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Austrian central bank governor calls for end to ECB subsidy for commercial banks

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European Central Bank,Commercial Banks,Subsidy

Austrian central bank Governor Robert Holzmann has called for the European Central Bank (ECB) to stop subsidizing commercial banks and reduce interest payments on the cash they receive from the ECB. Holzmann argues that the current structure places a major burden on the financial outcomes of central banks and that deficits cannot be sustained indefinitely. The issue stems from the ECB's quantitative easing program, which has led to commercial banks parking excess liquidity at the ECB at a 4% rate.

The European Central Bank needs to stop subsidizing commercial banks and should cut interest payments on the piles of cash lenders got from the central bank on the cheap, Austrian central bank Governor Robert Holzmann said. Commercial banks are sitting on 3.2 trillion euros worth of excess liquidity, parking this at the ECB at a 4% rate, pushing the ECB and many of the euro zone's national central banks deep into the red.

"There’s no monetary policy reason why we should offer this subsidy," said Holzmann, who also sits on the ECB's 26-member Governing Council."It's not acceptable that the current structure puts major burden on the financial outcomes of central banks," Holzmann told Reuters in an interview. "We cannot run deficits without an end in sight, it can’t be the case." At the core of the issue is the ECB's large scale money printing operation, also known as quantitative easing, which was the hallmark of its stimulus efforts over the past decad

 

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