Nick Kounis, head of financial markets research at ABN AMRO, points out that the ECB Executive Board member Benoit Coeure came out clearly against the central bank adopting a tiered deposit rate system in the near future.
“In an interview with the German newspaper Frankfurter Allgemeine Zeitung, he said that ‘at the current juncture, I do not see the monetary policy argument for tiering’. He argued that ‘those who would profit from tiering are, above all, banks with high excess liquidity, of which many are located in France and Germany where bank lending is already running high. Thus there is no evidence so far that the negative deposit rate is bad for lending.”
“On the contrary.’ He did admit that this view had to be reviewed regularly, as the net effect of negative rates can change over time, with the adverse effects becoming more prominent. Although a few Governing Council members have already expressed doubts about tiering, Mr Coeure is the first Executive Board member to do so and his remarks are significant as he is a very influential voice at the ECB.”
“We agree that the evidence up until now of the impact of negative rates on banks and the economy is actually positive. Although that will likely change over time, the cost of holding funds in the ECB’s deposit facility is a relatively modest part of the issues that are likely to emerge.”
“The narrowing spread between bank lending rates and deposit rates is the more significant issue going forward and tiered deposit rate system would do nothing to alleviate that issue.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.