To me, the story is not clear on certain details. Just because someone puts 100,000 Euros in a bank doesn’t mean it can’t be invested by the bank.
One think I do know: banks act in their own self-interest. So what the government and central bank is doing is the undoubtedly the source of the trouble.
But the specifics elude me. And I don’t think the story fully explains what’s going on.
Legally, they are prohibited from investing deposited fund in certain ways. This is to prevent total loss of those funds, and maintain access by the depositor. Really, the only accepted way of investing those funds is through lending them out to borrowers.
People are not borrowing at the moment. Many more depositors, meaning more negative rates from the Central Bank, far outweigh the borrowers. The interest they would get from borrowers is being eaten up by the negative rates the banks have to pay the Central Bank.
That is why they are now refusing deposits.