2013 1,348,471,131 1,530,028,149 2,030,803,801 7,653,244,411 7,529,669,242 893,420,308 210,903,613 120,276,654 261,705,371 123,575,169 134,836,288 190,909,825 209,680,387 429,352,255 from 18,824,687 14,429,734 19,268,513 58,584,938 19,720,863 74,486,874 35,397,773 9,179,065 9,924,772 5,577,585 1,661,503 1,113,081 2,413,300 5,989,206 5,901,929 3,508,926 6,873,879 € 74 -

Eesti Pank Annual Report 2013 tions, adjusted to reflect a zero return on the gold component. Following the adjustment of the capital key, Eurosystem’sthe for rate marginal opera refinancingavailable main latest the at reservesforeign the on The claimsare denominatedineuros atavalue fixedatthetimeoftheirtransfer. Theremuneration ispaid gold. in 15% and yen Japanese in 85% were reserves foreign These Eurosystem. the joined Pank Eesti whenECB the to assets reserveforeign of transfer the from arising Pank Eesti of claims reflects 11 Item RESERVES FOREIGN OF TRANSFER THE TO EQUIVALENT 11 –CLAIMS ITEM of euro banknotes allocated to a national central bank and the value of euro banknotes issued into circulation is recorded under Intra- under recorded is circulation into issued Eurosystem. the within banknotes banknotes euro of euro of allocation to the related value the and value claims/liabilities net the bank Eurosystem between central difference national the a to methods, accounting allocated Sheets these banknotes with Balance euro their accordance of in In banknotes capital. ECB euro the the in of share percentages paid-up their their to reflect NCBs proportion in the allocated and are basis, circulation in monthly a on banknotes euro banks the of central value the of national 92% the to remaining The basis. monthly a on ECB the to allocated is circulation 12 account, “Netresult ofpoolingmonetaryincome”). difference the from come between theamountspooledandallocatedbyEurosystem NCBs(seeitem36of theProfit income andLoss monetary of reallocation the with connection in ECB the on Claims system’s mainrefinancing operations. The remuneration oftheTARGET2 account is calculateddailyusingthelatestavailableratefor theEuro due tothedistributionofECB'sincomeoneuro banknotes. from the monetary income pooled from and reallocated to the Eurosystem central banks, and the amount arisingdifference the to due amount the TARGET2balance, the from arising claims net reflects 13 Item 13ITEM WITHIN THE (NET) EUROSYSTEM – CLAIMS OTHER Eurosystem’s mainrefinancing operations. policies) accounting the on notes the in balances” “Intra-Eurosystem and circulation” in “Banknotes (see Eurosystem the within banknoteseuro of allocation Pank’sthe Eesti reflectsto relatingEurosystem 12 the towardsItem claims WITHIN THEBANKNOTES EUROSYSTEM EURO OF ALLOCATION THE TO RELATED CLAIMS 12 –NET ITEM Eesti Pankpaidanadditional37,178euros offoreign reserves totheECBon1July2013. Total ECB’s interimprofit distribution Monetary incomereallocation TARGET2 balance In accordance with the accounting methods chosen by the Eurosystem for euro banknotes, 8% in by of banknotes, for euro the Eurosystem of the total banknotes chosen euro value methods the accounting with In accordance

12 . The remuneration is paid on these claims at the latest available rate for the for rate available latest the at claims these on paid is remuneration The . 31/12/2013 1,852,294 1,836,427 12,362 3,505 thousand euros 31/12/2012 1,766,471 1,740,599 24,402 1,470 75 - -

Eesti Pank Annual Report 2013 ITEM 14 – TANGIBLE FIXED ASSETS 14 FIXED –TANGIBLE ITEM shares andparticipatinginterests”). equityfrom “Income account Loss and Profit the of 35 item (see areaeuro the of banks central national At the decision of the Governing Council of the ECB, the ECB distributed its income in 2013 between the cost of217,118 euros. Eesti Pank holds 214 shares (200 voting shares) in the Bank for International Settlements at an acquisition ASSETS FINANCIAL 15 –OTHER ITEM ros, whichwaslessthanitsresidual value(seeitem38“Otherexpenses”intheprofit andlossaccount). propertya sold KuressaarePank in Eesti museum. eu the million for 0.6 inventory for buildings two with and use general for appliances on was procurement inventory main The software. management asset financialupdate to work development softwareand softwaredatabase procurements additional werefor largest The equipment. network and servers acquiring on held were procurementsHardware networks. technical and buildings of renovation the on spent was buildings on procurements the The of euros. share largest 1.2 million was it 2012 in euros; million 0.4 was 2013 in acquired assets fixed of cost The Balance attheendof2013 Balance attheendof2012 Total fixedassets Balance attheendof2013 Balance attheendof2012 Prepayments forfixed assets Balance attheendof2013 Balance attheendof2012 Carrying amount Balance attheendof2013 Disposals Depreciation charge Balance attheendof2012 Accumulated depreciation Balance attheendof2013 Disposals Acquisitions Balance attheendof2012 Acquisition cost Buildings 27,127 28,218 16,670 18,446 16,533 18,441 10,594 -1,091 1,248 9,777 -431 137 0 5 Hardware 2,649 3,681 3,596 2,821 -123 -123 295 208 866 947 860 947 6 0 Software 3,555 4,248 4,118 1,143 1,058 3,751 251 185 646 495 497 563 -55 -55 Inventory 4,257 5,839 6,227 1,482 1,970 1,482 1,970 4,357 -395 -387 487 7 0 0 thousand euros Total 20,238 40,895 42,159 20,161 22,421 19,372 21,921 21,523 -1,664 2,281 -996 400 789 500 76 -

