Eesti Pank is the central bank of the Republic of Estonia and a member of the European System of Central Banks. Estonia adopted the euro on 1 January 2011, becoming the seventeenth euro area Member State. This also meant that Eesti Pank joined the Eurosystem.
The primary objective of Eesti Pank is to contribute to price stability within the euro area. A stable price level is maintained with the help of the single monetary policy, which is formulated by all the Eurosystem members, including Eesti Pank. The latter is also responsible for the implementation of the euro area single monetary policy in Estonia.
In adopting and implementing decisions regarding the euro area, the Eurosystem follows the principle that decisions are adopted centrally in the Governing Council of the European Central Bank and implemented by national central banks thereafter. Thus, as a member of the Governing Council of the European Central Bank, Governor of Eesti Pank participates in the adoption of all decisions regarding the Eurosystem. Nevertheless, the implementation of the Eurosystem’s decisions in Estonia falls within the responsibility of Eesti Pank, not the European Central Bank.
Besides the price stability objective, Eesti Pank also contributes to achieving other economic policy goals in Estonia and in the euro area in line with the Treaty on the Functioning of the European Union.
In addition, Eesti Pank fulfils the traditional functions of a central bank: manages currency circulation, supports and organises transfers between commercial banks, participates in safeguarding financial stability, manages the foreign reserves of Estonia, prepares financial sector statistics and balance of payments statistics, and advises the government in economic policy issues of Estonia and of the euro area.
The European System of Central Banks (ESCB) comprises the European Central Bank (ECB) and the national central banks of the European Union Member States. Eesti Pank became a member of the ESCB in 2004 upon Estonia’s accession to the European Union.
The Eurosystem consists of the ECB and the national central banks of the nineteen countries that have adopted the euro.
Price stability – the Governing Council of the ECB announced the following quantitative definition in 1998: “Price stability shall be defined as a year-on-year increase in the HICP for the euro area of below 2%. Price stability is to be maintained over the medium term”. In addition, the Governing Council explained in May 2003 that in line with the objective of price stability, it aims to keep inflation rates „below but close to 2% over the medium term“.
The Governing Council of the European Central Bank consists of the six members of the Executive Board plus the governors of the national central banks of the nineteen euro area countries.