Marginal Lending Rate

The Marginal Lending Rate is the administered rate banks pay for overnight credit from the Eurosystem against eligible collateral. It is one of three key ECB interest rates set by the Governing Council to keep prices stable in the euro area. The facility has run since 1 January 1999 with identical terms across the euro area.

It is not a market rate or a household borrowing cost. The policy stance has been steered through the deposit facility rate since the 2024 framework.

The rate is decided, not surveyed, at monetary policy meetings held about every 6 weeks, with no fixed calendar day. The facility itself is open daily when TARGET, the Eurosystem payment system, operates.

Decisions appear at 14:15 CET with a press conference at 14:45 CET. Each release covers the other two key rates, asset purchases, refinancing operations and quarterly projections. Changes apply from the stated date or the next business day. Past rates are never revised, only replaced by later decisions.

The rate has no market components and reflects three policy rates plus three operating elements.

• Deposit facility rate: the floor of the overnight corridor, steering the policy stance since the 2024 framework.
• Main refinancing operations (MRO) rate: the price of regular one-week liquidity, set above the deposit rate.
• Marginal lending facility rate: the price of overnight credit against eligible collateral, capping overnight market rates.
• Eligible counterparties: only qualifying institutions borrowing through their home national central bank on their own initiative.
• Eligible collateral: pledged assets backing each loan, with no borrowing limit beyond sufficient collateral.
• Overnight maturity and TARGET window: one-night loans repaid the next business morning, requested shortly after TARGET close.

The 21 July 2022 decision raised three rates by 50 basis points, to 0.50% refinancing, 0.75% marginal lending and 0.00% deposits from 27 July 2022. The larger than signalled step started the exit from negative rates and was the first increase since 2011. Deposits at 0.00% ended an eight-year negative rate era, with marginal lending 25 basis points above refinancing.

The same release approved the Transmission Protection Instrument and a meeting by meeting approach tied to the 2% inflation goal. A further 75 basis point rise followed on 8 September 2022.

1. Policy rate: The Governing Council sets the annual rate and announces it in advance.
2. Overnight draw: On any TARGET business day, an eligible bank borrows overnight from its national central bank against eligible collateral. The loan takes the form of a repurchase agreement or a collateralised loan.
3. Overnight maturity: Credit lasts one night and is repaid the next day TARGET2 and the securities settlement systems operate.
4. Simple interest: Interest accrues as simple interest using actual days over 360 and is paid with the principal.
5. Formula and example: Interest equals principal times the annual rate times days divided by 360; one night means one day. For example, EUR 5,000,000 overnight at 0.75% gives EUR 104.17, paid with the principal the next business morning.