Readers Ask: Why Not Keep Cash Instead of Parking Euros With the ECB for Negative Returns?

by Mike ‘Mish’ Shedlock
Mish Talk

In response to Financial Wonderland: Reader Questions on Negative Rates and Money Heaven, several readers asked “Why do banks park funds at the ECB for negative returns instead if simply keeping cash?”

That’s a question I meant to answer in the above Financial Wonderland link, but let’s answer it now.

The two applicable answers are insurance, and space. It would cost more money for insuring bank vault cash that it costs in negative interest.

The insurance reason presumes banks have vaults big enough to store all that cash in the first place.

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