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Morgan Stanley Says Digital Euro Could Deplete Bank Deposits by 8%: Report

Smaller countries such as Greece, Latvia, Lithuania and Estonia would be hit the hardest.

Jun 16, 2021 at 8:04 a.m. UTC
Updated Sep 14, 2021 at 1:11 p.m. UTC

A digital euro could deplete bank deposits by 8%, according to a Morgan Stanley report cited by Reuters.

  • The U.S. investment bank based its estimate on a scenario where all citizens in the euro region aged 15 and older transfer €3,000 ($3,600) into a European Central Bank (ECB) digital wallet, Reuters reported Tuesday.
  • Morgan Stanley said that is a "bear case," using €3,000 as an amount because it was mentioned by ECB policymakers as a theoretical cap for citizens to hold.
  • "This could theoretically reduce euro-area total deposits, defined as households' and non-financial corporations' deposits, by €873 billion [$1.06 billion], or 8%," Morgan Stanley said.
  • Smaller euro-zone countries – such as Greece, Latvia, Lithuania and Estonia – would be hit the hardest. In these countries, converting €3,000 would be equivalent to 22%-51% of household deposits and 17%-30% of total deposits.
  • Like the majority of major central banks, the ECB is researching the implications of a central bank digital currency, with the threat to bank deposits often highlighted as one of the potential pitfalls. Should consumers choose to use a digital euro for everyday spending, depleted bank deposits would hamper banks' ability to lend.
  • ECB President Christine Lagarde said in March that a digital euro is likely to be launched within four years.

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