In a positive interest rate environment, the reserves held by credit institutions in excess of their reserve requirements are not remunerated (or, in other words, are remunerated at the rate of 0 per cent). Credit institutions therefore have an incentive to shift these amounts from their current accounts to the deposit facility at the end of each day, in order for them to be remunerated. As a result, excess reserves are usually relatively small within the Eurosystem.
From June 2014 to September 2022, negative remuneration was applied to excess reserve holdings, in line with the negative interest rate applied to the deposit facility over that time period. In September 2022, as the deposit facility rate returned to positive territory, the two-tier system introduced in September 2019 for remunerating excess reserves was suspended. Such two-tier system provided for the exemption of part of the excess reserves, calculated as a multiple of the reserve requirement, from the negative deposit facility rate.
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