ECB policymakers eye springtime push to cut payments on banks' deposits - sources
By Balazs Koranyi
MARRAKECH (Reuters) — European Central Bank policymakers are planning a springtime push to cut interest payments made to commercial banks, in part to recoup some of the costs associated with a decade worth of stimulus, sources familiar with discussions said.
With banks now earning generous profits, in great part at the expense of the central bank and the taxpayer, policymakers have already cut to zero the rate they pay to lenders on a certain pool of their excess deposits kept at the ECB.
Some policymakers have also been pushing for an increase in that asset pool, known as the minimum reserve ratio and roughly equivalent to 1% of deposits.
That would mean overall interest payments to lenders — which still earn the ECB deposit rate, currently 4%, on other excess cash parked with the central bank — would be reduced further. But the ECB rejected the proposal in July, partly on resistance from its Executive Board, the sources said.
Still, the battle is not over and proponents are looking to make a fresh push to raise the ratio next spring, when the ECB reviews its operational framework, conversations with eight sources indicate.
«This issue must come back, by the framework review, at the latest,» one of the sources said. «The reserve requirement is artificially low.»
EXCESS LIQUIDITY
At the core of the issue is the 3.6 trillion euros worth of excess liquidity sloshing around in the banking system, much of it created by the ECB when inflation was too low and policymakers were trying to stimulate the economy through a cash injection.
Interest rates are now at a record high, so the ECB's interest expense has soared on this large pool of debt and several national central banks, including the Bundesbank, are
Read more on investing.com
