( 2019 ), “ monetary policy, credit institutions, and the bank lending channel in the euro area ”, occasional paper series, no 222, ecb. [ 17 ] see de guindos, l. ( 2019 ), “ challenges for bank profitability ”, speech at the omfif city lecture, london, 1 may. [ 18 ] the annual gross savings for banks from the two - tier system are estimated to amount to up to €4 billion in 2020 compared with the counterfactual projection if the system had not been introduced. these savings more than offset the additional gross excess liquidity charge of around €1 billion that resulted from the september cut of the deposit facility rate by 10 basis points. [ 19 ] see brunnermeier, m. and koby, y. ( 2018 ), “ the reversal interest rate ”, working paper series, no 25406, national bureau of economic research. [ 20 ] for a more detailed discussion of the channels of transmission of the app and its impact on the euro area yield curve, see lane, p. r. ( 2019 ), “ the yield curve and monetary policy ”, public lecture for the centre for finance and the department of economics at university college london, london, 25 november. [ 21 ] see bernanke, b., op. cit. [ 22 ] see eser, f., lemke, w., nyholm, k., radde, s. and vladu, a. l. ( 2019 ), “ tracing the impact of the ecb ’ s asset purchase programme on the yield curve ”, working paper series, no 2293, ecb. european central bank directorate general communications sonnemannstrasse 20, 60314 frankfurt am main, germany tel. : + 49 69 1344 7455, e - mail : media @ ecb. europa. eu website : www. ecb. europa. eu reproduction is permitted provided that the source is acknowledged. media contacts copyright 2020, european central bank

as well as the interaction with asset purchases and other instruments. negative interest rates within our forward guidance framework, the negative interest rate policy has played a key role in enhancing this automatic stabilisation by lowering the effective lower bound. there was no playbook to guide the 2014 decision to push the deposit facility rate – which the ecb pays on bank excess reserves – into negative territory. subsequent cuts, including the latest in september 2019, have brought the deposit facility rate to - 0. 5 percent. a corollary of relaxing the lower bound constraint has been that the propagation of negative interest rates through the term structure of interest rates is qualitatively different and more powerful than traditional interest rate cuts occurring in positive territory. the difference comes from two effects. the primary mechanism is the way in which expectations about the future path of monetary policy are reflected in market interest rates when the central bank reduces the overnight interest rate to very low levels. if the central bank reduces its policy rate to zero and makes it clear that it will not lower its policy rate any further, then this declared and self - imposed non - negativity restriction influences rate expectations among market participants : looking to the future, they will see rate increases as being more likely than rate decreases. as a result, the predictive density of the future rate path will tend to be skewed upward, and interest rates at longer maturities will tend to decline by less than the reduction of the policy rate. by contrast, under a negative interest rate policy, where future rate cuts are possible, the distribution of rate expectations is more symmetric, putting downward pressure on longer - maturity interest rates. rate expectations can even be skewed downwards if the negative rate policy is flanked by communication that the interest rate might be reduced further. in this vein, the ecb ’ s forward guidance has reinforced the negative interest rate policy by stating that the governing council expects the ecb ’ s key interest rates “ to remain at their present or lower levels for an extended period of time ”. chart 4 eonia forward curve and its risk - neutral density : before the negative interest rate policy ( left side ) and after its introduction ( right side ) ( percentages per annum ) source : rostagno et al., op. cit. notes : risk - neutral densities as of 29 january 2013 ( left side ) and 5 september 2014 ( right side ) derived from options on euribor futures. the mean and the percentiles are shifted to