The European Central Bank (ECB) has decided to maintain the minimum reserve requirement for banks. A ECB spokesperson confirmed to the “Handelsblatt” (Friday edition) that the minimum reserve will remain part of the ECB’s instruments. This measure is a result of the ECB’s strategy review.
The minimum reserve requires banks to hold a percentage of their customers’ deposits as a liquidity buffer at the central banks. Since July 2023, banks have not received interest on these reserves.
Discussions about increasing the minimum reserve had sparked protests from the banking sector two years ago. The initiative of individual central bankers stalled and the ECB council ultimately decided to set the interest on the minimum reserve to zero. For the banks, this was also a disappointment, as their profit projections no longer applied in part.
The citizen’s movement Finanzwende has estimated that the euro central banks saved “approximately six billion euros” in interest costs last year due to this measure. This is according to a letter from the bank-critical organization to the ECB, reported by the “Handelsblatt” (Friday edition). In the letter, the organization requests the preservation of the minimum reserve to be able to compensate for “generous subsidies” to the banking sector in the future. The ECB spokesperson declined to comment on the estimate provided by Finanzwende.
The ECB reported a loss of 7.9 billion euros for 2024 on Thursday, which is due to its interest expenses exceeding its income since the recent high-interest phase.