The aim of the measure would be to absorb some of the excess liquidity and support the ECB’s efforts to encourage banks to reduce the cash they hold on deposit with the institution itself.
Reported by Renta 4
The European Central Bank (ECB) is reportedly discussing the possibility of raising the minimum reserve requirement to 2% from the current 1%, according to some media reports. Minimum reserves are the reserve balances that credit institutions are required to hold, on average, with their national central banks within the Eurosystem during a maintenance period.
The aim of the measure would be to absorb some of the excess liquidity and support the ECB’s efforts to encourage banks to reduce the cash they hold on deposit with the ECB itself. It would also help national central banks with abundant liquidity, such as Germany’s, to reduce losses linked to interest payments on bank deposits.
This measure is still at an early stage of internal deliberation, and according to sources, the ECB has not yet held a formal debate on the proposal, on which a decision is expected before the autumn.
Assessment: Negative news for the sector, although the implications are difficult to quantify and we do not expect a negative impact on the stock market in the short term. The measure could result in reduced lending and also have a negative impact on RoTE, but the direct effect could be neutral or negligible.
