by Mike ‘Mish’ Shedlock
Questions on negative rates keep coming in: Where does the money go? Who benefits? Will the Fed do the same? What’s Draghi up to?
A quick refresher course on paying interest on excess reserves vs. charging interest on excess reserves is in order.
Q: Who has negative rates?
A: The European Central Bank (ECB), Sveriges Riksbank in Sweden, the Swiss National Bank (SNB), the Bank of Japan (BoJ), and Denmark’s Danmarks Nationalbank (DN) all have negative rates.
Q: Negative rates on what?
A: The above five countries have negative rates on “excess reserves”. Switzerland also has negative rates on deposits. Most banks are reluctant to put negative rates on deposits fearing banks runs and currency hoarding.