Cash circulation and clearing system

The Bank of Estonia has the sole legal right to issue and withdraw Estonian banknotes and coinage, and arrange their circulation. The Bank’s aims are to keep adequate cash reserves in the vaults, organise cash reception and emission together with credit institutions and cash centres, the handling of cash and destruction of damaged notes. The Bank also determines the cash amounts to be released into circulation and cash orders necessary for supplementing the reserves, as well as choosing the producers. The Bank is additionally responsible for cash statistics, cash clearing systems and analysis. The issuing of banknotes and coinage does not, however, serve direct monetary policy aims.

Being responsible for financial stability and currency circulation in Estonia, the Bank also has to support the reliable, cost-efficient functioning and compact development of the non-cash payment and clearing system. The Bank’s duties therefore include planning and developing the payment and clearing system’s strategy and policy so that they correspond to international requirements; the monitoring of risks associated with payment and clearing systems; working out the relevant legal framework for the system and assisting its implementation; developing the payment and clearing system and analysing the efficiency of its functioning.

During the 10 years of Estonian independence, the activity of the Bank of Estonia has been based on the need to safeguard the stability of the Estonian monetary system and the low interest rate, support the banking system in its development from the socialist mono-bank system to the contemporary market economy-oriented system, and provide the economy with an efficiently functioning cash circulation and clearing system.

Relying on the currency board, a remarkable stabilisation of inflation has indeed been achieved, and the economy’s interest rate has moved closer to comparative West-European data.

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