Eesti Pank Annual Report 2013 resulting from theconversionoftransactionsat averageratefortheforeign currency onthatdate. values euro the with compared date, sheet balance the on prevailing rates exchange the at equivalents year-end. Thesevaluationchangesare theresult oftheconversionsuch transactionsintotheireuro at outstanding currency foreign in transactions forward and swap in changes valuation reflects 16 Item DIFFERENCES REVALUATION INSTRUMENTS 16ITEM – OFF-BALANCE-SHEET tions and deadlines of loan agreements that have already been signed will not be affected by this decision. condi The employees. Pank Eesti to loans consumer giving stop to 2013 January 15 on Boarddecided SupervisoryPank Eesti The conditions. similar under creditinstitutions Estonian by charged interestrate est rate on consumption loans for each year. The interest rate on consumption loans is comparable to the 30 years and consumption loans for up to two years. The Supervisory Board of Eesti Pank sets the inter of maximum a for Pank Eesti of employees to granted been have estate real by secured loans Housing ASSETS 18 –SUNDRY ITEM EXPENSES PREPAID AND 17 –ACCRUALS ITEM Valuation gainsonoutstandinginterest rateswaptransactionsare also included inthisitem. Total Other Credits related tomargincalls Foreign exchangetransactions Numismatic banknotesandcoinsoftheEstoniankroon Loans toemployeesofEestiPank Total Other claims Claims ontheFinancialSupervisionAuthority Prepaid expenses Loans Fixed-termdepositsandcurrent accounts Monetarypolicyoperations Derivativeinstruments Intra-Eurosystem balances Securities Interest income

31/12/2013 31/12/2013 11,612 1,231 8,149 9,768 8,070 6,155 372 728 744 302 373 606 936 14 65 7 0 thousand euros 31/12/2012 31/12/2012 thousand euros 11,175 12,639 1,966 8,950 8,737 1,760 5,899 338 551 575 101 140 116 939 23 77 9 9 - -

Eesti Pank Annual Report 2013 Foreign exchangetransactionsare convertedintotheir euro equivalentsattheaveragerateforforeign been grantedforamaximumoftenyearswithaninterest rateof5%. no more than the minimum loan interest rate set by the Minister of Finance. In addition, study loans have but 0.5% plus six-month the is 2012 since granted loans housing on rate interest The 2012. in nance. The deposit facility rate equals the ECB deposit interest rate, which was 0% in 2013 and 0-0.25% institutions plus the risk margin but not more than creditthe minimum loan to interest rate payable set by interest the Minister facility of Fi deposit the is 2012 before granted loans housing on rate interest The the counterpartieswhosebids are satisfied. ECB’sThe determinestransactions. decision into allocation enter to want they which at rate interest the term deposits are collected in a variable rate tender, where counterparties bid the amounts of money and Fixed- bank. central the with held institutions credit Estonian of deposits fixed-term the reflects 22 Item DEPOSITS –FIXED-TERM 22 ITEM ECB depositinterest rate,whichwas0%in2013and0-0.25%2012. the equals rate facility deposit The advance. in fixed rate interest an at bank central the with depositing Item 21 reflects the deposit facility of the Eurosystem available for Estonian credit institutions for overnight FACILITY 21 –DEPOSIT ITEM of theminimumreserve are notremunerated. interestmarginal available Eurosystem’sthe for rate refinancingmain excessin balances The operations. latest the is reserve, minimum the cover to held institutions, credit of accounts current the on balance theon remunerationpaid The Pank. Eesti with creditinstitutions of currentreflects accounts the 20 Item SYSTEM)RESERVE MINIMUM THE COVERING (INCLUDING ACCOUNTS 20–CURRENT ITEM the allocationofsuchbanknotestoEestiPank.Theclaimarisingfrom thisdifference isreflected initem12. thansmaller is Pank Eesti by issued actually eurobanknotes of value The policies). accounting on notes the Item 19 reflects Eesti Pank’s share of the total euro banknotes in circulation (see “Banknotes in circulation” in 19ITEM IN CIRCULATION – BANKNOTES recorded. wereinitiallytransactions the which at eurovalues the comparedto date, sheet balance the currencyon Total ECB banknotes(8%) Adjustments ofeuro banknotes Euro banknotes

31/12/2013 2,251,816 1,608,744 -195,751 838,823 thousand euros 31/12/2012 2,149,154 1,632,778 -186,769 703,145 78 -

Eesti Pank Annual Report 2013 ITEM 24 – LIABILITIES TO NON-EURO AREA RESIDENTS DENOMINATED DENOMINATED RESIDENTS AREA NON-EURO TO 24 –LIABILITIES ITEM accordance CounciloftheECB. withthedepositfacilityratesetbyGoverning on which interests are calculated quarterly on the basis of the average balance of the current account, in Pank, Eesti with held Authority Supervision Financial the of account current the mainly reflects 23 Item EUROS IN DENOMINATED RESIDENTS AREA EURO OTHER TO 23 –LIABILITIES ITEM ITEM 27 – ACCRUALS AND DEFERRED INCOME DEFERRED AND –ACCRUALS 27 ITEM from theforeign reserves ofthememberstates.Asaresult, Estoniareceived 61,965,241SDRs. supportusing liquidity increaseorderglobal to in done was This states. member its of all for issues SDR the increase to 2009 August 7 of IMF’sdecision the from arising IMF the to liability the reflects 26 Item ALLOCATED BY THE IMF RIGHTS DRAWING SPECIAL THE OF 26 –COUNTERPART ITEM Item 25reflects repo transactionsinforeign currency withnon-euro area residents. IN FOREIGN CURRENCY DENOMINATED RESIDENTS AREA NON-EURO TO 25 –LIABILITIES ITEM Item 24reflects theeuro depositsofnon-euro-area residents. Thesedepositsdonotbearinterest. EUROS IN Total Other liabilities Monetarypolicyoperations SDRallocation Depositsofcredit institutions Derivativeinstruments Interest expense Recreation reserve Employee salariespayable Tax liabilities Accounts payable

