The European Central Bank is examining whether to increase the share of funds that lenders must hold in a non-interest-bearing reserve account, reported Reuters.
Such a step would lower the ECB’s own interest costs and address some effects of its campaign against inflation.
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Under the option being considered, the minimum reserve ratio would be lifted to 2% from 1% of customer deposits and certain other funding categories, the sources said.
Reuters reported that the change would assist central banks in liquidity-rich countries, including Germany, in reducing losses linked to interest paid on bank deposits above required reserves.
Those balances expanded to trillions of euros during the bond-purchase stimulus schemes of the past decade.
The measure would also withdraw part of the surplus liquidity in the banking system, in line with ECB efforts to reduce banks’ reliance on free cash.
That approach is due to be reviewed this year as part of the central bank’s broader framework review.
A decision on the possible change is expected by the autumn.
The matter has not yet been formally discussed by the ECB’s Governing Council, and the sources said debate inside the institution remains at an early stage.
A top German banking industry body has opposed the prospect of a higher reserve requirement, Reuters said.
Heiner Herkenhoff, chief executive of the Association of German Banks, said a stricter rule would worsen what he regards as a tax on European banks, causing them to “fall further behind in global competition”.
“It will tie up additional liquidity, weaken the institutions’ profitability, and reduce their scope for investment and lending,” he told the news agency.
