Bloomberg News

ECB’s Coeure Says Negative Bank Deposit Rates Are Possible

July 20, 2012

The European Central Bank’s decision to cut deposit rates to zero had a “substantial” impact, while the bank needs to “reflect a lot” before deciding to reduce the rate further, ECB executive board member Benoit Coeure said.

Speaking today in Mexico City, Coeure said he sees the global economy moving toward very low or zero growth, stopping short of recession.

Coeure said the ECB needs to find ways to reduce reliance on ratings companies and can build credit rating capacities within its own institutions for some sovereigns. The central bank decided July 5 to cut its benchmark rate to a record low of 0.75 percent as well as cutting the rate it pays on overnight deposits to zero.

“The impact has been quite substantial on the whole yield curve,” Coeure said. “Now we see negative yields for all kinds of government securities.”

Before deciding whether to move the deposit facility to a negative yield “we’ll reflect a lot,” he said. “It’s possible.”

The ECB will need to consider whether markets can function at negative interest rates, he said. “Some of them can,” he said. “Some of them currently don’t. There are technical issues.”

To contact the reporter on this story: Nacha Cattan in Mexico City at

To contact the editor responsible for this story: Joshua Goodman at

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