31/12/2013 2,991 298 332 475 549 783 813 39 12 19 3 31/12/2012 thousand euros 3,073 230 292 568 526 784 826 77 52 79 1 9

Eesti Pank Annual Report 2013 ITEM 28 – SUNDRY LIABILITIES –SUNDRY 28 ITEM abilities. Revaluation accountsrepresent revaluation reserves thatarisefrom unrealised gainsonassetsandli ACCOUNTS –REVALUATION 30 ITEM 11.5 millioneuros of 31.12.2012,meaningthetotalprovision rose to18.3millioneuros. 2012. Theresult asat31.12.2013 isanadditionalprovision of6.8millioneuros from theriskprovision of assets. UndertheaccountingpoliciesofEestiPank,thisriskisdividedoverfiveyearsstartingfrom investment and operations policy monetary fromeuros million 45.7 of risks to exposed be to Pank Eesti showedmethod this 31.12.2013 at ValueAs the method. using probabilityRisk found 95% at with ment of monetary policy operations and investment assets with provisions for five years, using the risk assess Item 29reflects generalrisk provisions. Theaimofgeneralriskprovisions is to coverthefinancialrisks –PROVISIONS 29 ITEM recorded. wereinitiallytransactions the which at eurovalues the comparedto date, sheet balance the currencyon Foreign exchangetransactions are convertedintotheireuro equivalentsatthe average ratefortheforeign Other liabilitiesmainlyreflect thesupervisionfeespaidtoFinancialSupervisionAuthority. Total Gold Derivative instruments Foreign currency Securities Equities Total Other liabilities Credits related tomargincalls Foreign exchangetransactions Loans toemployeesofEestiPank coins Euro coins Estonian kroon banknotes

31/12/2013 31/12/2013 9,766 2,407 6,234 522 603 0 85,474 34,958 41,798 7,501 909 214 33 61 31/12/2012 thousand euros thousand euros 31/12/2012 13,679 82,711 30,862 44,146 3,159 8,234 7,530 651 796 839 70 23 80 0 80 - -

Eesti Pank Annual Report 2013 Changes incapitalandreserves in2013: RESERVES 31 AND –CAPITAL ITEM under “Write-downs onfinancialassets”. The unrealised lossesattheendofyearare recognised intheProfit andLossAccountasexpenses sory Board ofEestiPank. The remaining profit istransferred tothestatebudget. ing andsupplementingfoundation capital andfundsforspecificpurposes,at the decisionofSupervi both statutory and reserve capital. After these allocations, part of the profit can be allocated for establish Under Section 30 of the Eesti Pank Act, at least 25% of the annual profit must be allocated to increasing Total Special Reserve Reserve capital Fixed Capital

31/12/2013 383,917 211,100 100,000 72,817 Distribution ofprofit for2012 25,580 25,580 0 0 31/12/2012 thousand euros 358,337 211,100 100,000 47,237 81 - -

Eesti Pank Annual Report 2013 ITEM 32 INCOME ITEM – INTEREST NET ACCOUNT LOSS ONTHEPROFIT AND NOTES Monetary policyoperations Interest expensefrom minimumreserves Intra-Eurosystem interest expense Monetary income Transfer offoreign currency reserves Allocation ofbanknoteswithintheEurosystem Interest incomeonTARGET2 accounts Monetary policyoperations Intra-Eurosystem interest income Euro depositinterests Current accounts Repurchase transactions Intra-Eurosystem balances Derivative instruments Securities Interest expense Fixed-term deposits Reverse repurchase transactions Current accounts Loans toemployeesofEestiPank Derivative instruments Securities Intra-Eurosystem balances Interest income Net interest income

2013 2013 -11,758 26,459 40,718 28,960 15,171 26,459 -1,232 -1,232 -4,395 -6,007 4,223 9,878 2,904 7,877 -520 -712 492 -58 -66 63 80 15 6 9 0 thousand euros thousand euros 2012 2012 27,134 38,929 29,741 16,971 27,134 -9,188 -1,650 -1,095 -1,650 -2,367 -4,845 2,053 9,506 3,097 6,274 -555 -185 785 -82 -59 15 32 90 99 82 7

Eesti Pank Annual Report 2013 INTERESTS PARTICIPATING AND SHARES EQUITY FROM –INCOME 35 ITEM cludes the distribution of the ECB’s income from euro banknotes and securities purchased under Securi Item 35reflects dividendsfrom thesharesSettlements. Thisitemalsoin ofthe BankforInternational RISK PROVISIONS RISK AND WRITE-DOWNS OPERATIONS, FINANCIAL RESULT OF –NET 33 ITEM ITEM 34ITEM COMMISSIONS AND – INCOME NET FROM FEES Otherfeesandcommissions TARGET2 fees Commissionfees Fees andcommissionsexpenses Fines,arrears andother Current accountsservice fees Fees andcommissionsincome Net incomefrom feesand commissions Provisions forforeign exchangeraterisk,interest riskandcredit risk Other receivables from theIMF Net changeofloanportfoliowrite-downs Derivative instruments Exchange ratewrite-downs Securities Write-downs onfinancial assets Exchange rateprofit/loss Financial assetmanagementcosts Derivative instruments Securities Realised gainarisingfrom financialoperations Net result offinancialoperations,write-downsandriskprovisions

