FRANKFURT, April 8 (Reuters) – The German Banking Association BdB has called on the European Central Bank (ECB) on Monday to reduce the cost of surplus reserves deposited using the modulated rate.
"If the ECB can not end this year at different negative interest rates, it must at least take an example of the central banks of Switzerland and Japan," wrote BdB vice president Hans-Walter Peters in a speech he had to hold at the press conference.
Switzerland and Japan also have negative rates, but they apply to excess reserves of banks just above the upper limit.
"This development has to be done now," Hans-Walter Peters added.
The ECB's deposit rate is currently -0.4%, reflecting on banks due to significant liquidity costs placed with the central bank, a factor considered a handicap for monetary policy transmission to the real economy.
Members of the ESB Governing Board discussed in March at a meeting on monetary policy related to the current level of interest rates, the minutes of this meeting showed on Thursday.
According to sources close to current discussions, central bank services are studying the possibility of lowering the interest rate on deposits to reduce the cost of deposit interest rates for banks, thereby improving their profitability.
However, financial markets could see the introduction of modulated rates as a signal that interest rates would remain at a historically low level, which would be in contravention of ESB's guidelines on the future policy orientation of March, the central bank simply said the rates stay at its present level until at least 2020.
Some analysts also point out that if large banks such as Deutsche Bank or Commerzbank in Germany and BNP Paribas or Societe Generale in France certainly benefit from such a mechanism, it is not certain that the measure will be used by small or medium-sized banks,
The German banking sector is characterized by strong competition and low profitability, for which its two main players, Deutsche Bank and Commerzbank, have begun talks on possible mergers, which are expected to provide economies of scale and cost reduction.
"Profitable banks are not necessarily beautiful, but are necessary for a large, export-oriented economy such as the German economy," said Hans-Walter Peters. (Arno Schuetze, Marc Angrand for French Service, editor of Blandina Hénault)