Negative rates coming?

[JamesMuenchen]

The BOE's Prudent Regulation Authority is writing to banks to assess their readiness for Zero and Negative Interest Rates.

https://www.bankofengland.co.uk/prudent ... licy-rates

[servodude]

The BOE's Prudent Regulation Authority is writing to banks to assess their readiness for Zero and Negative Interest Rates.

https://www.bankofengland.co.uk/prudent ... licy-rates

Interesting times indeed.
I guess Swedish experiments are "of rigueur" these days when dealing with crises

-sd

[odysseus2000]

The BOE's Prudent Regulation Authority is writing to banks to assess their readiness for Zero and Negative Interest Rates.

https://www.bankofengland.co.uk/prudent ... licy-rates

Should negative interest rates be introduced, would one expect substantial cash flows out of banks to somewhere else, or are there no other suitable places for folk to put money?

There have been many suggestions of counter measures by deposit holders such as foreign exchange, equities, precious metals, real estate and more recently crypto currencies. I am not clear if any of these are practical alternatives to having a bank account and suspect none of them are as if they were there would have been strong flights to them from the nations that have instituted such policies.

Perhaps I am misunderstanding what all of this means, but as I look at it, anyone who needs a bank account and that is everyone is some way or other is stuck with what ever policy the politicians mandate.

Can anyone see a scenario(s) in which a policy of negative interest rates would change anything?

Regards,

[NeilW]

Should negative interest rates be introduced, would one expect substantial cash flows out of banks to somewhere else, or are there no other suitable places for folk to put money?

They can't go anywhere else in aggregate. For you to move out of a bank deposit, somebody else has to move in. All you can do is transfer the deposit to the Bank of England - aka hold your money in cash.

Can anyone see a scenario(s) in which a policy of negative interest rates would change anything?

Negative interest rates are functionally a charge on bank reserves held at the Bank of England by the banks. There are quite a lot of them thanks to QE and only banks can hold that kind of money. Therefore negative rates are a tax on banks, which they will recover by increasing the rates on loans.

What I find amusing is that people running central banks don't appear to know how bank accounting works.

[Adamski]

We already have negative interest rates of sorts, with cpi at 0.2%, and rpi at 0.5%. Most ppl savings rates are at near zero, so are losing money on their cash savings. Shop around and you can get better. Marcus pays 0.7%, and premium bond prize new rate is 1%.