When rates go negative, it can be costly sitting on massive cash balances. This is when liquidity optimisation specialists come to their fore. They typically ply their trade in the depths of Group Treasury at head office or in the more subdued areas of major trading rooms. The ratio of non-client assets to total assets has increased on the balance sheets of global banks post GFC. The banks with Treasury units that are most proficient in managing the non-client assets and the overall funding base have a key competitive advantage. In this environment it is hardly surprising therefore to see Deutsche Bank taking actions to reorganise Treasury.
https://www.ft.com/content/03b7d31c-c5bd-11e9-a8e9-296ca66511c9
However, if not done well, this can all end in tears. We have witnessed “low forever” interest rates in Japan for 20 years and so can make some educated guesses on how banks will respond in Europe. The search for yield will drive longer tenors. Think of the 100yr JGB . Now imagine how the 100yr price will fluctuate if somewhere down the road the rates head up quickly. These could be unexploded bombs in bank balance sheets as the revaluation hits the books. There will also be a move into higher risk areas - the Japanese banks have gone overseas in pursuit of yield which increased their vulnerability to dislocations in swap markets. The EUR banks will likely increase the proportion of non EUR non-client assets with associated funding risks , but will also likely delve into more complex structured investments.
This is all perfectly rational and if executed with the utmost skill of professional specialists it could all go well - but undoubtedly there will be instances of over-reach as the EUR bank quest for positive yield intensifies.