Rabobank: Reserve Remuneration: Are More Changes In The Cards?

Rabobank write “changes to the remuneration of minimum reserves highlight the ECB’s profitability concerns.”

• “If the ECB decides on further changes to the minimum required reserves system, we believe that raising the reserve requirement ratio slightly is the most feasible option.”
• “Bigger remuneration changes may depress money market rates, harming policy transmission.”
• “Looking further ahead, any such changes have to fit into the new operational framework.”
• “A floor framework will require the ECB to maintain a situation of ample reserves. Consequently, there will probably be a consistent use of the deposit facility.”
• “Considering potential side effects of changes to reserve remuneration, the recent change could also herald a new push for the acceleration of the quantitative tightening process.”