Even though the Europe-wide Euribor interbank offered rate has grown and people's loans become more expensive as a result, Swedbank customers do not seem to be experiencing payment difficulties, not to mention there being a panic, Lepp suggested.

"Things are very calm still. As long as unemployment remains in check, people will continue to perform their [financial] obligations. Therefore, I would be reluctant to talk about any kind of panic today. People haven't even been requesting payment holidays. There is none of that today – no arrears and no applications for deferring payments. What we can see is that new loan applications are down over the last four to six weeks. My colleagues informed me that this week has been slightly more active again."

Lepp suggested that changes on the real estate market have also been less drastic than what has been suggested in the media, while developers who have borrowed heavily might miss out on expected profits.

"Looking at Scandinavia, prices are down there too – by 10 percent, and there is even talk of 20 percent. That said, if we then look at it historically, we have gone back just one year in terms of the price level – how much of a problem can we really say a slight price adjustment is," Lepp remarked.

The Swedbank CEO also said that banks carefully consider applicants' credit worthiness before issuing loans.

Lepp added that people tend to overestimate the importance of luxury apartments selling for €4,000-5,000 per square meter. "Most transactions involve second-hand flats."

Pressure on salaries still strong

Because unemployment hasn't really exploded in Estonia, this has a continued effect on salary pressure.

"Pressure on salaries remains strong. Employment is still strong. Unemployment has gone up slightly, by 5,000 since this fall to land on 50,000, but these are still small numbers – we have over 600,000 people employed. The pressure on employers will ease only once the labor market has more free hands," he said.

The bank executive said that the situation is worrying in some sectors of the economy, such as forestry.

"The processing industry plays a major role in our export and we must take care of it. In terms of different parts of it, the timber industry and forestry, and how we treat one of our greatest resources. It was down in November [exports] – 12 percent in industrial volume. The timber sector contracted by 22 percent on year. Companies need to adjust to lower volumes, meaning fewer hands are needed. A snowball is slowly gathering momentum there," Lepp offered.

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