On the occasion of the ECB's recent interest rate hike Henrike Hahn, MEP (The Greens/EFA), Deputy Speaker of the German Delegation of the Greens/EFA, Substitute Member of the Economic and Monetary Affairs Committee and Shadow Rapporteur on the ECB Annual Report 2021, comments:
“It's good that the ECB is finally slowing the pace of rate hikes. The sharp drop in demand for credit makes it clear that the interest rate hikes are having an impact. Whether further hikes in interest rates are still appropriate should be carefully considered in the future.
However, it is also clear that the ECB must finally deal with the effects of its monetary policy on the ECB's remuneration of commercial banks' deposits. With today's rate hike, banks will receive €151 billion in interest rate payments for their deposits at the ECB this year.
This is not just a by-product of monetary policy, but also a clear taxpayer-funded subsidy to the financial sector. The ECB does not have a democratic mandate to disburse such an amount to the private sector.
Re-establishing minimum reserve requirements, on which banks do not receive interest, would enable the ECB to limit the remuneration of bank deposits in a proportionate manner, while still allowing for a smooth transmission of monetary policy. I invite the ECB to adapt its policies quickly.”
I would be happy to answer any further questions.