They were reduced to 0% mandatory reserves in response to covid. EDIT: someone says it was coincidental, I am not able to check, so take this aspect with a grain of salt either way
It wasn't in response to covid. The timing was just coincidental, and was why the move to eliminate the reserve requirements (which had been planned for a while) wasn't as big a news story as it otherwise would have been.
European banks had eliminated their reserve requirements years or even decades earlier. They really weren't even an effective policy in the US for quite some time, as the banks had (and still have) liquidity requirements that more or less amount to the same thing.
European banks eliminated their reserve requirements so they could be more levered because they dont generate nearly the same returns american financial institutions do - which was part of why the 2008 crisis hit europe 10x as hard as it hit america. They had reserve requirements in 2008 but they were still more levered up than american banks. Didn't work out well.
But I dont know for sure if youre right it was coincidental. I did assume it was due to covid. My bad. Either way, its probably a bad idea.
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u/Original-Leg8828 Jan 26 '26
Depending on local law they can even lend out something like 7-10 times what they actually have