Monetary Policy

Two-tier System

On 30 October 2019, the two-tier system for reserve remuneration was introduced which exempted part of credit institutions' (subject to the minimum reserve requirement) excess reserve holdings from the negative deposit facility rate. The two-tier system applied to excess liquidity held in current accounts with the Eurosystem but did not apply to deposit facility holdings. The amount of reserve holdings in excess of the minimum reserve requirement that is exempt from the deposit facility rate (the exemption allowance) was determined as a multiple of a credit institution's minimum reserve requirements. The Governing Council decided to set the multiplier for the calculation of the allowance at six and the applicable remuneration rate at zero percent. The non-exempt excess reserve holdings continue to be remunerated at zero percent or the deposit facility rate, whichever is lower.

Following the raising of the deposit facility rate to above zero effective from the 14 September 2022, the two-tier system for the remuneration of excess reserves is no longer necessary. The Governing Council therefore decided to suspend the two-tier system by setting the multiplier to zero.