While developments in Latvia are being closely observed, Estonian banks are not substantially connected to ABLV Bank, one of Latvia's largest commercial banks which is currently facing financial problems, according to the Estonian Financial Supervision Authority.
"Estonian banks are well-capitalized and stand on a strong financial basis," the Financial Supervision Authority said.
The authority has been keeping an eye on Estonian banks that focus on serving risky non-residents since 2014, and it has been directing the sector to acknowledge risks and implement necessary risk control.
"This has resulted in the share of non-residents falling from 20 percent to 11-12 percent," the authority noted, adding that it is closely following the developments in Latvia.
"Estonian banks are not substantially connected to ABLV," the watchdog explained. "This means that the latter's financial risks will not be transfered over to Estonia."
The European Central Bank (ECB) on Monday froze all payments by ABLV, whose financial position deteriorated after the U.S. Department of the Treasury last week imposed sanctions on the Latvian bank for its alleged role in money laundering schemes.
Editor: Aili Vahtla