Negative Interest rates

Mallotum_X

Bank of England deputy governor Paul Tucker has said negative interest rates should be considered.

The Bank rate has been at a record low of 0.5% for more than three years.

A negative interest rate would mean the central bank charges banks to hold their money and could encourage them to lend out more of their funds.

Speaking to MPs on the Treasury Committee, Mr Tucker said: "This would be an extraordinary thing to do and it needs to be thought through carefully."

He said it was an idea he had raised.

Negative interest rates have been discussed by other countries. Negative rates would have a detrimental impact on savers, who have already seen the income from their savings fall since the financial crisis.

http://www.bbc.co.uk/news/business-21589128


Things must be looking up...

BlondeHeadOn

So it's 'spend, spend, spend' then.....

james_toney

YOU will spend your money , no savers ever again,

seriously though, they cant do it can they?

Harry_Boyle

Seems mad to pillory the banks for lending too much and not having enough reserves and then come up with a scheme that will stop them from deleveraging and rebuilding their reserves.

grizzly1911

Viv Nicholson for Chancellor?

shortchanged_2

Is this the green shoots some refer to?

neilem

I'm no financial expert, but this doesn't feel good to me. The reason Tucker states is to force the banks into lending more. Hm, they do lend as long as you reliable and have at least some capital to back-up any loan, otherwise why not just deregulate again and have credit available to anyone who wants it - was this not how the financial crisis developed in the first place? It worries me how these people can get into such influential positions...

james_toney

neilem wrote: »

I'm no financial expert, but this doesn't feel good to me. The reason Tucker states is to force the banks into lending more. Hm, they do lend as long as you reliable and have at least some capital to back-up any loan, otherwise why not just deregulate again and have credit available to anyone who wants it - was this not how the financial crisis developed in the first place? It worries me how these people can get into such influential positions...

it worries me too,

nicko33

Can't a bank hold it's own "money" for free at 0% if the BOE goes to negative rates?
Are we talking physical money, or numbers in a computer?

IronWolf

nicko33 wrote: »

Can't a bank hold it's own "money" for free at 0% if the BOE goes to negative rates?
Are we talking physical money, or numbers in a computer?

A bank is required by law to hold a certain amount of reserves at the Bank of England.

The idea is that they wouldn't hold more than necessary and would instead loan out the rest.

purch

nicko33 wrote: »

Can't a bank hold it's own "money" for free at 0% if the BOE goes to negative rates?
Are we talking physical money, or numbers in a computer?

No. That is not how the Banking system works.

All money is effectively held in reserve accounts with the BOE, and all payments between UK clearing Banks are made as transfers between their reserve accounts.

All credit balances left receive the current Bank rate.

You can read all about it in the Banks red book if you have a spare few hours