Deposits are still dominating on the Estonian financial services market
An overview of the Estonian financial services market recently prepared by the Financial Supervisory Authority shows that as at the end of June this year Estonian people had more financial assets (by 1,382 euros) than financial obligations. The average amount of financial assets was 6,801 euros and the volume of loans was up to 5,419 euros. The report of the Financial Supervisory Authority is based on the data submitted by financial companies.
By the number of agreements, the most popular financial service in Estonia is the demand deposit or a bank account. As at the end of June 2015, private persons had 2,019 million bank accounts. The total amount of clients’ deposits increased in the first half of 2015 by 5%, i.e. by 757 million euros, reaching 15.6 billion euros by the end of June.
Andre Nõmm, a Member of the Management Board at the Financial Supervision Authority, said that if the low interest rate environment continued for a longer period, Estonian consumers might start searching higher yield options for their savings. “We would like to remind people that they should consider their risk tolerance before making any binding financial decisions. It is advisable to contemplate the potential advantages and disadvantages of the offered financial services. If you plan to establish relationships with service providers that are not currently subject to financial supervision, e.g. savings and loans associations and investment platforms, you have to take into account that the regular savings and investor protection mechanisms do not apply to them,” said Nõmm, who is responsible for the supervision of financial services.
According to the overview prepared by the Financial Supervision Authority, the number of loan agreements made with private persons grew in the first half of 2015 compared to the time a year ago by more than 20,000 agreements, an increase from 675,000 to 698,000. The largest growth took place in volume of housing loans with an increase of 104 million euros, reaching 6.15 billion euros by the end of June. The average housing loan balance of private persons as at the end of June is 37,386 euros. The volume of consumer loans increased significantly, by 18 million euros in a half year, and comprised 405 million euros by the end of June. Loans to businesses grew by 68 million euros, reaching 6.6 billion euros by the end of June. The total volume of banks’ loan portfolios increased in the first half of 2015 by 2.8%, i.e. by 421 million euros. As at the end of June 2015, the amount of banks’ total loan portfolio was 15.5 billion euros.
“Although the current moment seems like a good time for borrowing, from the interest perspective, we would like to point out that interests will not remain low forever, especially if you intend to assume long-term financial obligations,” stressed Andre Nõmm. “In addition to the EURIBOR-related loan component, people should pay attention to the margin, and when uncertain, ask for an explanation of the composition of margin and its size.”
According to the report prepared by the Financial Supervision Authority, a growth was seen in most investing sector product classes. The fast growth in the funds sector was still driven by the mandatory pension funds, whose volume of assets increased by 247 million euros, i.e. by 11%. The number of unit holders that had made an agreement with a pension fund grew from 747,000 to 757,000 by the end of June this year. The average amount of investments per one unit holder in mandatory pension funds was up to 3,439 euros and in voluntary pension funds up to 2,884 euros.
The volume of insurance premiums grew in both life insurance and non-life insurance. The volume of annuity premiums grew in a year from 8 million euros to 9.8 million euros and assurance on early death grew from 5 million euros to 5.8 million euros. The largest growth in non-life insurance was in property insurance and land vehicles insurance, where the volume of insurance premiums grew year-on-year by 2.3 million euros and 1.9 million euros, respectively.
Direct link: Overview of Estonian financial services market as at 30.06.2015.
The earlier overviews are available on the Financial Supervision Authority webpage.