Minimum reserves

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General information and calculation procedures

The Eurosystem requires euro-area banks to hold a proportion of their liabilities in the form of deposits on accounts with their national central bank. These liabilities constitute the minimum reserve requirement. The amount of minimum reserves to be held by each bank is determined on the basis of an aggregate of specific balance sheet liabilities (reserve base), consisting mainly of customer deposits and outstanding debt securities with a maturity of up to two years, to which a minimum reserve ratio, currently set at 1 per cent, is applied. From this amount a lump sum of €100,000 is deducted in order to limit administrative costs for banks with very low minimum reserves (see Bank of Italy Circular 314/2021, only in Italian).

Reserve holdings

To comply with this requirement, banks have to hold with their national central bank an amount of funds whose average is equal to or greater than the amount resulting from the calculation described above. Compliance with the minimum reserve requirement is assessed on the average of the end-of-day balance on the counterparties' reserve accounts, usually over a 6- or 7-week period (known as the maintenance period). This allows banks to react to short-term changes in the money markets by transferring funds into the reserve accounts, or, conversely, by withdrawing funds, thereby contributing to the stabilization of money market rates. The maintenance period calendar is published regularly (see the 'Indicative calendar for the Eurosystem's reserve maintenance periods', below).

Banks can comply with their reserve requirements either through their own accounts with the Bank of Italy, or indirectly, through a financial intermediary which is in turn subject to minimum reserve requirements in Italy. Banks applying for authorization for indirect compliance should submit their request to the Bank of Italy through its local branches (see Circular 314/2021). The request has to contain a copy of the agreement drawn up between the parties for managing the minimum reserves indirectly and a declaration certifying their working relationship, and has to be filed using Annex 2 of Circular 314.

Remuneration

At the end of the maintenance period, the national central bank pays interest on the minimum reserves held by banks. As of 20 September 2023, the remuneration rate on minimum reserve requirements is 0 per cent (see 'Interest rates on the minimum reserve', below).

Sanctions

Non-compliance with the minimum reserve requirement is notified when the average closing balance of the bank in the maintenance period falls below the reserve requirement for the same period. A sanction is imposed in the event of non-compliance, and is calculated by applying a penalty rate to the amount of the shortfall (see 'Interest rates on the minimum reserve', below). Failure to comply with obligations under the regulation governing minimum reserves other than non-compliance with the minimum reserve requirement may also give rise to sanctions, to be determined on a case-by-case basis (see Article 2 of Council Regulation (EC) No 2532/98).

The ECB mandatorily publishes on its website (where they remain for at least five years) any decision to impose sanctions for infringements of minimum reserve requirements (see Article 9 of European Central Bank Regulation (EC) No 2157/1999).

Public disclosure

Information on the minimum reserves, published according to the EU regulations currently in force, can be found on the main business information platforms (Bloomberg and Refinitiv Eikon). The ECB publishes the full list of monetary financial institutions subject to minimum reserve requirements.

CALENDAR OF THE CONFIRMATION PROCEDURES FOR RESERVE REQUIREMENTS

Compliance with the reserve requirement is determined on the average of the end-of-day balances on the counterparties' reserve accounts, usually over a 6- or 7-week period, known as the maintenance period.

Maintenance periods start on the settlement day of the first main refinancing operation following the monthly monetary policy meeting of the ECB's Governing Council.

INTEREST RATES ON THE MINIMUM RESERVE

ECB REGULATIONS AND THE BANK OF ITALY CIRCULAR

Acting as regulatory authority in accordance with the powers conferred onto the ECB by the ESCB Statute, the ECB can require credit institutions to hold minimum reserves. Based on the relevant regulations, the ECB is endowed with the authority to make the most important decisions and delegates some of the management activities to the NCBs. In this context, both the ECB and the NCBs operate by issuing measures that are in turn governed by European law and applicable national law respectively.

BANK OF ITALY ADMINISTRATIVE PROCEEDINGS

In the area of minimum reserve requirements, the Bank of Italy operates by issuing administrative measures, in accordance with the applicable legislation and, in particular, Laws 241/1990 and 262/2005, as amended.

By issuing the Regulation of 21 July 2021 (in force since 9 August 2021) and pursuant to Articles 2 and 4 of Law 241/1990, the Bank of Italy identified the time frame for completion of the administrative proceedings, the organizational units in charge and the procedural steps for the management of minimum reserves. These procedures are detailed in List 4 annexed to the Regulation.

With Resolution 428 of 20 July 2021, the Bank of Italy’s Governing Board delegated the Head of the Market Operations Directorate to issue, within the bounds of its remit, the necessary administrative measures for the management of minimum reserves.

The Regulation, the list of proceedings and the resolutions on the delegation of powers issued by the Governing Board can be found in the dedicated section of the Bank of Italy's website:

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