Daily Archives: July 19, 2012

Claire Jones

Something odd is happening with the ECB’s deposit facility – banks are still bothering to use it.

Predictably, the amount parked at the facility plunged last week after the governing council’s decision to pay nothing on deposits took effect. The slump in deposits was pretty much matched by a rise in funds held in banks’ ECB current accounts – through which most of their central bank business is conducted.  But since then, the amounts transferred to the deposit facility overnight has remained more or less the same.

 

So why are banks still bothering to lock up funds in the deposit facility overnight now that there’s no monetary advantage to parking them there? And to what extent would their behaviour change if the deposit rate turned negative? Read more