Minimum reserves

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.