2013 2013 -2,727 -7,192 -6,800 -1,219 -1,416 3,102 2,335 -141 -109 -529 -141 894 900 759 -29 -97 -97 -3 5 0 5 thousand euros thousand euros 2012 2012 -11,500 -1,244 -7,807 1,344 4,375 4,937 -454 -488 -294 -394 -350 -106 860 899 793 -46 -29 -71 39 -6 83 0 - -

Eesti Pank Annual Report 2013 ITEM 36ITEM – RESULT NET OF POOLING OF MONETARY INCOME million euros. At the decision of the Council Governing of the ECB, the ECB distributed its profit in 2013 totalling 1.370 the accountingpolicies). on notes the in ECB” the of distribution profit “Interim (see euros million 3.5 of Programme Markets ties purchase programme are considered to generate income at the latest available marginal rate for the Eu the for rate marginal available latest the at income generate to consideredareprogrammepurchase bond covered second the of implementation the on and2011 November programme3 of purchaseECB/2011/17 Decision under bonds covered the of implementation the on 2009 July 2 of ECB/2009/16 Gold isconsidered togeneratenoincome.Securitiesheldformonetarypolicypurposes underDecision key share. amount of each national central bank’s gold holdings in proportion to each national central bank’s capital limiteda and Eurosystem; the within banknotes euro of allocation the to related claims intra-Eurosystem foreign reserve assetstotheECB;netintra-Eurosystem claimsresulting from TARGET2 transactions;net operations policy denominated ineuros; monetary securitiesheldformonetarypolicypurposes;claimsequivalent tothetransferof to related institutions credit area euro to lending are: assets Earmarkable be pooled. interest paid on liabilities included within the liability base is to be deducted from the monetary income to and net intra-Eurosystem liabilities related to the allocation of euro banknotes within the Eurosystem. Any transactions; TARGET2 from resulting liabilities intra-Eurosystem net euros; in denominated operations sists mainly of: banknotes in circulation; liabilities to euro area credit institutions related to monetary policy nual income that derives from the earmarkable assets held against its liability base. The liability base con an bank’sactual central the national measuring each by of determined amount is The income monetary to EestiPankof42,668,900euros isthenetresult of12,361,948euros inmonetary income. differenceeuros30,306,952 of Pank Eesti by reallocatedpooled that income and monetary the between totalled 2013 in system is allocated among Eurosystem central banks according banks to the subscribed ECB’s capital key. central The Eurosystem the from income 16,676,890,145 euros, monetary which includes the share of of Eesti Pank. The monetary income pooling pooled by the Euro of result net The Adjustment forthemonetaryincomeofprevious year MonetaryincomeallocatedtoEestiPank MonetaryincomepooledbyEestiPank Monetary incomereallocation Net result ofpoolingmonetaryincome

2013 -30,307 42,669 12,362 12,362 0 thousand euros 2012 -35,492 59,874 24,382 24,402 20 84 - - - -

Eesti Pank Annual Report 2013 ITEM 37ITEM – INCOME OTHER expense fortheyearisconsidered intheallocationofmonetaryincome. or income total the and operations refinancing Eurosystem’smain the for rate marginal available latest differencedifferencethe the base, of liability value its the of offsetto value is applying thethe by of short rosystem’s main refinancing operations. Where the value of an NCB’s earmarkable assets exceeds or falls Staff costsare mainly wage costs,includingtaxes. COSTS 39–STAFF ITEM Item 38reflects thelossarising from thesaleofKuressaare real property. EXPENSES –OTHER 38 ITEM Income”. investing their assets. Income from the rent of the training centres of Eesti Pank is forrecorded Pank under Eesti “Rental to Fund Guarantee the by paid fee service the includes management asset from Income of thefixedassetsused. real estateandadministration services.TheFinancialSupervisionAuthoritycoversthedepreciation costs technology,accounting, information with Authority Supervision Financial the provides Pank Eesti Pank. Eesti by provided services support the of cost the of 100% monthly reimbursed Authority Supervision Under the cooperation protocol between the Financial Supervision Authority and Eesti Pank, the Financial Unemployment insurance Compensations andbenefits Social tax Wages Staff costs Other income Compensation forexpensesfrom thechangeovertoeuro Rental income Income from thesaleofcoin metal Income onfinancialassetmanagement Income from thesaleofcollectorcoinsandnumismaticproducts Expenses compensatedbytheFinancialSupervisionAuthority Other income

2013 -7,845 -1,925 -5,758 -106 -56 thousand euros 2012 -7,859 -1,921 -5,736 -128 -74 2013 129 216 476 951 33 72 25 0 thousand euros 2012 1,336 219 118 352 586 42 19 85 0

