Bank of Estonia chief: We will back up commercial banks

Bank of Estonia governor Madis Müller.
Bank of Estonia governor Madis Müller. Source: ERR

The European Central Bank is standing behind banks needing to lend to companies or otherwise make funds available to mitigate the economic effects of the coronavirus pandemic, Madis Müller, Governor of the Bank of Estonia, says.

"Decisions made by the European Central Bank on Thursday were aimed at bolstering the financial system, and the banks having available loan money they could offer companies," Müller, who had just returned from a European Central Bank (ECB) governors' council meeting, told ERR Friday morning.

"As a central bank, we stand behind the [commercial] banks, in order to keep them in good shape," Müller said, adding that significant grace periods will be available for customers who need them.

As for the economic outlook, Müller said that the current economic forecasts could be pretty much ripped up.

"Forecasting is currently a thankless task. The current forecasts are no longer valid," Müller said. 

"But at the same time, it cannot be ruled out that by autumn, the economy will have recovered," he continued.

"It is appropriate for the government to take care of problems that arise in certain sectors, and not to let them become longer lasting, leaving companies to go bankrupt," Müller continued.

"We hope these problems are temporary."

Actions should be precisely targeted and rapid, as developments are also moving very quickly, he added.

"The risk is that companies which are rapidly losing revenue - hotels and restaurants and cultural institutions - may have trouble paying their employees, but we don't want people to lose their income, so the decision has to be quick," Müller said.

The government could also weigh up think of additional loan guarantees, Müller said. 

"As for person-to-person measures, options that would reach those in need quickly, such as those who fall sick, could also be considered," he said.

"Principally, it makes sense to focus on those who are most affected. There is no money on the table," Müller responded to a question as to whether the central bank would itself make handouts if needed.

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Editor: Andrew Whyte

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