Lower ECB deposit rates drive euro banks to boost loans, not reserves.
The study looked at how lowering deposit rates by the ECB affects banks in the euro area. Banks that rely more on interest rates are likely to reduce their reserves at the central bank when deposit rates are lower. This leads them to lend more money instead. The effect is stronger for well-capitalized banks in certain countries in the euro area. This shows that traditional ways of controlling the economy may not work as well during times of crisis.