QuestionWhat is the Complementary Deposit Facility?
Under the Complementary Deposit Facility, the Bank applies interest rates to financial institutions' excess reserves (current account balances and special reserve account balances at the Bank in excess of required reserves held by financial institutions subject to the reserve requirement system). After the introduction of the facility in 2008, the Bank applied a positive interest rate to excess reserves up until Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate (as explained later) was introduced in January 2016.
Under the framework of QQE with a Negative Interest Rate, current accounts at the Bank were divided into three tiers, to which a positive interest rate, a zero interest rate, and a negative interest rate were applied, respectively.
However, in March 2024, the Bank decided to change the monetary policy framework, and it has abandoned the tier system and applied a positive interest rate to excess reserves, as it did before the introduction of QQE with a Negative Interest Rate.
Eligible Institutions
Financial institutions eligible for the Complementary Deposit Facility are mainly banks, securities companies, and tanshi companies (money market brokers) that have current accounts at the Bank. However, as an exception, some financial institutions with current accounts at the Bank, such as central counterparties and public financial institutions, are ineligible for the facility. Financial institutions that do not hold current accounts at the Bank, such as investment trust companies and insurance companies, are ineligible for the facility.
Related Page
For modifications of the scheme of operations under the Complementary Deposit Facility, see Complementary Deposit Facility.