The Settlement System of Ordinary Payments (ESTA) of Eesti Pank

ESTA is a settlement system of retail payments

ESTA settles domestic interbank retail payments using a fixed time schedule. ESTA only settles payments initiated in the Estonian kroon.

ESTA operates fast and has long operating hours

ESTA is open every business day from 8.15 to 18.00. Payments are not settled on national holidays and at weekends. ESTA is convenient and fast for bank customers. This is ensured by long operating hours of the system and the frequent transfer of payments to banks. Banks are informed of the incoming payment orders every hour. Hence, transfers between the banks take place 10 times a day, that is every hour between 9.00 and 18.00. A payment is transferred into the payee's account in another bank within 30 to 90 minutes, depending on the time of initiating the payment.

Settlement day of the Settlement System of Ordinary Payments (ESTA) of Eesti Pank

Figure 1. Functioning of ESTA

Principles of settlement in ESTA

ESTA settles payments in batches. A batch of payment orders from a participant will first undergo technical validation to check the format of each payment order. As a result, the batch of payment orders may be either validated, partially validated, or rejected. The entire batch is validated, if all the payment orders in the batch have been entered correctly. If the number of incorrect payment orders in the batch is below the predefined threshold determined by the participant, the batch is partially validated.

After technical validation the system carries out financial validation of the payment orders accepted as the result of the technical validation with the aim to check if the participant has sufficient cash collateral with ESTA in order to settle the payments in the batch.

If the cash collateral is sufficient, current collaterals of the credit institution are renewed based on the validated payment orders (the amount of the payer's collaterals is decreased and the payee's bank collaterals are increased).

Following a change in the collaterals, payments in the payment orders batch are considered settled and finalised, and the credit institution that sent the batch is informed which payment orders were accepted (or settled) and which were rejected.

At closing time, the manager of ESTA establishes the balance of each participant's cash collateral and returns it into their accounts with Eesti Pank.

System participants are banks and the Estonian CSD

ESTA participation is based on the principle that any entity that has an account in Eesti Pank, meets the participation requirements as determined by Eesti Pank and has concluded a respective agreement with Eesti Pank can be a participant of ESTA.

As at 1 June 2008, ESTA has 13 participants: ESTA had 13 participants: AS Hansapank, AS SEB Pank, AS Sampo Pank, AS Eesti Krediidipank, Tallinna Äripanga AS, Marfin Pank Eesti AS, Nordea Bank Finland Plc Estonia Branch, Parex Banka Estonia Branch, AS UniCredit Bank Estonian Branch, Svenska Handelsbanken AB Estonian Branch, Bank DnB Nord AS Estonian Branch, Eesti Pank and Estonian CSD.

ESTA is secure and reliable

ESTA is a 100% secured system, which means that settlements of the credit institutions participating in the system are processed using cash collaterals they initially deposited into Eesti Pank. The payee is only informed of the incoming payment after it has been settled. Credit and liquidity risks are kept to a minimum through the system's functionality. Operational risks are managed on a daily basis.

Eesti Pank pays special attention to achieving the system's operational reliability. Contingency measures and procedures have been elaborated in order to secure settlements in contingency situations. So far ESTA has been operational 99.8% of its working life.

Volume of work

An average of 100,000 payments a day are settled via the system at a total value of 2 billion kroons. The value and the number of payments have been growing every year. The rise in the annual value of payments in 2007 was 25% and the number of payments grew by 13%.

Figure 2. Number and value of payments settled through ESTA

Fees

It costs 100,000 Estonian kroons to join the settlement system of ordinary payments. In addition, each participant of the system has to pay Eesti Pank, the manager of the settlement system, 0.50 kroons per each payment settled.

Legal framework of ESTA

ESTA statistics