UPDATE 1-Bank of England asks banks about readiness for negative rates

(Adds details)

LONDON, Oct 12 (Reuters) - The Bank of England asked banks
on Monday for information about their readiness for zero or
negative interest rates, following up on its announcement last
month that it was considering how to take rates below zero if
needed.

"As part of this work, we are requesting specific
information about your firm’s current readiness to deal with a
zero Bank Rate, a negative Bank Rate, or a tiered system of
reserves remuneration – and the steps that you would need to
take to prepare for the implementation of these," Deputy BoE
Governor Sam Woods said in a letter to banks.

"It is important for the Bank, PRA, and firms to understand
the implications of these potential approaches to implementing a
zero or negative Bank Rate, since the MPC may see fit to choose
various options based on the situation at the time," he said.

Woods said he wanted to know if there were any technology
challenges to implementing zero or negative rates.

The BoE set a deadline of Nov. 12 - a week after its next
monetary policy announcement - for banks to respond to its
request for information on the impact of negative rates.

Woods echoed recent comments by BoE Governor Andrew Bailey
by saying the central bank's look into the impact of taking
rates to or below zero was not a sign that it would cut
borrowing costs to those levels.

The BoE is widely expected to announce on Nov. 5 that it is
increasing its bond-buying programme again to help Britain's
economy as it tries to recover from its record slump earlier
this year caused by the coronavirus lockdown.

(Reporting by Huw Jones
Writing by William Schomberg)