Negative interest on excess reserves

[2][3] During economic downturns, central banks often lower interest rates to stimulate growth.

Until late in the 20th century, it was thought that rates could not go below zero because banks would hold onto cash instead of paying a fee to deposit it.

Central banks in Europe and in Japan have demonstrated rates can go negative, and several have pushed them in that direction for the same reason they lowered them to zero in the first place: to provide stimulus and, where inflation is below target, to raise the inflation rate.

[4] The notion is that negative rates will provide even more incentive for commercial banks to make loans.

Potential lending projects by a bank not worth funding (even in a low-interest-rate environment) might now look attractive.