So their business model is to borrow from depositors and pay them 1% and then deposit that with the reserve bank at below inflation (at 1.5% although they really only get 0.25%). So they net 0.5% which means they might as well set the money on fire.

Wait, what?

In what fictional alternative universe does it not make sense for a bank to get paid 50 BP of its customers' money per year?

You lend me a million. I put the million with the CB. The CB pays me € 500 more than I pay you. Who cares if it's below inflation? The inflation eats the customers' money, not the spread (OK, technically it does eat the spread, but it eats less than half a basis point in this case).

- Jake

Friends come and go. Enemies accumulate.