Must a EU bank pay 500€ to the ECB, if I deposit 100k€ into that bank? Given that the current ECB reserve rates are negative (-0.5%), I suspect that if I deposit 100k€ into a EU commercial bank, that bank must in turn deposit my money at the ECB and pay 500€/year to ECB (negative interests).
Is that correct? How does the mechanism work?
Banks do not make matching deposits into central banks, other than in a hypothetical 100% reserve system. As such, the answer is “no”.
What happens is that the private bank has a liquidity inflow, and it would need to find a corresponding asset, normally a money market instrument. The yield on that instrument is likely negative, but the “negative interest” is flowing to the seller of the instrument.