> keep an entry in a digital record

A record where, though?

Bank "clearing" means that ultimately a bank is keeping its money either with other banks or with the central bank. They're records, but not necessarily interest-bearing, and keeping it with other banks is not risk-free.

How about keeping it with the central bank?

ECB deposit rates are also negative.

https://www.ecb.europa.eu/explainers/tell-me/html/what-is-th...

I'm not an economist or finance expert so take the following with a grain of salt, but this is how I understand it...

When you talk about "money being electronic" you're basically talking about bonds. When people (or companies, foreign governments, etc.) want to hold large quantities of USD they don't really hold USD, they hold short-term US government bonds.

The only truly "real USD" is physical cash, or an account balance at the Federal Reserve (which is available only to banks).

So people don't own bonds just because of the coupon, it's also really the only convenient way to own (something mostly equivalent to) currency -- other than keeping it in a private bank, which is much more likely to fail than the government.

The odds of a commercial bank going bust is higher then Germany going bust. Commercial banks only need to keep a few % of the money deposited at them on their books (its called fractional reserve banking), the other 95% or so can be invested or lent out elsewhere. There are regulations that restrict the risk, require hedging, insurance, etc but those don't help much if the insurer or a significant amount of the borrowers go bust as well due to systemic problems.

Banks are allowed to loan out the money, but they don't have to, and could take business from the negative-yielding government bonds by just leaving the money alone, in their electronic reserve account.

Then where is the bank supposed to keep their money? In another commercial bank? In cash? This creates an infinite regression problem...

They could keep it in the Fed, but the Fed charges money for the privilege (and I assume so does the ECB and other equivalents)

Banks hold unloaned reserves already.

Hold them where? In cash?

I imagine I could hold cash safely for a fee less than 0.75%

FWIW we're used to thinking of bank deposits as risk free- but realize, FDIC insurance is capped at $250k! Bank deposits of large sums, then, carries some risk, which can be translated to cost/depreciation.

(I realize we're talking about German banks, and FDIC is a US institution)