Minimum reserves

The minimum reserve system primarily pursues the aims of stabilising money market interest rates, as averaging the reserve requirement over the maintenance period encourages banks to balance the effects of temporary volatility in liquidity.

The minimum reserves are stipulated with regard to the banks’ liabilities to non-banking sectors, i.e. households, corporates and government. Liabilities to other institutions subject to Eurosystem minimum reserve requirements (list), the ECB and Eurosystem NCBs are excluded. A reserve ratio of 1% is set for liabilities with a maturity of up to two years, while a ratio of 0% applies to liabilities with longer maturities.

Banks must meet the minimum reserve requirements through balances on accounts with their NCB in accordance with the ECB Regulation on the application of minimum reserves, whereby their average balance over the reserve maintenance period (which is usually six weeks) is at least equal to their requirement. The money on these accounts may be used freely for payments. Minimum reserves up to the amount of the reserve requirements are remunerated at the main refinancing rate.

Until 29 October 2019 excess reserves were remunerated at 0% or at at deposit facility rate, whichever is lower. From 30 October 2019 until 13 september 2022, a two-tier system for remuneration of excess reserves had been used. Part of excess reserves up to a six times (multiplier) of the institutions' reserve requirements (exempt tier of excess reserves) had been remunerated at annual rate of 0%. The rest of excess reserves (non-exempt tier of excess reserves) continued to be remunerated at the deposit facility rate. Following the raising of the deposit facilitiy rate to above zero (when the entire excess reserves are remunerated at 0%), the Governing Council decided to suspend the two-tier system for the remuneration of excess reserves on 14 September 2022, when the deposit facility rate became positive, by lowering the multiplier from 6 to 0.

The calendar of reserve maintenance periods for each year is announced in advance. The reserve maintenance period begins on the settlement date of the first main refinancing operation following the meeting of the Governing Council of the ECB, at which a decision on ECB interest rates is taken.