Eesti Pank Annual Report 2013 ITEM 40 – ADMINISTRATIVE EXPENSES –ADMINISTRATIVE 40 ITEM On average,there were 233employeesatEesti Pankinfull-timeequivalent2013(2372012). interest rateonhousingloansandthepreferential pricefortherent ofthetrainingcentre. Compensation and benefits include pension benefits and fringe benefits tax calculated on the preferential of theEurosystem. assets joint the into went that produced were tender,banknotes the 20-euro Under banks. central area euroother eight with tender joint a through banknotes europrocured its Pank Eesti countries. areaeuro area. The ECB Council Governing sets the amount of euro cash that must be produced each year for the Eesti Pank participates in the production of euro banknotes together with other central banks of the euro 41ITEM – PRODUCTION BANKNOTE SERVICES (762 in2012). with organisations international and financial institutions. There were a total of 761 business trips in 2013 work for and Pank Eesti of behalf on travel business staff of costs the reflect expenses travel Business cam information polls, research paigns, andtheMuseumofEestiPank. relations public databases, online and website public the agencies, informationpublications, events, public of costs the cover publications and relations public of costs The cross-border payments,andmanagementcostsofforeign reserves. The costsoffinancialassetmanagementcomprisethecostmarketinformation,feesandfor Other administrativeexpenses Legal, expertiseandarbitration Communications andtransport representationExternal Training Office Public relations andpublications Economic research Business travel Real estaterenovation and administration Financial assetmanagement Information technologymaintenance Administrative expenses

2013 -4,940 -1,271 -253 -273 -472 -984 -993 -139 -142 -192 -43 -84 -94 thousand euros 2012 -5,160 -1,179 -1,209 -318 -113 -561 -916 -225 -176 -199 -113 -76 -75 86 -

Eesti Pank Annual Report 2013 ITEM 42ITEM – OPERATING OTHER EXPENSES ITEM 43 – DERIVATIVE INSTRUMENTS on thebalancesheetdate(seeItem15). part of the share capital (75%) of the BIS denominated in Swiss gold francs, which totalled 527,923 euros unpaid the for Settlements International for Bank the to liability contingent a has Pank Eesti 1930 Since Settlements Bank forInternational amounted to1.3 millioneuros. 2014in banknotes euro of production the for Pank Eesti of liabilities contractual the 2013, of end the At The production ofbanknotesandcoins 44ITEM LIABILITIES – CONTINGENT Claims Foreign exchangeswapand forward transactions Value ofinterest rateswapcontracts Sale Purchase Value offutures contracts Other expenses Production ofeuro coins Management ofcashcirculation Production ofcollectorcoinsandnumismaticproducts Other operatingexpenses Liabilities Unpaid share capital(75%) ofBIS Contractual obligationstoproduce banknotesandcoins Contingent liabilities

31/12/2013 31/12/2013 184,394 281,309 280,318 2013 1,297 1,825 81,442 79,989 528 -558 -185 -285 -88 0 31/12/2012 31/12/2012 thousand euros thousand euros thousand euros 2012 305,430 265,584 168,491 189,435 191,377 1,793 2,345 -965 -182 -438 -132 -213 552 87

Eesti Pank Annual Report 2013 NCBs changed. the of subscriptions key capital the 2014, January 1 theon area euro of the to Statute Latvia of entry the the and of ESCB, 29.3 article under key capital the of adjustment five-yearly regular the Following 45ITEM – IMPORTANT EVENTS POST-BALANCE-SHEET * Owingtorounding, thetotalmaynotcorrespond tothesumofallfigures shown. Total* Subtotal –non-euro area nationalcentralbanks* Bank ofEngland Sveriges Riksbank Banca NaţionalăaRomâniei Narodowy BankPolski Magyar NemzetiBank Lietuvos bankas Latvijas Banka Hrvatska narodna banka Danmarks Nationalbank Česká národní banka Българска народнабанка Subtotal –euro area nationalcentralbanks* Suomen Pankki–FinlandsBank Národná bankaSlovenska Banka Slovenije Banco dePortugal Oesterreichische Nationalbank De NederlandscheBank Central BankofMalta Banque centraleduLuxembourg Latvijas Banka Central BankofCyprus Banca d’Italia Banque deFrance Banco deEspaña Bank ofGreece Central BankofIreland Eesti Pank Deutsche Bundesbank Nationale BankvanBelgië/BanquedeBelgique (Bulgarian NationalBank) Capital keysubscriptions from 1January2014 % 100.0000 14.1792 17.9973 30.0217 13.6743 69.9783 12.3108 8.8409 2.0332 1.1607 0.1928 2.4778 2.2729 2.6024 5.1230 1.3798 0.4132 0.6023 1.4873 1.6075 0.8590 1.2564 0.7725 0.3455 1.7434 1.9631 4.0035 0.0648 0.2030 0.2821 0.1513 - Capital keysubscriptions until 31December2013 % 100.0000 14.1342 18.7603 30.4419 14.4320 69.5581 12.4570 8.2533 1.9483 1.1111 0.1780 2.4176 2.2612 2.4449 4.8581 1.3740 0.4093 0.2742 0.5945 1.4754 1.4539 0.8644 1.2456 0.6881 0.3270 1.7636 1.9370 3.9663 0.0635 0.1739 0.1333 88 -

Eesti Pank Annual Report 2013 into the ECB’s capital on 1 July 2014 and transferred 8,576,754 euros to the ECB’s foreign reserve assets. rency reserve. Following the adjustment of the capital key, Eesti Pank paid an additional 1,602,101 euros cur foreign the to banks central area euro the of contributions the and ECB the of capital the to states member EU the of banks central the of payments the revaluing for used was key capital adjusted The 89 -

