Estonia Should Raise Reserves to Curb ECB Risk, Kaasik Says

Estonia’s central bank should increase reserves as European monetary-policy makers make “non- standard loans” to help tackle their debt crisis, Deputy Governor Ulo Kaasik said.

The European Central Bank’s decision to issue three-year loans to commercial banks has heightened risks to regional central banks’ balance sheets, according to Kaasik. Estonia adopted the euro last year.

Estonian policy makers “must find ways to increase reserves,” he said today in an e-mailed statement. The stockpile is three times less than the euro-region average, adjusting for the Baltic nation’s contribution to the ECB measures, he added.

A decision on whether to bolster reserves will probably be taken when the central bank’s supervisory board next meets on April 10, according to Chairman Jaan Mannik. “This is about distributing last year’s profit,” he said today in a phone interview.

Reserves were 374 million euros ($497 million) at the end of last year, Viljar Raask, a spokesman for the central bank, said today by phone. Estonia has contributed 0.18 percent of the ECB’s capital, according to the Frankfurt-based central bank.

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Ott Ummelas at oummelas@bloomberg.net

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