The European Central Bank has published a report on the Eurosystem’s Q4 2025 bank treasurer survey, showing that euro area banks expect to continue holding central bank reserves well above minimum reserve requirements and to keep those positions broadly stable even as aggregate excess liquidity declines. Based on responses from 184 banks representing about 72% of euro area banking assets and reserves, the survey finds that expected reserve demand is shaped mainly by internal liquidity management, liquidity and minimum reserve regulations, expected deposit outflows, supervisory expectations and a desire to maintain a strong liquidity profile. Reserve preferences vary materially by business model, with retail banks and diversified lenders reporting median preferred reserve levels of around 2% of total assets, versus about 4% to 6% for corporate lenders, custodians and asset managers. The report indicates that banks are managing liquidity primarily against internal liquidity coverage ratio and net stable funding ratio targets, typically set above the 100% regulatory minimum, and that these metrics are currently more binding than absolute reserve levels. While the Eurosystem expects aggregate excess liquidity to fall by about 20% over 2026, most respondents expect their own reserve positions, as well as LCR and NSFR levels, to remain broadly stable by the end of 2026. If faced with a liquidity shortfall in normal conditions, banks would first use unsecured term money markets, debt issuance and deposit gathering, while stressed conditions would push them more toward secured funding, including repo and Eurosystem borrowing. Expected demand for the Eurosystem’s standard refinancing operations remains limited for now. Most banks do not plan regular use over the next three years, although 15% reported concrete participation plans, including 11% expecting short-lived but likely recurring use and 4% incorporating SROs into funding plans. Borrowing would become more likely if SROs were cheaper than market funding, market access deteriorated or banks needed to improve LCR, while ample liquidity, more attractive market pricing and perceived investor or ratings stigma remain the main deterrents. Many banks without firm participation plans nonetheless indicated willingness to conduct operational readiness tests, and decisions on SRO use are typically taken at senior treasury and executive management level.
European Central Bank2026-07-24
European Central Bank survey finds euro area banks expect stable reserve holdings and limited demand for standard refinancing operations
The European Central Bank’s Q4 2025 bank treasurer survey shows euro area banks expect to hold reserves well above minimum requirements and keep them broadly stable through end-2026 despite falling excess liquidity. Banks see LCR and NSFR targets as more binding than absolute reserve levels and would generally turn to markets first if liquidity tightens. Most do not plan regular use of standard refinancing operations, with demand likely to rise mainly if market funding becomes less attractive or less available.