Recognising there is strength in numbers, Estonia, Latvia and Lithuania are joining together to created a pan-Baltic capital market, with covered bonds the first product planned. Michael Turner reports.

Bulgarian lenders bucked the trend as Tier 1 capital contracted in most of central and eastern Europe, while Czech institutions retained their status as most profitable banks in the region.

Private equity investment in central and eastern Europe could be set to increase as investors look to capture the region’s potential as its economies return to growth. 

Central and eastern European banks in the EU faced a sluggish 2013, but Poland led the region in terms of growth and the Czech Republic in terms of returns. Baltic banks are also starting to rise to the challenge.

A return to economic growth in Estonia shows that it is possible to benefit from eurozone membership, even amid Europe's financial crisis. But governments must first acknowledge the limits of what the state can do.