These costs of holding and insuring cash explain why the effective lower bound on interest rates is below zero.7  4  The ECB’s deposit facility rate has become its most important policy rate in an environment of very ample excess liquidity.
The overnight money market rate, which was previously driven by the rate on the ECB’s main refinancing operations, is now close to the deposit facility rate. 5  See, for example, The Economist, “Negative creep”, 6 February 2016.