Eesti Pank Annual Report 2013

statistical work of Eesti Pank is part of the official statistics programme. The decree was passed under passed was decree The programme. statistics official the of part is Pank Eesti of work statistical Act clause 34(1), Eesti Pank collects data for monetary, financial and balance of payments statistics. The The decree approves thelistofstatisticalactionsEesti Pankfor2013–2017.UndertheEesti I, RT 11.01.2013, published: (officially 3) programme statistical official the under Pank Eesti of actions statistical of list The 2013 1,No 7January 2013 IN PANK EESTI OF GOVERNOR THE OF DECREES APPENDICES This decree ispassedunderclause354)and5)oftheEmergency Act. circulation ing vitalservices”. cash and vices ser Eesti Pank of 25 January 2013 “List of credit institutions and payment branches of foreign credit of institutions provid of Governor the of 3 DecreeNo in listed institutions the by followed be must circulation,which cash and operation continuous The decree setoutthedescriptionsandrecommendations for forcontinuousoperationsofpaymentservices I, RT 12.03.2013, requirements published: 13)(officially and Descriptions 2013 8March 4, No This decree ispassedunderclause3(3)oftheCredit InstitutionsAct. Finland PLCEstoniabranch. Act Emergency the in clause defined 34 (8) 1) as and 2): services AS SEB Pank, vital Swedbank AS, of Danske Bank providersA/S Estonia branch, as and Nordea banks Bank following the named Pank Eesti I, RT 29.01.2013, published: (officially 12) service avital providing institutions credit foreign of branches and institutions credit of List 2013 January 25 3, No the Credit InstitutionsAct. of (2) 87 clause and Act Pank Eesti the of (5) 14 clause and (2) 2 clause under passed was decree The (TARGET2)”. Trans-Europeana on 2012 December 5 GrossReal-time Automated Expresssettlement Transfer system of ECB the of “Guideline the to changes and rewording the with connection in TARGET2changed were ofpart as Pank TARGET2-EestiEesti the ofby for run services for fees and operation of rules the of Some “Approval 2008 May 9 of I, RT 29.01.2013, published: (officially 1) Pank Eesti of Governor the rules” of TARGET2-Eesti 4 No Decree of Amendment 2013 January 23 2, No I,29.01.2014,1). list (RT tistical actions of Eesti Pank under the official statistical programme”, which sets out a new version of the sta of “List 2014 January 24 of Pank Eesti of decreeGovernor The repealedthe was Decreeof by 5 No clause 16(1)2)oftheOfficial StatisticsAct. 91 - -

Eesti Pank Annual Report 2013 This decree waspassedunderclause91(1)oftheCredit InstitutionsAct. with standingorders, soastoreflect thechangesin theprovision ofpaymentservices. e-invoicesand transfers credit bank SEPA include internet to payments, amended is decreecurrent The I, RT 26.06.2013, published: 2) (officially institutions” bycredit submitted statistics “Payments 2012 January 24 of 2 No Decree Governor’s Pank Eesti to Amendments 2013 18 June 5, No This decree waspassedunderclause93(1)oftheAdministrativeProcedure Act. of15December2010“The procedureGovernor forsendingeuro banknotesandcoinstoEestiPank”. cash areto thoseinthepartconcerning regulated ofEestiPank underDecree No24oftheGovernor may be sent from credit institutions to Eesti Pank, a procedure which has now ended. Similar procedures notes and coins to Eesti Pank”, was repealed. The decree regulated how Eesti kroon banknotes and coins Decree No 15 of the Governor of Eesti Pank Governor of 4 November 2005, “Procedure for sending bank I, RT 28.12.2013, published: (officially 2) sending for “Procedure 2005, Pank” November toEesti coins and banknotes 4 15, No Decree Governor's Pank Eesti of Repeal 2013 December 20 8, No Eesti Pank Act. the of (2) 2 clause and Act Institutions Credit the of (3) 91 clause under passed was decree The of payments. The aim of the reporting is to collect information that is needed for the compilation of the national balance tomers of credit institutions and the deadlines and procedure for submission of the reports to Eesti Pank. This decree sets requirements on the contents and structure for reporting of payments between the cus I, RT 25.10.2013, published: (officially 1) payments of balance the of compilation the for required data of Submission 2013 7,No October 22 sory Board ofEestiPankdated 7May2013. Supervi the of 3-4 No decision and Act Pank Eesti the of (2) 141 clause under passed was decree This seven euros andayearof issueof2013wasissuedintheRepublicEstoniaon7October2013. Under the decree a silver collector coin dedicated to the music of Raimond Valgre with a nominal value of I, 26.09.2013,(RT 4) coins collector of Issue 2013 September 20 6, No 92 - - -

Eesti Pank Annual Report 2013 This decree was passed under clause 141 (2) of the Eesti Pank Act and decision No 3-4 of the Super- the of 3-4 No decision and Act Pank 141Eesti the clause of (2) under passed was decree This of Estoniaon9January2014. Games in Sochi with a nominal value of ten euros and a year of issue of 2014 was issued in the Republic Under the decree a silver collector coin for the Estonian delegation and athletes to the XXII Olympic Winter I, RT 28.12.2013, published: (officially 3) coins collector of Issue 2013 December 20 9, No visory Board of Eesti Pank dated 7 May 2013. 7May dated Pank of Eesti Board visory 93

Eesti Pank Annual Report 2013 Appointment of the internal auditor Appointment oftheinternal 2013 2-1,No 5March for grantingconsumerloanstoemployeesofthebank. conditionson 2001 December 18 of Pank Eesti of Board Supervisory the of 11-3 No decision of Repeal 1-1,No 2013 15 January 2013 IN PANK EESTI OF BOARD SUPERVISORY THE OF DECISIONS Approval of the work schedule for 2014 of the Internal Audit Department of Eesti Pank of Eesti Department 2014 for Audit Internal schedule of the work of the Approval 2013 8-1,No 17 December AuditDepartmentofEestiPank Amendment oftheworkschedulefor2013Internal 2013 3September 5–1, No Appointment ofamembertheSupervisoryBoard oftheFinancialSupervisionAuthority 4-1,No 11 2013 June Approval ofthedesignsand nominalvaluesofcollectorcoins 2013 7May 3-4, No Eesti Pankprofit distribution for2012 2013 7May 3-3, No Profit distributionstrategy of EestiPank 2013 7May 3-2, No Eesti PankAnnualReport2012 3-1,No 2013 7May 94

