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FRANKFURT, Sept 18 - European Central Bank policymakers want to soon start discussing how to tackle the multi-trillion-euro pool of excess liquidity sloshing around banks, with raising reserve requirements a possible first move, six sources told Reuters.
With rates likely on hold at least until December, policymakers are now starting to shift their focus to the cash that they injected into the banking system over a decade of bond purchases. RAISING RESERVES Several policymakers are in favour of raising the amount of reserves that banks must park at the central bank - on which they do not earn interest - from 1% of customer deposits to a figure that could be closer to 3% or 4%, the sources said.
However, one source said some policymakers wanted to bundle a decision on reserves with those on the ECB's asset purchase schemes and interest-rate framework, which could be a much slower process. ECB President Christine Lagarde said last week that policymakers had not discussed the bond-buying schemes at their latest policy meeting. She described the PEPP as the ECB's"first line of defence" to preserve policy transmission - central bank jargon for bond market stability in the most indebted countries.
Slovakian governor Peter Kazimir said on Monday he would wait another six months before making a decision on PEPP.
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