BoE asks banks how ready

they are for negative rates

Financial Times

Matty Mezes - 40271739

Financial Times. (2020). BoE asks banks how ready they are for negative rates. Retrieved from https://www.ft.com/content/7994e660-eaf0-40d5-a631-5b7663f16ceb
 • How did we get here?

• What does it mean?

Contents • Has it happened before?

• What are the implications?

• Questions?
• How did we get here?

• What does it mean?

• Has it happened before?

• What are the implications?

• Questions?
BoE base rate
 Covid-19
• Economy came to a standstill
• Chancellor of the Exchequer propping up the
economy through:
• Furlough scheme
• Grants
• Universal credit
• Purchase of PPE, ventilators, …

Total cost of £210bn (up to 7 August)

• How did we get here?

• What does it mean?

• Has it happened before?

• What are the implications?

• Questions?
 BoE statement of
exploring negative rates

• 17th September 2020

• 0.6% drop in value of Sterling against the
dollar
 Three main concerns raised by banks:

• whether their core IT systems would be able to

What do negative rates handle a switch
mean for banks? • what impact would it have on customer contracts
that assume a single, positive interest rate

• how banks would communicate the changes to

customers
What do negative rates • Will customers get charged to hold their deposits
in the bank?
mean for customers?
• Will customers enjoy negative mortgage rates?
What do negative rates • Government bonds may produce negative returns
mean for investors? • Investors will look for returns in riskier assets
• How did we get here?

• What does it mean?

• Has it happened before?

• What are the implications?

• Questions?
 Negative central bank
rates around the world

• Sweden
• Denmark
• Switzerland
• Japan
• European Central Bank
• How did we get here?

• What does it mean?

• Has it happened before?

• What are the implications?

• Questions?
 Practical implications of
negative rates

• Debt levels rising

• Real Estate prices rising
• Investors moving into riskier assets
looking for returns
• Bank business models
 • How did we get here?

• What does it mean?

Thank you! • Has it happened before?

• What are the implications?

• Questions?