I saw in the news today that the European Central Bank lowered its interest rate below zero.
My understanding is that this rate is what banks are paid (or if negative, "charged") by the central bank to keep their money for short periods of time.
Thinking about this like a normal depositor, I would still be interested in leaving my money in a bank at 0%, just for the added security. But if the bank started changing me interest to leave it there (i.e. had a negative interest rate), then I would just start storing it under my mattress. But if I didn't want to spend it (lend it, in the case of a bank) when it was on deposit, I probably still won't once it's under my mattress.
Why don't European banks just do the same (I.e. keep the money they aren't lending)? Do they need to store their money in the ECB for some reason, so they're compelled to take the hit of the negative interest rate?
Edit: The press coverage says this move was intended to encourage lending. Instead it just seems like it will encourage a shift in where banks store their money (away from the ECB and towards their "mattresses"). How does it actually encourage lending?