Eesti Pank Annual Report 2013 virtual libraryinEstonianonly, whichlinkstootherlibrariesofeconomicstexts. a is there addition, In database. statistics comprehensive a also is Theremore. much and euro; the and guidelines for collectors; Eesti Pank’s press releases and publications; information on the European Union including coins, and banknotes Estonian on information legislation; banking on information features also Pank anditsactivitiesontheEstonianmonetarysystem,economyfinancialenvironment. It Eesti on information contains website www.eestipank.ee.The is website Pank Eesti the of address The 2013 IN PANK EESTI OF PUBLICATIONS Estonia’s Balance ofPaymentsYearbook 2012 of 2013 Quarter Third the for of Payments Estonia’s Balance of 2013 Quarter Second the for of Payments Estonia’s Balance of 2013 Quarter First the for of Payments Estonia’s Balance 2012 for of Payments Estonia’s Balance 2013: in published Issues debt.Itcontainsawealthofstatisticaldata. national investmentpositionandexternal reviewa gives payments of Estonia’sbalance of The foreign country’sthe including activities, trade inter position investment international the and payments of balance The Financial StabilityReview2/2013 1/2013 Review Stability Financial 2013: in published Issues of Estoniancompaniesandhouseholds,related risks,financialmarkets,paymentsystems,andsimilar. behaviourfinancial the examines it and releasedyear is a Review twice Stability Financial Pank Eesti The Review Stability Financial Four economicpolicystatementswere released in2013. press releases andare usuallyalsopresented atapress conference. cerning economic and banking policies. The statements are available on the bank’s website, published as The statements provide prompt and concise opinions of the central bank on the most relevant issues con Economic policy statement of Eesti Pank and alistofthepublicationsyear. Eurosystem, a list of decrees of Eesti Pank and the decisions of the Supervisory Board, of the Governor the financial statement. It also reviews the economic and financial environment, decisions adopted by the The Annual Report gives a review of the central bank’s activities and results during the reporting year and Report Annual 95 - -

Eesti Pank Annual Report 2013 Estonian EconomyandMonetaryPolicy2/2013. 1/2013. Policy Monetary and Economy Estonian 2013: in published Issues review andaneconomicforecast. economic thorough a presenting publication biannual a is Policy Monetary and Economy Estonian The forecast and state current Policy: Monetary and Economy Estonian Labour MarketReview2/2013 1/2013 Review Market Labour 2013: in published Issues sues. is related other and market, labour the in developments institutional costs, labour demand, and supply labour market, labour Estonian the in trends important most the discusses Review Market Labour The Review Market Labour • • • • • • • • • 2013: in published Issues in Englishonly. publishedareoften papers the and experts, economic and economists all, above is, papers working the The working papers are summaries of the economic studies conducted at Eesti Pank. The target group of Working Papers Shocks viaHeteroskedasticity: aBayesianApproach. Policy Monetary Netšunajev.Identifying Kulikov,Aleksei Dmitry 9/2013: Papers Working Pank Eesti Estonia. for Model DSGE AMarkov-Switching Economy: Open a Small in Premia Risk Time-Varying and Crises Financial 8/2013: Blagov. Papers Boris Working Pank Eesti mission in Estonia. 7/2013:Trans Policy Papers Eesti Pank Working Euro Monetary Area Uusküla. Lenno Errit, Gertrud Estonia. from Evidence Income. Business with holds Eesti Pank Working Papers 6/2013: Merike byKukk, Karsten Staehr. House Income Underreporting 2000–2012. Europe in Functions Reaction cal 5/2013: Papers Eesti Pank Working and Fis Staehr. Debt Crisis Karsten Baldi, Guido European The Effects its and Protection Reallocation. Employment Labour on of Relaxation Malk. Liina 4/2013: Papers Working Pank Eesti Tune? Own to its –Dancing Crisis Debt Sovereign European the During Rate Exchange Euro The Uusküla. Lenno Strasky, Jan Osbat, Chiara Ehrmann, 3/2013: Michael Papers Working Pank Eesti Julián Lawless, Martina Kosma, Firms. European from Evidence Theodora Survey Wages: Cutting Avoid Tairi Firms Why Rõõm. Caju, Messina, Du Philip 2/2013: Papers Working Pank Eesti Baltic Countries. the in Adjustment Economic Randveer. Martti 1/2013:Hansson, Ardo Papers Working Pank Eesti 96 - - - -

Eesti Pank Annual Report 2013 Lending Review 2013: in published Issues cial accountsanalysisandcredit supplyanddemand.Thereview ispublishedonceayear. The review of financing and lending in the non-financial sector covers banking and leasing statistics, finan Lending Review Estonian currency from themarktoeuro. EestiPank.2013.Updatedversion publications Other Estonian CompetitivenessReport 2013: in published Issues indicators forrelative prices andcosts. pacity using relative productivity growth, changes in export indicators and similar, and of competitiveness indicators for competitiveness. Competitiveness is assessed through assessment of Estonian export ca of groups widely-used several considers issue each and ways different several in analysed be can ness fromstarting Competitive year 2013. a once Report Competitiveness Estonian the publishes Pank Eesti Report Competitiveness Estonian 97 - - -

