ECB Eyes Reserve Requirement Hike Amid Central Bank Losses

The European Central Bank (ECB) is considering raising banks' minimum reserve requirements to cut its own tax bill and mitigate losses at some national central banks. ECB President Christine Lagarde said that while the topic was not discussed during their recent meeting, it will be in the future.

According to sources, doubling the proportion of cash that lenders must keep in an unremunerated account as a buffer would lower the amount of interest they receive from their national central banks. This change could save the ECB and the 21 national central banks of the Eurosystem nearly €4 billion per year.

The measure aims to address the losses at central banks in some euro zone countries, such as Germany and the Netherlands, which are a result of the ECB's massive crisis-fighting liquidity injections from 2015 to 2022. These injections were undertaken when interest rates were negative and inflation low.