Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Use Tiered Reserve Systems
Episode 77 of Monetary Policy Explained with Fexingo dives into tiered reserve systems — a policy tool central banks use to shield small banks from negative rates or manage liquidity gluts. Lucas and Luna walk through the 2020 Bank of Japan tiering, which exempted part of bank reserves from negative rates to protect regional lenders' margins. They compare it to the European Central Bank's 2019 tiering, which set a multiplier on excess reserves to curb pass-through to lending rates. The hosts discuss why tiering dampens the transmission mechanism but preserves financial stability…
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