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The ECB will remunerate the deposits of the States to relieve the markets


The ECB will remunerate the deposits of the States to relieve the markets |  Photo credits: Istock

The ECB will remunerate the deposits of the States to relieve the markets | Photo credits: Istock

FRANKFURT, Sept 8 (Reuters) – The European Central Bank (ECB) said on Thursday it would start remunerating deposits from eurozone member states to ease pressure on bond markets.

From September 14, government deposits with their national central bank will be remunerated at the rate of the ECB’s deposit facility, i.e. 0.75% after the rate hike decided on Thursday.

This development aims to support the reverse repurchase or “repo” market, in which bonds can be exchanged for cash.

This vitally important market has been disrupted in recent years by massive bond purchases by the ECB, which have resulted in a scarcity of government bonds and excess liquidity.

“This change will prevent sudden outflows of deposits into the market at a time when certain segments of the eurozone repo markets show signs of scarcity of collateral,” explains the ECB.

The new remuneration rule will apply until April 30, 2023. (Reportage Francesco Canepa, French version Marc Angrand)





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