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(Adds banking sector reaction)
By Huw Jones
LONDON, Feb 4 (Reuters) - Banks told the Bank of England
they would need at least six months to work out how to respond
to sub-zero rates, which experts say could see borrowers paying
less interest, savers receiving less, and even charges imposed
on current accounts to recover profit.
Investors have scaled back their bets that the British
central bank will implement sub-zero rates anytime soon amid
hopes of an economic recovery later this year, leading to a rise
in the pound and British government bond yields.
Nonetheless, the BOE's Prudential Regulation Authority
(PRA), headed by BoE Deputy Governor Sam Woods, has been
consulting with banks and reported findings on Thursday.
Banks said their "legacy" systems were not built to handle a
negative rate, but that a majority of them would be able to
implement "tactical" or short-term workarounds in time.
"These tactical solutions... do not necessarily result in a
negative rate on retail products such as mortgages and current
or savings accounts," Woods said.
"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."
Permanent or costlier strategic changes would take 12 to 18
months, he added.
Wood said the PRA will now engage with firms with the aim of
having them able to implement a negative Bank Rate at any point
after six months.
David Postings, CEO of banking industry body UK Finance,
said negative rates would require "considerable changes" to
systems and starting to work out how to implement them now will
give maximum flexibility in the future.
Much of the work will be on ensuring readiness of tracker
mortgages, which move in tandem with base rates, to reflect any
sub-zero rates.
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.
(Additional reporting by Iain Withers
Editing by Alexander Smith and Alexandra Hudson)
