Banks, Estonia, Financial Services

The Banking Association together with Swedbank, SEB Pank, Estonian branch of Nordea Bank and Estonian branch of Danske Bank sent a joint opinion to the Consumer Protection Board regarding the exchange rate used for payments made on loans issued in euros.

“Most of long-term loans issued by banks to consumers by today, including housing loans, are issued in euros. At the same time consumers also have an option to take the loan in Estonian kroons,” stated the response, adding that the banks and loan customers agree that the loan contract will be concluded and executed in euros.

The banks and the organisation is convinced that such an agreement is in compliance with the Law of Obligations.

“Just as other enterprises providing currency exchange service, the bank uses commercial exchange rate in converting the kroons into euros,” stated the letter.

The Consumer Protection Board claimed that commercial banks can exchange euros into kroons and vice versa on the basis of the exchange rate set by the Bank of Estonia, but the Banking Association is of the position that the board fails to note that the regulation of the Governor of the Bank of Estonia only applies on credit establishments buying currencies in stock, not on retail sales of foreign currencies to consumers.

The Banking Association also stated that it is not true, as the Consumer Protection Board stated, that banks do not bear any costs on providing the currency exchange services.

The association does not agree that costs related to granting loans should be included in the interest rate margins and contract fees.