The European Central Bank should refrain from taking more accommodative monetary policy measures at its upcoming meeting in September, the National Association of German Cooperative Banks said Aug. 28.
While such measures are giving reduced impetus to the Eurozone economy, their negative side effects are increasing, the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken, or BVR, said.
Monetary policy in the Eurozone is already looser than Japan's, which is noteworthy given that the Japanese policy is often perceived as expansionary, the BVR noted. The course of the monetary policy could be measured by the difference between nominal economic growth and funding costs. A growing gap indicates an expansionary course. The gap in the eurozone stands at 3.1 percentage points, nearly double the 1.7-percentage-point gap in Japan, the BVR said.
Savers are bearing the brunt of the extremely low and negative interest rates across the Eurozone, but this environment is also detrimental for the traditional banking business as the ECB has not provided relief for lenders and is charging them a negative 0.4% interest rate on central bank deposits, the BVR said.
Since early 2019, the industry has been calling on the ECB to introduce tiered deposit rates that would ease some of the pressure on banks' profitability amid the gradual economic slowdown. Banks in Germany are particularly vulnerable to the low-interest-rate environment as they largely rely on net interest income to earn money.
The ECB governing council will hold its next monetary policy meeting Sept. 12.
