The European Central Bank is weighing a return to a policy it abandoned over a decade ago. Sources say policymakers are actively discussing whether to raise the minimum reserve ratio from 1% to 2%, with a decision expected this autumn.
If that sounds like a small number, here’s the thing: that single percentage point shift could pull approximately €165 billion in excess liquidity out of the euro area banking system.
What’s actually on the table
The minimum reserve ratio determines how much cash commercial banks must park at the central bank relative to their deposits.
The ratio was originally set at 2% when the euro launched in 1999. Then the sovereign debt crisis hit, and the ECB cut it in half to 1% in January 2012, hoping cheaper liquidity would encourage banks to lend more freely. That emergency-era setting has remained in place ever since.
