YEREVAN, July 1. /ARKA/. The European Central Bank (ECB) is considering the possibility of doubling the share of funds that credit institutions must hold as reserves in an unpaid account. According to Reuters, citing six sources, this would reduce the central bank's own interest expenses and mitigate the side effects of its fight against inflation.
The potential increase being discussed by the ECB leadership would raise the minimum reserve requirement to 2% from 1% of customer deposits at banks and some other forms of funding, sources said.
This would help central banks in liquidity-rich countries like Germany reduce losses associated with interest paid on deposits exceeding required reserves. These deposits have ballooned to trillions of euros due to stimulus programs through bond purchases over the last decade.
It would also allow for the withdrawal of some excess liquidity, advancing the ECB's efforts to gradually phase out banks' free cash, which needs to be reviewed as part of the so-called operational framework analysis this year.
A decision on this potential step, which has not yet been formally discussed by the ECB's Governing Council, is expected in the fall. Sources indicated that discussions within the ECB are in the early stages.
