Suppose, for instance, that a bank has € million of excess reserves continuously for one year, then at an interest rate of –0.20% it receives back € 99.8 million, so the cost of depositing funds with the ECB for a full year is € 200,000. Why do banks accept such a cost of depositing excess reserves with the central bank?
The answer is that the alternatives to depositing excess reserves are also costly. In fact, the cost of using alternatives to central bank deposits determines to what extent the rate on excess reserves can go negative in practice. Banks can always choose to hold physical currency instead of electronic money in their accounts with the ECB.