So, so explain this post, the Bank if Italy balance sheet for October was published last Friday. And the TARGET2 debit fell about EUR50 billion, the largest on record... why?
This is the largest T2 debit decrease in record. Well, this coincides with the new “tiering system” whereby 6 times required reserves can be deposited at 0%... 
Now, capital inflows and T2 debit declines are not unknown. But they are usually associated with falling BTP yields and anticipation of ECB asset purchases. Not so this time. Why?
The tiering system has made it possible for Italian banks to access liquidity abroadat negative yields in order to deposit at BdI at 0%z
Hence current accounts at the Bank of Italy reached the highest level in history. Presumably banks in Italy can access funding at negative rates to deposit at home; and Core banks are willing to provide such funding at a loss more favourable than holding deposits at home.
This, the new tiering system has contributed to increased interbank lending. Now, it’s possible there are other channels through which this is working; but overall the Bundesbank balance sheet is consistent with German banks...
Channeling liquidity to Italy so that they pay less “tax” than if they kept surplus liquidty at home. Roughly, the Core countries pay EUR1 million a day to the euro system, but could be paying EUR0.8 billion currently, this saving 0.2bn a day!!!
What’s not to like?!
