Q: How would you describe the activities of the Bank of Estonia? How does the central bank manage its tasks?
A: In terms of formatting the financial and payment policies and coordinating the banking system I have no reproach. The Bank of Estonia has developed fast. Looking ahead in the future, I see a lot of changes to be made.
It all depends on how fast Estonia joins the Euro Zone. If everything goes as planned, Estonia will be ready to join the European Union on Jan. 1, 2003, and two years later join the European Economic and Monetary Union.
After the full introduction of the euro, most of the functions of the central bank related to local money will change, and the organization itself will change.
Q: The very first things you, as the newly elected President of the Bank of Estonia, will change are...
A: First of all, I would check the kind of information made available to the public. The central bank has statistics and study departments where serious work is done with a lot of information at hand.
I will see whether their work is acceptable, and whether it is good enough for entrepreneurs, top management and politicians to take the right managerial decisions.
The organizational side of the bank has to be looked over. How does management work? Do some departments duplicate each other? Is it possible to improve anything? Maybe the management consultants can help. Every person should be working where he feels most wanted and where it gives him most satisfaction. I am not planning to dismiss anyone, but it is important that everybody is working in the right position and doing the right job.
Q: Would the entrepreneurs have to pay for that information?
A: No, I have not thought about that. I mean the same public information, which is available at present, bank bulletins and market reviews, which are for free. There is not enough information at present, and it is not processed enough. The problem also lies in marketing it correctly.
Q: You have said the central bank should intervene as little as possible in the activities of the commercial banks, but at the same time you expect them to hand in monthly economic results instead of quarterly results?
A: Yes. It does not restrict them at all and does not require any additional effort. They do daily statements of accounts anyway. I have heard through the press that analysts are very annoyed with the lack of information.
Q: Are you planning to increase and strengthen supervision over the commercial banks?
A: Supervision should be strengthened rather than increased. First steps have already been taken to establish an integrated supervision system for the whole finance sector – banking, insurance and security.
I will do my best to make it function properly. To my mind this integrated organization will be established by Jan.1, 2002. I think it will be managed by the banking supervision board. By strengthening the supervision, I did not mean setting any additional obligations but improving the present monitoring.
Q: It has been discussed lately whether to use the profits of the central bank in the state budget. The former president, Vahur Kraft, was against it. What is your standpoint?
A: There are certain rules. The law foresees how much money has to be reinvested in the bank. The council can then decide on spending additional money for certain purposes.
The profit in excess should go to the state budget, because the state owns the Bank of Estonia. It has been operating this way all the time, and it is the right way to continue. But I do not feel it is right to ask suddenly for 200 million kroons ($12.3 million) for the state budget, no matter how much profit the bank has earned. According to the press, the central bank ended last year with a loss.
Q: Is the role of the central bank in Estonia different from what it is in other countries?
A: The role of the Bank of Estonia is actually different, thanks to a currency board regime and a fixed exchange rate system which automatically eliminates the possibility to use money in certain directions. The currency board expects signals to come from the market. The intervention of the Bank of Estonia in the economy is relatively small.
Lithuania's central bank with its currency board is similar to Estonia's. Latvia's central bank is not much different either, but both Latvian and Lithuanian central banks face consolidating their banking market.
Q: How much did you deal with banking before running for the managerial position in the Bank of Estonia?
A: I have done a lot of research on the central bank and currency board systems. I have read a lot and compared Estonia to other countries. I have gained that kind of background in theory.
Q: Do you have any interesting ideas that you would like to put into practice, something that you have learned in theory?
A: One of the things I have learned is that central banking is a very conservative sphere. It is known that a currency board works well in small, open economies like Estonia's, where it acts like a basic anchor to stabilize the environment. We should keep up the same system in joining the Euro Zone.