Excess liquidity to keep EONIA close to the ECB’s deposit rate

The ECB ’ s non-conventional policy measures have led to a continuous increase in t he amount of central bank reserves in the euro area banking system . T he amount of excess liquidity, reserves banks hold beyond the minimum reserve requirement s at the ECB , is now close to €2 trillion. Th is large stock of excess liquidity has pushed EONIA close to the ECB’s deposit rate. Ex cess liquidity will gradually decline going forward , as past long-term funding operations are being repaid . Banks will have, for example, an opportunity for early repayment of the second TLTRO operation by end of September. Th e decline in excess liquidity , however, i s unlikely to have any significant impact on the E ONIA - deposit rate spread . Only once excess liquidity will have declined below €300 billion would we expect the spread to widen significantly.