Guest post. Translated from the French by Tim Gupwell
Two days ago, Christian Noyer, the Governor of the Bank of France, confidently commented on the decision taken by the BCE to put an end to all remuneration on the liquidities parked in the Eurosystem by the commercial banks. The banks prefer placing their holdings in a sure location, rather than lending it out to their peers. 800 billion Euros have recently taken this route – an unprecedented level. As one can see, there is no lack of liquidity in the market, the problem is the use it is put to, or rather not put to.
“We have taken an important step towards discouraging banks from bringing their liquidities to us, and encouraging them to be more active in distributing credit and in terms of investments in the securities markets,” explained Christian Noyer subsequently, who is also a member of the Executive Board of the ECB, expressing the hope that the “banks help revive the interbank market” – the key to the problem in his opinion.