Comment from Robin Fieth, CEO of the BSA following the publication of the BofE Monetary Policy Report and the ‘Dear CEO’ letter from the PRA on implementing negative rates. 

Robin Fieth, CEO of the Building Societies Association commented:

“It is clear from the Monetary Policy Report that the MPC sees no current need for negative Bank Rate, but we understand the aim for it to be in their toolkit in a way that is capable of implementation.  Even with pervasive changes to core systems now off the table, building societies and banks will have to implement some significant changes to their systems and processes to enable them to deal with negative rates.  Such changes always involve the risk of unintended consequence, so will require careful implementation and substantial testing and review.

“A negative Bank Rate, should one ever be introduced, does not automatically mean savers would see negative interest rates. International experience in economies where negative bank rates have been introduced suggest that ordinary retail savers would not be charged for their savings, or borrowers paid to borrow. If the eventuality were to arise in the future, clear communication to avoid consumer confusion will be essential.  

“Overall, we remain unconvinced that a negative Bank Rate would be effective in stimulating the economy through encouraging households to reduce their saving or increase borrowing, but that is now a debate for another day.”

Link to the Monetary Policy Report 

Link to the Dear CEO letter