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(Adds bank executives' comments, background, bylines)
By Huw Jones and Iain Withers
LONDON, Dec 14 (Reuters) - The Bank of England should
carefully consider whether negative interest rates would have
the outcomes hoped for, a senior HSBC bank executive said on
Monday.
The BoE is consulting with lenders to see what preparations
they need to make if the central bank were to cut interest rates
to negative levels to help an economy hit by the COVID-19
pandemic.
BoE Governor Andrew Bailey has stressed that no decision has
been taken on negative rates, but bankers told lawmakers on
Monday such a policy would be costly, distracting and may not
even work well.
Lenders in Britain make the bulk of their profits on the
difference between the rates charged on lending and paid out on
deposits and are concerned margins will be further squeezed by
sub-zero rates.
"I do think the (BoE's) Monetary Policy Committee does have
to carefully consider whether negative interest rates have the
desired outcomes," Amanda Murphy, head of commercial banking at
HSBC UK, told parliament's Treasury Select Committee.
"Where we see places where they have already been
introduced, Europe, Japan, Switzerland, we haven't seen
inflation rise and the growth hasn't come back as strongly as
one might have hoped," she added.
"We have a programme underway to get ourselves ready, we are
not ready to date to be able to deal with negative interest
rates. There is considerable cost associated with that that we
put into the system to enable us to do that," Murphy said.
Susan Allen, chief executive for retail and business banking
at Santander UK, said the bank's legacy systems were not ready
for negative interest rates.
"That programme to adapt those systems would realistically
be expected to take somewhere in the region of 12 to maybe 18
months to deliver," Allen said.
David Oldfield, CEO of Lloyds Commercial Banking, said
preparations for implementing negative rates were not a trivial
matter.
"It's a tool in the Bank of England toolbox and it's not
clear at this stage quite how they are going to deploy this
range of tools over time," Oldfield said.
Starling Bank CEO Anne Boden said negative rates would not
have the impact that people expect.
"We already charge negative interest rates on our euro
accounts for sums above 50,000 so our systems are ready," Boden
said.
Asked about fraud concerns on more than 42 billion pounds
worth of COVID emergency loans granted by the industry to small
businesses, Lloyds' Oldfield said the rate of fraud on its own
loans was about five times normal levels, but still less than
1%.
(Reporting by Huw Jones and Iain Withers; Editing by Richard
Chang)
