The ECB's Power Struggle Will All End in Tiers
There’s an arcane battle going on over the future direction of the central bank's monetary policy. So-called “tiering” of deposit rates would solve little.
The ECB messing around at the margins of deposit rates will do little to help Europe's banks and economy.
Photographer: Thomas Lohnes/Getty Images EuropeWith Mario Draghi halfway out of the door, the battle is on for the future direction of European Central Bank monetary policy. The nature of the contest is arcane, to say the least.
For a while now, the Banque de France governor Francois Villeroy de Galhau has been pushing the idea of “tiering” deposit rates to ease the pain that’s been inflicted on commercial banks by negative interest rates. At the moment, euro zone lenders are essentially having to pay to park their excess deposits with their central banks, putting a squeeze on profits. Tiering would exempt some of those excess reserves from the lowest rate, thereby lowering the cost to the banks.