Money Market Update: another ECB remuneration tweak?

To summarize:

• The ECB is a loss-making central bank nowadays, with operating losses wiping out half its equity last year. Its equity will very likely be fully wiped out within the next year and a half;
• In 2023, the ECB responded to its operating losses by cutting the remuneration rate of banks’ required reserve, penalizing government and other official sector deposits. It also ceased dividend payments. Given the sustained losses, there’s a risk of more such  ‘technical tweaks’ to remuneration, which distort the money market;
• However, the ECB sits on a trillion euros in unrealized gains on its balance sheet. Gains which it doesn’t allow itself to recognize;
• Any debate on further changes to reserve renumeration and dividend payments should involve the ECB’s massive gains on its assets, principally its gold holdings.