rahandussektori

The rahandussektor (financial sector) is the part of the economy that provides financial services, including banking, insurance, asset management, capital markets, and payment systems. It intermediates funds from savers to borrowers, facilitates payments, and manages risk, supporting investment and economic growth.

Major subsectors include commercial and retail banks, non-bank financial institutions, insurers, pension funds, asset managers, investment banks, capital markets, payment service providers, and fintech firms.

Regulation and supervision: The sector is regulated to ensure financial stability and consumer protection. Central banks and financial supervisory authorities oversee institutions and markets. In Estonia and the European Union, directives shape national rules, with Eesti Pank (Bank of Estonia) and Finantsinspektsioon supervising firms and enforcing prudential standards.

Functions and importance: It channels funds, provides liquidity, enables price formation for capital, and transfers risk through insurance and hedging products. It supports savings mobilization, corporate investment, consumer credit, and pension provision, and it is a key conduit for monetary policy transmission.

Trends and challenges: Digitalization is transforming banking, payments, and wealth management, with growing fintech ecosystems. Increased cyber risk, regulatory compliance costs, and climate-related financial risks pose ongoing challenges; low or negative interest rates in many markets affect profitability and funding models.

Estonian context: In Estonia, the financial sector operates within EU rules and is supervised by the Bank of Estonia and the Financial Supervisory Authority, coordinating oversight to maintain stability while fostering innovation.