ECB calls for change in banks' approach to liquidity

Member of the Executive Board of the European Central Bank (ECB) Isabel Schnabel and Chair of the Supervisory Board Claudia Buch voiced the need to prepare the banking system for a new operational framework. They warned about the gradual reduction of excess liquidity and emphasized that it is important for financial institutions to start adjusting their behavior now.

Currently, nearly €3 trillion ($3.27 trillion) of excess liquidity remains in the banking system. The ECB intends to shrink this amount by €500 billion ($545 billion) by redeeming government bonds. However, commercial banks must already begin to adapt to the new operating conditions.

Banks should pay special attention to the development of IT infrastructure and training of staff. They must effectively use various liquidity sources, including transactions with the central bank, as well as the money market. The review of the operational framework is scheduled for 2026, but the adjustment should start in advance, the representatives of the regulator believe. In their opinion, this will help ensure stable operation of the financial system in the future.