Remuneration of minimum reserves
Until 20 December 2022, minimum reserve holdings up to the level of the minimum reserve requirement have been remunerated at the average interest rate of the Eurosystem’s main refinancing operations over the maintenance period (weighted according to the number of calendar days). In its meeting of October 27, 2022, the Governing Council of the ECB decided to set the remuneration of minimum reserves at the Eurosystem’s deposit facility rate (DFR). Under the prevailing market and liquidity conditions, the DFR better reflects the rate at which funds can be invested in money market instruments if not held as minimum reserves and the rate at which banks borrow funds in the money market to fulfil minimum reserves.
Remuneration of excess reserve holdings
Excess reserves, i.e. holdings exceeding the minimum reserve requirement, are remunerated at 0% or the deposit facility rate, whichever is the lower rate. In its meeting of September 12, 2019, the Governing Council of the ECB decided to introduce a two-tier system for remunerating excess reserve holdings. The volume of excess reserves exempt from a negative deposit facility rate – the exempt tier – was determined as a multiple of a bank’s minimum reserve requirements and was remunerated at a rate determined by the ECB. Following the raising of the deposit facility rate to above zero, with effect from 14 September 2022, the two-tier system for the remuneration of excess reserves is no longer necessary. The Governing Council therefore decided in its meeting of September 8, 2022 to suspend the two-tier system by setting the multiplier to zero.
For more information on the two-tier system, see the ECB's website:
Two-tier system for remunerating excess reserve holdings