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By Huw Jones
LONDON, Feb 4 (Reuters) - The Bank of England's banking
supervisor said that banks would need at least six months to
make quick fixes before they could implement any sub-zero
interest rates, which may not include current accounts and
mortgages.
The BoE's Prudential Regulation Authority (PRA), headed by
BoE Deputy Governor Sam Woods, asked bank CEOs how much time
they would need to get ready to implement any negative rates.
Earlier the BoE kept its stimulus programmes on hold ahead
of what it hopes will be an economic recovery later this year,
leading to a rise in the pound and British government bond
yields as investors scaled back their bets that the central bank
will implement sub-zero rates anytime soon.
Woods said in a letter published on Thursday that a majority
of British banks said they would need to make some permanent or
"tactical" short-term workarounds to systems and processes.
"The PRA understands that the majority of firms would be
able to implement tactical solutions to accommodate a negative
Bank Rate within six months, without material risks to safety
and soundness," Woods said, adding that permanent or strategic
changes would take 12 to 18 months.
Wood said the PRA will now "engage with firms on their
development of tactical solutions, with the aim of having firms
put themselves in a position to be able to implement a negative
Bank Rate at any point after six months".
Many banks told the PRA that their "legacy" systems were not
built to handle a negative rate and that "substantive" changes
would be needed, Woods said.
"These tactical solutions referred to workarounds that would
be put in place to handle a negative Bank Rate, but do not
necessarily result in a negative rate on retail products such as
mortgages and current or savings accounts," Woods said.
Bankers say negative rates would crimp their ability to make
profit and could lead to banks charging millions of customers in
Britain for corporate and even current accounts.
(Reporting by Huw Jones, Editing by Iain Withers and Alexander
Smith)
