Tuesday December 10, 2019

The positives of negative deposit rates

The ECB charges 0.4 per cent on deposits to stimulate bank lending to individuals and SMEs. But the policy is being re-examined

12th May, 2019
Mario Draghi: despite making positive noises, the president of the European Central Bank is unlikely to change deposit rates PIc: Bloomberg

At its April meeting, European Central Bank president Mario Draghi described himself as having an open mind regarding potentially changing the bank’s negative deposit rate policy. At present, it charges 0.4 per cent on deposits.

The policy is designed to stimulate bank lending to individuals and the SME sector, because if deposits are simply left with the ECB, banks are charged for them. The ECB claims (with some justification) that its negative interest rate...

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