ECB "Up to 700 billion euros in deposit outflows possible if digital euro is introduced"

The European Central Bank (ECB) estimated that, in a situation of financial distress following the introduction of a digital euro, up to 700 billion euros (about 1,010 trillion won) in deposits could be withdrawn from commercial banks. It analyzed that in this case about 12 banks within the eurozone could face liquidity pressures.

On the 11th (local time), Reuters reported that this analysis was conducted at the request of the European Parliament to assess the impact that the introduction of a 'digital euro' would have on banking sector liquidity. The ECB said that, assuming a per-person digital euro holding limit of 3,000 euros, an amount corresponding to about 8.2% of total retail deposits could be withdrawn.

The ECB explained, "This corresponds to an extreme scenario and the likelihood of it actually occurring is low," while also pointing out, "Small retail banks, which have weaker deposit bases, could be relatively more affected." Some members of the European Parliament urged a cautious approach, saying, "Bank runs in the digital age can unfold much faster and more forcefully than in the past."

However, the ECB added that the estimates may be overstated because they did not take into account that some depositors hold multiple bank accounts. Conversely, it found that if the holding limit were lowered to 500–2000 euros, the scale of deposit outflows would be significantly reduced.

The ECB said, "The holding limit restriction has been confirmed as a means to help maintain the stability of the financial system and to support the effective implementation of monetary policy."

Meanwhile, European Union (EU) finance ministers last month agreed on a roadmap for launching the digital euro, and the holding limits and the actual introduction timing will be discussed later.