This fee is a cost levied by the European Central Bank (ECB) on commercial banks holding excess reserves in their accounts at national central banks within the Eurosystem. For example, if a commercial bank maintains a higher balance than required for mandatory reserves or operational needs, the ECB may apply this charge to discourage excessive liquidity hoarding.
Managing excess liquidity is crucial for maintaining price stability and promoting efficient monetary policy implementation. Historically, this charge has been used to steer market interest rates and influence bank lending behavior. By incentivizing banks to lend excess funds rather than holding them, this mechanism contributes to a healthy and dynamic financial ecosystem. This framework helps manage inflation and supports economic growth.