The Bank of England (BOE) told banks to start getting ready for negative interest rates, while also saying that message shouldn't be taken as a signal that the policy is imminent.
The central bank's Prudential Regulation Authority (PRA) said most financial institutions aren't sufficiently prepared for the prospect of negative rates, especially as regards to retail products like rate-tracking mortgages, so they should take at least six months to set their systems up without running undue risks. The BOE made the announcement as it held its key rate at a record low of 0.1 percent.
The move raises the threat that the central bank will push borrowing costs below zero, turning the lending business on its head by charging depositors to store cash while giving money back to borrowers. The BOE has been studying the case for negative rates for almost a year as a way to pull the U.K. out of its worst slump in three centuries. So far, it hasn't followed counterparts in Europe and Japan in implementing the policy.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
- Exclusive discounts on ALM and Treasury & Risk events.
- Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
*May exclude premium content
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
