Strategic objectives of the Estonian Banking Association for 2020-2022

In 2020-2022, Estonian banks will make it their main goal to contribute to the rapid and sustainable recovery of the economy from the global economic crisis caused by the novel coronavirus. The rapid response in spring 2020 allowed Estonia to ease its economic contraction and provided a good footing for using various measures to support a smart economic recovery. Every crisis offers an opportunity to bring forth changes and speed up reforms. It is important for Estonia to make the right choices in recovering from the crisis and taking our economic development to a new level.

For the economy to recover rapidly and sustainably, our approach to managing the crisis has to keep an eye on the distant future as well. We must look for ways of contributing to sustainable growth not only tomorrow and the day after tomorrow, but five or ten years down the road. 

The prerequisite for a rapid and effective economic recovery is the skilful management of risks, adoption of sustainable economic practices and increasing innovation.

Avoiding overreactions – a calm and stable exit from the crisis

To allow the economy to recover quickly, we must take reasonable steps to managing the crisis without undue restrictions, offering flexible measures for those in difficulty and ensuring sufficient financing. In the years ahead, Estonian banks will devote increased attention to three topics to keep banks from slowing the economic recovery:

1. Regardless of the phase of the economic cycle, we will continue to finance new projects to inject new capital into the Estonian economy. At any given time, there are strong business ideas on the market that need support from banks to become a reality. We will support healthy competition in financing these projects. In cooperation with state institutions (ministries, Kredex, Rural Development Foundation, Enterprise Estonia etc.) we will seek ways of supporting economic recovery, including solutions to potential market disruptions. The management of the Banking Association regularly monitors the amount of money invested into the Estonian economy and changes to it.

2.  In cooperation with clients, we will help to resolve their payment difficulties in a responsible manner. Estonian banks issue loans knowing that they are prepared to support clients, should payment problems arise. In cooperation with clients, banks help to find appropriate solutions that are sustainable in the long run. Payment moratoria will have an important role in exiting the crisis. They allow companies and families to return to financial stability faster with less risk of social problems piling up. The board of the Estonian Banking Association regularly monitors the percentage of problem loans and loans with payment moratoria in banks’ loan portfolios. If necessary, we will consider instituting measures for supporting clients across different banks (based on the European Banking Authority guidelines) similarly to the rules for granting payment moratoria established in the spring of 2020.

3. It must be easy to open and use a bank account in Estonia. We will make sure that all inhabitants of Estonia are guaranteed easy access to everyday banking services. At the same time, the systems in use must not increase risks for exploitation of the Estonian financial sector and money laundering. For that reason, we support the establishment of a mechanism for settlement of disputes at the Financial Supervision Authority that would help resolve potential disagreements over refusals to open a bank account and account closures. The board of the Banking Association regularly monitors the number of new active bank accounts added, as this is an indicator of economic development.

Sustainable growth – raising awareness, compassion and trustworthiness

For the Estonian economy to be able to make a sustainable recovery from the crisis, we have to take the quality of economic growth to a new level. We need to start today by working toward a more secure and stable future. Estonia’s banks are devoting special attention to three topics in order to ensure sustainable development that will shape our future:

1. Banks support the transition to the green economy. A more sustainable approach to the environment is an important topic throughout the world, including in Estonian society. Instead of being a factor that limits economic growth, environmental conservation activities are becoming an engine for growth, and support from banks for implementing these changes is very important. We support the broader adoption of the UN’s Principles for Responsible Banking in the Estonian banking sector. We support the country’s progress toward climate neutrality by 2050. We will assist Estonian households and companies to make the green transformation an economic success story for them. We consider it important that banks play an active role in collection of data related to environmental impacts of companies and individuals and use of the information in lending activity and advisory services. We engage in cooperation with other advocacy organisations to raise environmental awareness.

