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Financial Stability Review
23/10/2013

1
Key points

2 2
Increased economic activity has reduced
uncertainty in the international financial
environment
Economies are recovering mo...
Money market rates have remained low in
the current monetary policy environment

Source: EcoWin

4
The strong confidence shown by the markets
thus far has given Nordic bank groups good
access to financing and stable price...
A high debt burden among households
and rapid growth in real estate prices have
emerged as the major risks to financial
st...
The slowdown in the economy has not
affected the solvency of Estonian companies

Sources: Krediidiinfo, Eesti Pank
7
The risks to the solvency of households
have been reduced by the low level of
EURIBOR and by favourable
developments in th...
Real estate prices have risen faster than
nominal GDP

Sources: Statistics Estonia, Estonian Land Board

9
Growth in housing loans has remained modest
Bank lending standards have not changed

10
The margins on housing loans have not
changed

11
Growth in deposits has made the financing of
the loan portfolio more balanced
The loans-to-deposit ratio fell to 109%

12
Capitalisation of banks has improved as
profitability is good
The quality of capital is high and leverage low

13
Main risks and consequences

14
Most of the risks to financial stability in
Estonia are small

15
The recession in the euro area weakened the
asset quality of euro area banks significantly

16
The Nordic financial sector is considered
secure but risks have increased in the real
estate market

17
The banks operating in Estonia need to
continue to be careful in issuing real
estate loans

18
Main risks affecting Estonian financial
stability

Weak economies in Europe damaging the quality of bank assets

A sharp f...
For the Estonian banking sector to maintain
its resilience it is important to keep the
minimum capital requirement at 10%
...
Planned changes to the capital
requirements from 2014

Until 31/12/2013

From 2014

10%

8%

Systemic risk buffer

-

2%*
...
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Financial Stability Review 2/2013

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Transcript of "Financial Stability Review 2/2013"

  1. 1. Financial Stability Review 23/10/2013 1
  2. 2. Key points 2 2
  3. 3. Increased economic activity has reduced uncertainty in the international financial environment Economies are recovering more slowly in some euro area countries and the risks are compounded by high debt levels and weak banking sectors Source: EcoWin 3
  4. 4. Money market rates have remained low in the current monetary policy environment Source: EcoWin 4
  5. 5. The strong confidence shown by the markets thus far has given Nordic bank groups good access to financing and stable prices The large share of funding coming from the markets creates a vulnerability in the financing of Swedish banks Source: Bloomberg 5
  6. 6. A high debt burden among households and rapid growth in real estate prices have emerged as the major risks to financial stability in Sweden and Norway A fall in real estate prices could cause a recession and hinder banks in accessing funding from financial markets Sources: Valueguard, Norwegian Association of Real Estate Agents, Eesti Pank calculations 6
  7. 7. The slowdown in the economy has not affected the solvency of Estonian companies Sources: Krediidiinfo, Eesti Pank 7
  8. 8. The risks to the solvency of households have been reduced by the low level of EURIBOR and by favourable developments in the labour market Sources: Statistics Estonia, Eesti Pank 8
  9. 9. Real estate prices have risen faster than nominal GDP Sources: Statistics Estonia, Estonian Land Board 9
  10. 10. Growth in housing loans has remained modest Bank lending standards have not changed 10
  11. 11. The margins on housing loans have not changed 11
  12. 12. Growth in deposits has made the financing of the loan portfolio more balanced The loans-to-deposit ratio fell to 109% 12
  13. 13. Capitalisation of banks has improved as profitability is good The quality of capital is high and leverage low 13
  14. 14. Main risks and consequences 14
  15. 15. Most of the risks to financial stability in Estonia are small 15
  16. 16. The recession in the euro area weakened the asset quality of euro area banks significantly 16
  17. 17. The Nordic financial sector is considered secure but risks have increased in the real estate market 17
  18. 18. The banks operating in Estonia need to continue to be careful in issuing real estate loans 18
  19. 19. Main risks affecting Estonian financial stability Weak economies in Europe damaging the quality of bank assets A sharp fall in Nordic real estate prices following on from the rapid growth that could pose a threat to economies and bank groups in the area A spiral effect created by rapid rises in real estate prices and wages, in which banks, borrowers and savers start to act ever more riskily Small risk Large risk 19
  20. 20. For the Estonian banking sector to maintain its resilience it is important to keep the minimum capital requirement at 10% 20
  21. 21. Planned changes to the capital requirements from 2014 Until 31/12/2013 From 2014 10% 8% Systemic risk buffer - 2%* Counter-cyclical buffer - 0%* 10% 10%* Minimum capital adequacy requirement Total capital requirements * Proposed requirement 21
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