Monetary Policy

Two-tier System

On 30 October 2019, the two-tier system for reserve remuneration was introduced which exempts part of credit institutions' (subject to the minimum reserve requirement) excess reserve holdings from the negative deposit facility rate. The two-tier system applies to excess liquidity held in current accounts with the Eurosystem but does 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) is 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.