MNI BRIEF: ECB Tweaks Remuneration On Reserves, Effective Sept

The ECB announced on Thursday it would set the remuneration of minimum reserves at 0%, with the change effective from the start of the Sept 20 maintenance period.

"Today’s decision to reduce the remuneration on minimum reserves will preserve the effectiveness of monetary policy by maintaining the current degree of control over the monetary policy stance and ensuring the full pass-through of the Governing Council’s interest rate decisions to money markets. At the same time, it will improve the efficiency of monetary policy by reducing the overall amount of interest that needs to be paid on reserves in order to implement the appropriate stance," the ECB said in a statement.

Credit institution minimum reserves are equivalent to 1% of specific liabilities and are currently remunerated at the deposit rate.

Last year, the ECB cut the remuneration of minimum reserves from the MRO rate to the DFR. That change aligned minimum reserve remuneration more closely with short-term money market rates. Since then, the efficiency aspect has risen in relevance, in line with the higher level of the key ECB interest rates.

The decision will not prejudge the outcome of the ongoing review of the ECB’s operational framework, the statement added.