German Banking Association Opposes ECB's Proposed Increase in Minimum Reserve Ratio
Miles Bennett
The ECB is considering doubling banks' minimum reserve ratio from 1% to 2%. Germany's banking lobby hit back, calling the move a de facto tax that would weaken European banks' global competitiveness.
What is the ECB considering?
The ECB is weighing a plan to raise the minimum reserve ratio — the share of funds banks must park in non-interest-bearing central-bank accounts — from 1% to 2%, according to sources cited by Reuters.
This means → banks would have to freeze twice as much capital at the ECB, earning nothing on it.
The goal: cut the ECB's own interest expenses and offset side effects of its anti-inflation rate hikes.
Why is the German banking industry pushing back?
Heiner Herkenhoff, CEO of the German Banking Association, said the higher requirement would tie up extra liquidity, erode profitability, and squeeze room for lending and investment.
In plain terms = banks forced to park more money at the ECB have less to lend or invest — their earning power shrinks directly.
He called the move a "substantial tax" on European banks, one that would put them at a further disadvantage against global rivals.
How does geopolitics change the calculus?
Herkenhoff stressed that with geopolitical uncertainty rising, "Europe needs strong, competitive banks — not additional competitive handicaps."
This reflects a deeper tension: the ECB wants to save on its own costs, but the bill lands on commercial banks — the very channel through which credit flows to the European economy.
The topic has not yet reached the ECB Governing Council for formal debate; internal talks remain at an early stage. A decision is expected this autumn — making the fall policy window the key date to watch.
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