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ECB introduces a negative deposit facility interest rate
* Deposit facility interest rate cut effective as of 11 June 2014
* Negative rate to apply also to average reserve holdings in excess of the minimum reserve requirements and other deposits held with the Eurosystem

When deciding to lower the key ECB interest rates at its meeting today, the Governing Council of the ECB took the decision to cut the interest rate on the deposit facility to -0.10%.

This change will come into effect on 11 June 2014, together with the changes to the interest rates on the main refinancing operations and on the marginal lending facility. The negative deposit facility interest rate will also apply to:

(i) banks' average reserve holdings in excess of the minimum reserve requirements;
(ii) government deposits held with the Eurosystem that exceed certain thresholds that will be set in the relevant Guideline to be published by 7 June;
(iii) Eurosystem reserve management services accounts if not currently remunerated;
(iv) participants' account balances in TARGET2;
(v) non-Eurosystem NCB balances (overnight deposits) held in TARGET2;
and
(vi) other accounts held by third parties with Eurosystem central banks when stipulated that they are not currently remunerated or are remunerated at the deposit facility rate.

Wait till Hans Werner Unsinn finds out that the ECB will charge for Target2 balances...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 10:19:59 AM EST
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I don't get it. What does it mean? How charges for what? I know Target 2 has been a hot issue with the inflation paranoia crowd, but I do not understand what is said here.
by rz on Thu Jun 5th, 2014 at 10:30:36 AM EST
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I think I get it know: If the Bundesbank has a positive Target II balance it will have to pay some extra interest rate.

Hans is going to go ballistic. I feel a certain dread, when thinking about the commentary in tonights Tagesschau.

by rz on Thu Jun 5th, 2014 at 10:47:24 AM EST
[ Parent ]
Exactly.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 11:16:58 AM EST
[ Parent ]
A ghost of Keynes' bancor plan that haunts only the Eurozone! Headline: ECB PUNISHES SUCCESS!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jun 5th, 2014 at 01:46:25 PM EST
[ Parent ]
Waiting for a Migeru diary to explain this to the profane.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Jun 5th, 2014 at 11:03:47 AM EST
[ Parent ]

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