At today’s sitting of the Riigikogu, the President of Eesti Pank Ardo Hansson presented the 2015 Annual Report of Eesti Pank, and the Chairman of the Management Board of the Financial Supervision Authority Kilvar Kessler made a report on the 2015 Annual Report of the Financial Supervision Authority.

The President of Eesti Pank Ardo Hansson said that worrying signals can be seen in the Estonian economy, although the situation of the labour market and retail sale is good. “Salaries are growing, employment is high, the unemployment rate is low and there is no inflation. This means that real salaries are growing, and all this is manifested in a very rapid growth of retail sale,” Hansson said.

In Hansson’s opinion, investments, profitability, export and productivity cause concern, however. “A discord that we definitely underline the most is that currently there is an imbalance between wage growth and productivity growth,” Hansson stressed.

Hansson said that Eesti Pank is looking into the future relatively optimistically. “A soft landing is possible, where the growth of salary will take a downward turn. At the same time, if global economy will do better, if our productivity will grow, then our nominal economic growth may speed up. And so this imbalance will disappear and we will be able to find a new balance point again,” Hansson said.

Hansson explained that Estonia has the potential to invest more. “At present, our productivity is around 65% of the European average, and it can definitely be increased. There are 40% less machines and equipment measured in euro per employee in Estonian enterprises than for example in Germany or Finland,” Hansson said.

Hansson highlighted the establishment of a macro-financial supervision toolbox in last year’s work of Eesti Pank. Four measures have been established within this framework: a systemic risk buffer, a counter-cyclical capital buffer, the requirements for housing loans, and the capital buffer for ‘systemically significant banks’, due to be implemented as of 1 August. “We have defined two systemically significant banks in Estonia – Swedbank and SEB Bank. We are going to set slightly higher capital requirements for them than for smaller banks,” Hansson said.

Andres Ammas from the Free Party Faction, Aivar Sõerd from the Reform Party Faction and Kalvi Kõva from the Social Democratic Party Faction took the floor on behalf of factions during the debate.

Andres Ammas said that, in the opinion of the Free Party, the Estonian economy is in stagnation and the Estonian Government lacks ideas. “We have an experience from last autumn where, in budget discussions in this hall, the members of the Free Party Faction drew attention to the Government’s over-optimism, but questions on this issue were not taken very seriously,” Ammas said.

In Aivar Sõerd’s opinion, the Estonian economy is actually close to its potential development or potential growth at the moment. “Bonds can come under discussion when we have a bad economic situation and economic growth is below potential; at present, however, unemployment is very low. As President of Eesti Pank also stressed, the state budget is doing well at present,” Sõerd said.

Kalvi Kõva highlighted that, within the framework of the state budget strategy, the Government has directed eight million euro into the funding of research in 2017 to stimulate economic growth. “In our opinion it is a very big step towards achieving sufficient funding for our research, and that the funding of research would also result in tangible economic growth in the coming years,” Kõva said.

The Chairman of the Management Board of the Financial Supervision Authority Kilvar Kessler gave positive assessment to the state of the Estonian financial sector in the last year. “In 2015, there was an increased interest in entering the regulated financial market of Estonia, either with application for an activity licence or acquisition of an enterprise or a qualifying holding. Some financial intermediaries changed their strategy for operating in the Estonian market,” Kessler said.

He added that the volume of loans granted by credit institutions had grown and the quality of loan portfolio had stayed at a good level. The amount of deposits had increased. The proportion of non-resident customers in the whole customer base had moved towards a reduction. Investment funds had grown mainly as a result of the growth of mandatory pension funds. Indicators of the insurance sector had been generally good.

In Kessler’s opinion, the Estonian supervision has been relatively conservative when establishing additional capital requirements imposed on banks for covering risks. He explained that, in addition to the standard of automatic capital, the supervision has imposed additional capital requirements amounting to a total of EUR 132 million on big banks, and a total of EUR 62 million on small banks, for covering risks. “This way, some smaller banks have survived the realisation of a large risk so that insolvency has been avoided. Estonian depositors actually do not remember a time when they have lost their deposits because of the bankruptcy of a bank, or when taxpayers’ money has been spent on saving banks,” Kessler said. He added that such a situation has not emerged of itself but as a result of a joint responsible contribution by the market, the supervision and the legislator.

Kessler said that, in the euro area banking supervision system, the Financial Supervision Authority attaches importance to sound conservatism in dealing with risks, a consistent approach to similar situations, and an open, respectful dialogue with the market and partners. “I believe that the current financial stability of Estonia is a good example for the new banking supervision of the euro area,” Kessler said.

One Bill passed the first reading in the Riigikogu:

The aim of the Bill on Amendments to the Political Parties Act (208 SE), initiated by the Estonian Conservative People’s Party Faction, the Pro Patria and Res Publica Union Faction, the Estonian Free Party Faction, the Social Democratic Party Faction and the Estonian Reform Party Faction, is to ensure general reliability of persons in the membership of the Political Parties Financing Surveillance Committee. According to the Bill, persons who have been punished for an intentionally committed criminal offence or who have been punished for an intentionally committed offence against the state cannot be members of the body entitled to verify the legality of the funding of political parties. Nor should the committee include members who have been deprived of the right to operate in such area of activity.

Member of the Riigikogu Kalvi Kõva said that new provisions of the section concerning the surveillance of the financing of political parties had been added in the Bill. “The following person cannot be a member of the committee: first, who has a criminal record for an intentionally committed criminal offence; second, who has been punished for an intentionally committed criminal offence against the state, regardless of the deletion of the information concerning punishment; third, who has been deprived of the right to work in a particular post or to operate in a particular area of activity by a court judgement which has entered into force,” Kõva said.

The first reading of a Bill was adjourned in the Riigikogu:

The Apartment Association Dispute Resolution Bill (187 SE), initiated by the Estonian Centre Party Faction, provides for the procedure and conditions for the resolution of apartment association disputes between a member of an apartment association and the apartment association. The Bill provides for the establishment of apartment association dispute resolution committees in local governments. Apartment association dispute is a private law dispute arising from activity or inactivity of an apartment association. Such disputes can be disputes concerning the repeal and the establishment of nullity of a resolution of the general meeting, a refusal of the apartment association board to disclose data concerning the activities of the apartment association or a refusal to allow an entitled person to examine the documents of the apartment association, problems arising from inadequate taking of minutes of meetings, and vagueness in the use of the funds of the apartment association.

The first reading of the Bill was adjourned due to the end of the working hours of the Riigikogu and it will be resumed at Wednesday’s sitting,

Verbatim record of the sitting (in Estonian) 

Photos of the sitting

Video recordings of the sittings of the Riigikogu can be viewed at https://www.youtube.com/riigikogu

(NB! The recording will be uploaded with a delay.)

Riigikogu Press Service
Kati Varblane
T: 631 6353, 516 9152
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Questions: [email protected]