Holzmann proposes increasing banks' MRR to 5–10%

Robert Holzmann, head of the Bank of Austria, proposed raising the minimum reserve requirements (MRR) for banks from 1% to 5–10%.

This measure would reduce implicit subsidies received by commercial financial institutions and strengthen the balance sheets of eurozone central banks, which have been strained by previous asset purchases and rising interest rates since the COVID-19 pandemic. As Bloomberg notes, such financial pressures could potentially undermine regulatory independence.

Several national central banks, including Germany's Bundesbank, have reported significant losses. In February, the financial regulator announced a deficit of 19.2 billion euros ($20.1 billion) for 2024.

However, raising the reserve requirement ratio could face opposition from commercial banks, which view the MRR as a tax that could negatively impact lending. This occurred in 2023 when Holzmann previously put forward his idea, the agency recalled.

The European Central Bank is currently re-evaluating its monetary policy strategy. According to Bloomberg, raising minimum reserve requirements is unlikely to be part of the discussion.