Pierre Wunsch Opposes ECB Plan to Raise Bank Reserve Charges
Pierre Wunsch opposes a European Central Bank proposal to increase minimum required reserve ratios to offset the central bank's financial losses.
Governor of the National Bank of Belgium Pierre Wunsch opposed a proposal by the European Central Bank to increase charges on commercial banks by raising the minimum required reserve ratio. Speaking at a conference in Brussels, Wunsch argued that using the ratio to reduce the central bank's financial losses would transform the mechanism into a "quasi-fiscal instrument."
The European Central Bank is currently debating whether to require banks to hold more excess liquidity in unremunerated accounts. This move aims to tighten financing conditions and mitigate losses the bank has incurred from paying interest on trillions of euros in excess liquidity.
Wunsch cautioned that increasing these taxes on banks could discourage their participation in future bond purchase schemes, which he warned would damage the credibility of future central bank operations. He maintained that fiscal policy is typically not a role allocated to a central bank.
