cover image: SUERF Policy Brief  - No 840, April 2024


SUERF Policy Brief - No 840, April 2024

9 Apr 2024

Figure 1 represents the aggregate balance sheet as of the end of 2022 in the form of an asset-liability match to provide a clearer picture of the breakdown between the different interest rate regimes. [...] Designed at the level of the aggregate euro area banking system, it follows a double-entry accounting logic and leverages the near-closed-system properties of the banking sector to generate fully consistent projections of its balance sheet: the overall volume of customer deposits follows from the settlement of loans, securities and other accounts, and the effect of central bank transactions is exp. [...] The other main scenario features are a stagnation of the volume of loans, a sharp rise in the share of interest-paying deposits, and a progressive decline of the Eurosystem’s portfolio of securities. [...] Another source of risk is linked to the banks’ net position with the central banks, driven by the evolution of the central bank asset portfolios: in an extreme scenario (S2) where the Eurosystem’s quantitative tightening were to accelerate with a complete liquidation at the end of 2025, the banks would get lower deposits and lower excess reserves as a consequence of the repayments to the central b. [...] In particular, the modelled evolution of deposits is a mechanical result from the behaviour of the central bank, the other central bank depositors, and from the volume of loans and securities.


Anita Kinney

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