ECB Director skeptical of mitigating the penalty rates for banks



The Director of the ECB currently sees no monetary policy action against low interest rates.

(Photo: AP)

Berlin, FrankfurtECB Director Benoit Coeure has been reluctant to relieve banks of the harmful effects of years of low interest rates. "I find the intensity of the discussion surprising because it focuses on a narrow aspect of our monetary policy," Coeure told the "Frankfurter Allgemeine Zeitung" on Tuesday.

Negative deposit rates are not the biggest problem. Their contribution to low bank profits is limited. Banks should think more about their costs.

Regarding the growth slowdown in the euro zone, the Frenchman said it was very uncertain how long and how strong the slowdown would be. The uncertainty has political reasons. "Growth will only come back in the second half of the year as solutions to the trade dispute emerge," Coeure said.

The negative deposit rate is not the most important factor in making interest rates so low. "If we change something, there must be a monetary reason for it. At the moment, I do not see the monetary policy argument for staggering. "

Banks in the euro zone have been paying penalties for a long time when hoarding excess liquidity overnight at the ECB. Since March 2016, the deposit rate has been minus 0.4 percent.

Especially institutions in Northern Europe had complained that the long-standing negative interest rates would slow their earnings. ECB President Mario Draghi had recently announced that the side effects of low interest rates could be examined.

However, the European Central Bank must look closely at the development, said Coeure. Staggering would benefit above all those banks with high levels of excess liquidity, many of whom would be in France and Germany, where lending is already high. "So far, there is no evidence that the negative deposit rate is bad for lending. Rather the other way around. "

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