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Impact of ECB negative rate on banks "negligible" - Scope Ratings
October 6, 2016 / 3:32 PM / a year ago

Impact of ECB negative rate on banks "negligible" - Scope Ratings

FRANKFURT, Oct 6 (Reuters) - The impact of the European Central Bank’s charge on euro zone banks’ deposits, a source of grievance in Germany, is “negligible”, Scope Ratings said on Thursday, putting it at just 0.02 percent of their assets.

Analysts at the agency, which focuses mainly on issuing ratings for banks, calculate the ECB’s negative deposit rate - effectively a 0.40 percent charge on banks’ excess reserves - would cost euro zone banks 5.6 billion euros ($6.3 billion) a year.

“While not immaterial, such a cost would be bearable,” analysts Marco Troiano and Chiara Romano wrote in a report.

“It equates to about 0.02 percent of euro area banks’ total assets (30.6 trillion euros as of June 2016), so its impact on return on assets (and equity) is negligible at the aggregate level.”

This estimate is based on the assumption that excess liquidity - the difference between banks’ deposits and their mandatory reserves - grows to 1.4 trillion euros in March 2017.

This is the earliest possible end-date that the ECB has indicated for its bond-buying programme, which pumps 80 billion euros into the financial system every month, the vast majority of which ends up in banks’ own accounts.

For related graphics on excess liquidity in the euro zone, click on and and

To read more, please click: ($1 = 0.8953 euros) (Reporting by Francesco Canepa; Editing by Hugh Lawson)

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