ECB Considers Options to Offset Stimulus Policy Losses Amid Financial Burden

The European Central Bank (ECB) is considering several options to mitigate its financial losses from stimulus policies of the last decade. ECB President Christine Lagarde confirmed that policymakers will discuss raising minimum reserve requirements, which means increasing the amount of cash banks must keep in an unremunerated account as a buffer in case of a liquidity crunch.

Alternative options include not paying interest to banks on some of their excess reserves or even charging them fees. This would ease the financial burden on national central banks and help offset losses resulting from ECB stimulus policies.

The debate among ECB policymakers is wide open, with more suggestions expected before a decision is made. Doubling minimum reserve requirements to 2% could save the ECB and the Eurosystem nearly €4 billion per year, according to Reuters calculations.