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MNI INTERVIEW: ECB To Limit Reserve Remuneration -Papadia

The ECB could tier its reserve remunerations and is in no rush to sell bonds, its former director general for market operations tells MNI.

The European Central Bank is likely to limit the interest on reserves it pays to commercial banks as monetary policy tightens, most likely by imposing a tiering system, the ECB’s former director general for market operations Francesco Papadia told MNI.

The ECB used tiering to shelter banks from the full effect of negative interest rates, and now that rates are positive and rising fast, it would be appropriate for the central bank to limit their earnings on reserves, Papadia, now senior resident fellow at the Bruegel thinktank, said in an interview.

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The European Central Bank is likely to limit the interest on reserves it pays to commercial banks as monetary policy tightens, most likely by imposing a tiering system, the ECB’s former director general for market operations Francesco Papadia told MNI.

The ECB used tiering to shelter banks from the full effect of negative interest rates, and now that rates are positive and rising fast, it would be appropriate for the central bank to limit their earnings on reserves, Papadia, now senior resident fellow at the Bruegel thinktank, said in an interview.

Keep reading...Show less