Banks Seek Safe Havens with Elevated Reserve Demand

The European Central Bank (ECB) conducted a survey of its counterparties in Q4 2025 to gauge their expected demand for central bank reserves. The survey covered 184 banks, representing approximately 72% of total banking assets and central bank reserves in the euro area.

Banks intend to hold central bank reserves significantly above the ECB's minimum reserve requirements (MRR). In fact, they expect to maintain a median level of reserves equal to 4-6% of their total assets. This is a stark contrast to pre-global financial crisis levels, where banks operated with reserve levels just sufficient to satisfy their MRR.

The survey highlights that regulatory reforms have changed the way banks operate and manage their liquidity. Virtually all surveyed banks design their liquidity management practices around supervisory metrics such as the liquidity coverage ratio (LCR) or the net stable funding ratio (NSFR).