Outgoing Bank of Estonia governor: Bank had a good year

Outgoing Bank of Estonia Governor Ardo Hansson.
Outgoing Bank of Estonia Governor Ardo Hansson. Source: ERR

Outgoing Bank of Estonia Governor Ardo Hansson said that 2018 had been a good year for the central bank, highlighting the improvement of the availability of cash and the spread of instant payments, BNS reports.

In a presentation to the Riigikogu on Tuesday, Hansson, who is to be replaced by Madis Müller, said the availability of cash has particularly improved in rural areas, noting there are 380 new points issuing cash across Estonia. In addition, Hansson mentioned the more widespread use of instant payments as a positive thing.

According to a freshly-published Bank of Estonia report for 2018, quoted by BNS, the central bank issued €970 million in cash and a total of 25.6 million banknotes to banks, in 2018.

The net profit at the Bank of Estonia rose from €4.3 million in 2017 to €13.9 million last year. At the end of March 2019, the central bank announced that it is to transfer €3.5 million, around a quarter of its profit, to the state budget.

The Bank of Estonia's net interest income rose to €28.3 million in 2018, from €20 million the year before. The main portion of interest income came from the excess reserves of Estonian credit institutions and securities kept for the purpose of monetary policy, according to the annual report.

A large part of 2018's investment income came from the realization of the share portfolio at the beginning of the year. The prices of risk assets, including shares, declined by approximately 10 percent in the uncertain economic environment last year, and the figure was reportedly even higher in Europe. At the same time, the interest rates of bonds rose modestly, and the results for bond portfolios were positive last year overall.

Portfolio volume increased by foreign currency bonds

In 2018, more government bonds in foreign currency were purchased, hence the portfolio volume increased noticeably. The net income at the Bank of Estonia was increased by the net result of the cash income of the euro system to the amount of €7.4 million, and income from shares and holdings to the amount of €6.9 million, including the distribution of European Central Bank (ECB) profits in the amount of €4 million.

The Bank of Estonia's main activity expenses declined by €100,000 euros on year to €19.7 million in 2018. Larger expenses were made on salaries, cash production and information and communication technology (ICT).

The central bank's capital was reported at €463.7 million as of Dec. 31, 2018.

A year before that, on Dec. 31, 2017, the provision for foreign exchange, interest rate, credit and gold price risks amounted to a reported €45 million. In 2018, the Bank of Estonia transferred €26.8 million to provision. As a result of this transfer, risk provision increased to €71.8 million.

Hansson stepping down in June

Hansson is currently a member of the Governing Council at the ECB and seen as one of the top candidates to succeed current ECB president Mario Draghi. He will remain in office through June 6.

Müller, who has served as deputy governor since 2011, will then take over as head of the central bank on June 7, and will be the sixth governor of the Bank of Estonia since the country regained its independence from the Soviet Union in 1991.

Editor: Andrew Whyte

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