However, banks often decided to hold on to about one fifth of excess reserves which they placed in the deposit facility that pays a lower rate of remuneration, so that the short-term rate remained stuck to the floor of the corridor (Slide 9).
This points to banks’ strong preference for reserves, which may affect the ability of central banks to effectively steer short-term rates in a large corridor system, such as the one we had before 2008. [13] There are two main reasons as to why banks may today wish to hold a higher level of excess reserves. One relates to regulatory changes.