How Central Banks Use Tiered Reserve Remuneration

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Jun 13, 2026 · 8m · transcript

In Episode 49 of Monetary Policy Explained with Fexingo, Lucas and Luna dig into tiered reserve remuneration—a tool central banks use to encourage lending without cutting the policy rate below zero. They walk through the European Central Bank's 2019 tiering system, which exempted a portion of banks' excess reserves from negative rates, saving the banking sector roughly €4 billion per year. Lucas explains the mechanics: how central banks set a threshold, apply a higher rate to the first chunk of reserves, and a lower (or negative) rate to the rest. Luna asks whether tiering actually…