Eesti Pank Annual Report 2013 setting additional capital or other requirementssector.other financial or the reducecapital in to additional risks setting alsowill Pank Eesti for use will Pank Eesti that defined be to proceduresneed and criteria clear that means This Estonia. in institution supervisory financial macro the as act to mandate clearer a have will Pank Eesti 2014 From area euro thein supervision banking single and supervision financial 1. Macro 2014–2018 FOR PANK EESTI OF FOCUS STRATEGIC ing CounciloftheEuropean CentralBank. Eurosystem, and the of Governor Eesti Pank is jointly responsible with the other members of the Govern the of decisions the all for area euro the of banks central other the with responsible jointly is Pank Eesti Eurosystem the of decisions the for Pank's responsibility Eesti 3. analysis, anddisseminationofknowledgeaboutcentralbanking andtheeconomy. includes This society.explanations ofthe key trends indevelopment,presentation ofeconomicforecasts and research for and and bank the for important are that discussions leads and starts Pank Eesti anda constructivecriticwherepartner forthegovernment necessary. Estonia-based joint research andwork so international as to in ensure part the quality takes of Pank the analysis. Eesti Eesti given. Pank must be be a can trusted advice sound that so safeguarded be analysis of neutrality political and quality,independence the that important is sustainability.It fiscal and competi tiveness supervision, financial macro be will years coming the in research and analysis for topics key andgrowingare analysis its of breadth the and bank the of role The euroarea. the of processes making decision- and analysis the in role active an play stability.Pank financial Eesti fromassesses Experts and Eesti Pank analyses and explains developments in the economy, writes an economic forecast for Estonia public the and government the to advisor active and atrusted as Pank Eesti 2. is notresponsible formacro financialsupervisioninalloftheneighbouringcountries. bankcentral the and supervision, banking single coveredby be probablynot will that countries in based areEstonia in operating banks of parentbanks the of several because moreurgent made is changes for macro financialsupervision andtheprinciplesofcooperationforpreventing financialcrises.Theneed and banking both covers This partnership. international Nordic-Baltic of framework the in done be will Eesti Pank's work with the other central banks, supervisory bodies and ministries of finance in our region Supervision Authority. Financialthe morewith work closely to have will Eurosystemroleit the Pank's means in Eesti Estonia. in supervision banking of implementation the of success the ensure to need will Authority Supervision cial Finan the area,euro the of banks the supervising in Bank Central European the of tasks new the Given been thecasebefore now. nancial sector and more focused and specific measures that will be taken to mitigate those risks than fi has the to risks the of assessment bank central the review stability financial regular its in publicly explain 98 - - - -

Eesti Pank Annual Report 2013 4. The evolving role of Eesti Pank in organising the circulation of cash of circulation the organising in Pank Eesti of role evolving The 4. facing theEurosystem. abroad. The limits and to its Estonia own within resources mean partners that with Eesti Pank relations focuses on good the maintains most important and topical issuesstaff of skills professional the enhances work, research high-level out carries Pank Eesti this, Toachieve topics. important on takes it positions the and areaeuro the of policies the affect can that areaeuro the in partner good a be must Pank Eesti environment. workingefficient and secure a maintain to innovations technical of use make to Pank Eesti for important As the work of a central bank relies on an information technology system that functions without error, it is of newrequirements. the organisation to adapt its work and its processes in a constantly changing environment and in the face of capacity the ensure to is aim The tasks. additional on taking when resources limited use to way best the about choices make to ready be must Pank Eesti Eurosystem, the in bank central smallest the As successful role in defining policy and advising the government and the public, and a in play all can its Pank other Eesti functions. that means development Staff employee. each of responsibilities important most the of one as skills of enhancement the treating and this for resources sufficient allocating knowledge, and skills staff of development the supports and culture organisational its improve to works Pank Eesti together, and well-trainedprofessionally. work to keen motivated, are staff if goals its achieve and work its in succeed to able only is Pank Eesti 5. A developing organisation Estonia, andsteadilyremoves thenotesoffirstseriesfrom circulation. incirculation into smoothly releasedare they sure makes area,euro the of banks central the of plan and timetable joint the with accordance in publicly series second the of banknotes new the presents Pank circulation tocoverEstonia's needs,andthatthecashreleased intocirculation is ofsufficient quality. Eesti The main objective for Eesti Pank in organising cash circulation is still to ensure there is sufficient cash in working withmarketparticipantsandexchanginginformation. environmentbyEuropeanpayment the with retailmarket local the of integration the supports Pank Eesti Pank will continue to operate the TARGET2-Eesti settlement system for express cross-border euro payments. Eurosystem.Eesti the of member a as bank central the by operated and owned be will which securities, for platform TARGET2-Securitiessettlement the of launch the by challenges new with faced be will Pank Eesti make paymentswithoutinterruption. cancustomers bank that so Eurosystem,and the of transactions policy monetary the in participating for environmentoperational an have can banks Estonian that so necessary is This Pank. Eesti for important Work inthedevelopment,supervisionandoperationofeuro area settlementsystemsisevermore 99

Eesti Pank Annual Report 2013 Layout: Urmas Raidma Urmas Layout: Kell Kaja Editor: 1406-1414 ISSN e-mail: [email protected] +372 954 6680 fax: +372 998 Phone: 6680 Pank Eesti of Subscriptions for publications www.eestipank.ee Website [email protected] E-mail 836 6680 +372 Fax 719 6680 +372 Phone 15095 Tallinn 13 pst Estonia Address © EestiPank,2014 100

Eesti Pank Annual Report 2013