2.  Inhabitants of Estonia must be better protected against bad financial decisions and cybercrime. Banks consider it important to support long-term saving and growing a monetary buffer. People have a greater responsibility for saving for their retirement. There is also an increasingly wide array of possibilities and options for doing so. Banks are making efforts to offer financial education: people need to be able to ask themselves and service providers the right questions so that terms and conditions would be understood equally well by all parties. We will continue promoting financial literacy in schools and among our clients. We also devote attention to cyber security to reduce the number of people and companies who fall victim to fraud and raise awareness of the risks of the cyber world. As part of the fight against cybercrime, we organise cyber security campaigns.

3. We will raise the trustworthiness of the sector by practising responsible banking. In recent years, new revelations have dealt a blow to the reputation of Estonian banks. The adverse events are due to undervaluation of risks and working in isolation in the previous decade. Our goal is to increase market-wide cooperation and exchange of information that would meet today’s needs and standards and ensure that criminal money would not have inroads into our financial system. Estonian banks support the implementation of a modern management culture and consider it important to observe uncompromising ethical standards in their operating activities. The Estonian Banking Association contributes to the creation of sector-wide standards for processing of personal data. 

More innovative thinking, less bureaucracy

For the Estonian economy to enjoy stable growth, we have to look for ways to do things better, faster and wiser. Estonian banks will devote increased attention to three topics in order to find innovative solutions for eliminating obstacles to economic development:

1. We will make exchange of information between state, clients and banks faster and more convenient. Improving exchange of information helps to reduce bureaucracy, makes it less of a burden to conduct business for clients, and allows innovative services to be brought to market. Banks want to make exchange of information more efficient through the following steps:

1.1. Making state-collected data more available from existing registers and creation of a registry of publicly exposed persons would relieve clients of the burden of having to update information repeatedly, and this is important for money laundering countermeasures.

1.2. We support initiatives that help clients to more easily update their own data and allow them to get up-to-date information about their business partners.

1.3. We support the creation of a positive client registry, as this will contribute to responsible lending and make the loan issuing process simpler for clients and banks alike.

1.4. We seek possibilities for cooperating with companies who offer innovative technological solutions for improving exchange of information and cooperation between banks to mitigate the risks of money laundering. The top example of such an initiative is the Estonian banks’ pilot project “AML Bridge Estonia”, taking place in cooperation with the start-up Salv.

2. In cooperation with the state, we will remove obstacles to financial innovation and create new products. The Emergency Act (HOS) requires updating, as it currently does not take into account the use of cross-border products and services and cloud-based solutions in the financial sector, although these are already standard. Also in cooperation with the state, we also want to introduce other products that broaden the possibilities for young families with many children to buy a home outside large cities. Buying a home is still complicated for many due to self-financing requirements. Estonian banks together with the Estonian state are looking for ways to replace self-financing with state support, while ensuring that responsible lending principles are followed.

3. We will continue jointly developing payment services, and the next step is to develop request-to-pay type acquiring services for individuals and companies.  This instant-payment-based mobile payment solution will broaden cashless settlement possibilities and offer an alternative to card payments. We will also take steps to enable wide implementation of e-Receipt.

At its monthly meetings, the board of the Banking Association ensures that sector-wide focus topics remain at the centre of attention for Estonian banks. In this way, we will ensure that banks support people and companies looking to make a rapid and stable exit from the economic crisis; and take needed steps for making the future of the Estonian economy and banking sustainable and the work of the banking sector up-to-date and trustworthy.

The 11 standing committees and 9 working groups at the Banking Association – which include representatives from the member banks – will start dealing with the abovementioned priorities.
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Founded in 1992, the Estonian Banking Association is an umbrella organisation of Estonian banks. The 10 member banks employ close to 5,000 people, serve 2.3 million clients and hold 31 billion euros in assets, of which 19 billion euros are loans financing the Estonian economy. The main goals of the Estonian Banking Association are to develop Estonian banking and coordinate the joint activities of the member banks. The Estonian Banking Association is a member of the European Banking Federation and an associate member of the European Payments Council.