ECB’s Tiering System May Be on Auto Pilot for Years of QE

(Bloomberg) --

The European Central Bank could easily leave its tiering system unchanged for the duration of its asset purchases, though it may decide to tweak the scheme toward the end of this year to mitigate the negative side effects for banks, according to Bloomberg Economics. The ECB currently applies a multiplier of six to an institution’s minimum reserve requirements to determine the exempted amount -- that leaves only about one trillion euros ($1.1 trillion) of reserves subject to the deposit rate. If the ECB were to decide it doesn’t want to significantly increase that figure, it could raise the multiplier to seven from next year, as additional QE purchases increase the stock of excess liquidity.

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