Banks, Estonia, Financial Services

CEO of Nordea Estonia Vahur Kraft stated that as compared to the end of August, when the previous reserve requirement of 15% was valid, after the reduction of the reserve requirement nearly 20 billion kroons should be released till the end of the year. When Estonia joins the euro area, the reserve requirement should decrease by another 15 billion kroons at least, he said.

Kraft said that Nordea has not had problems with availability of loans so far and thus it won’t affect its loan supply. In the second half of 2010, Nordea has increased the volume of loans issued to customers by 4% in the year-on-year comparison.

SEB Board Chairman Riho Unt said that SEB’s reserve requirement decreases by January 1 gradually by around 500 million EUR. "Even during the steepest of economic falls, no project was delayed due to the shortage of funds,” he said.

Unt said that SEB Pank intends to use the funds that will be released from the obligatory reserve to reduce its obligations to the parent bank due to the lower loan demand. “Naturally we are always open for new business,” he said.

Swedbank Eesti Finance Director Heiki Raadik confirmed that due to the lower reserve requirement of the central bank, Swedbank keeps less money in the central bank. "The internal liquidity reserve requirement of Swedbank is higher than the 15% that was the valid rate of Eesti Pank so far and thus the reduction of the central bank reserve requirement does not change in essence anything – Swedbank will invest most of the money that is freed from the central bank in liquid bonds, the rest goes to the interbank lending market,” explained Raadik.

Jaak Tõrs, Eesti Pank Financial Mediation Department Head: “From January to August this year, the account balance of banks at the end of the month has fluctuated from 22 billion to 27 billion EEK. Banks behave in different ways. Some banks reduced the account more and other less. The central bank does not determine how much a specific bank reduces the account balance. The aim of Eesti Pank is that the banks fulfil the obligatory reserve requirement as the average of the month.”

The obligatory reserve requirement fell from 15% to 11% on September 1, and to 7% on November 1. Starting January 1, 2011 the reserve requirement for obligations with duration of less than 2 years is 2% and for obligations longer than that 0%.