Gone4Good
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Sep 9, 2005
- Messages
- 5,381
I had to calculate the total cost of funding to the bank and pass it to all the lending depts so they knew what they had to get just to break even... it would have included all reserves set asides and even a negative rate, which when you come down to it is basically a reserve requirement....
I doubt any bank is allocating ECB interest the way you suggest.
The ECB is charging member banks who deposit money with the ECB interest on those deposits. If the banks lend that money out, instead of depositing it with the ECB, they don't pay that interest.
So interest paid to the ECB is not a cost of loaning money. It is a cost of not loaning money. Which makes it the opposite of a reserve requirement.
Last edited: