ECB Plans Negative Rate on Bank Deposits!

• ECB Plans Negative Rate on Bank Deposits! 
  by Christian Reiermann, http://www.spiegel.de/ 
  When it meets on June 6, SPIEGEL has learned, the European Central Bank may implement a negative interest rate for financial institutions seeking to park their money at the Frankfurt powerhouse. The move is aimed at spurring loans.
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  European Central Bank executive board member Peter Praet of Germany is expected to recommend that the bank cut its main refinancing rate from the current 0.25 percent to a record low of 0.15 percent when the bank’s Governing Council meets on June 5.
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  In addition, the bank also wants to introduce a negative rate on bank deposits of -0.1 for the first time in its history. The ECB’s deposit rate is currently at zero, and a further cut would mean that banks would effectively have to pay a fee to park their money. Normally they would be paid interest to do so. Under the new punitive rate, if a bank were to deposit €100 million in a central bank account, the ECB would withhold €100,000. The measure is aimed at encouraging banks to lend money rather than park it at the ECB. It is hoped the move will prevent the kind of credit crunch and freeze in lending seen during the height of the euro crisis, when private and corporate loans all but dried up.
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