On 4 February, the PRA wrote (PDF 448 KB) to firms with the outcomes of its 12 October request (PDF 354 KB) for specific firms to provide information on their operational readiness for a zero or negative Bank rate, or a tiered system of remuneration.
The PRA stressed that this letter (and the earlier information request) should not be taken as an indication that the setting of a negative Bank rate is “imminent or indeed a prospect at any time”.
However, on the basis of feedback provided, the PRA concluded that:
Following the Monetary Policy Committee (MPC) February meeting (PDF 418 KB) (see paras 67-72), the MPC asked the PRA to engage with firms to ensure that they begin preparations to develop the necessary tactical solutions. Firms are now expected to work towards a position where they are able to implement a negative Bank rate at any point after six months.
At this stage, to avoid the need for reprioritisation, firms are not expected to start work to implement strategic solutions unless these are already in their plans.
Challenges for firms are multi-dimensional and complex, involving processes, systems and models, contracts and client outreach. Firms must consider: