On 12 October 2020, the PRA published a letter that it had sent to specific firms to help it and the Bank of England (BoE) understand the operational implications of implementing a negative or zero interest rate (Bank Rate).

The letter reminds firms of the September 2020 minutes of the BoE’s Monetary Policy Committee (MPC) where the BoE and the PRA are commencing structured engagement on the operational considerations of a negative Bank Rate. For these purposes, the BoE/PRA also include being operationally ready to deal with a zero Bank Rate. This structured engagement is not indicative that the MPC will employ a zero or negative Bank Rate.

The BoE/PRA explain that responding to the letter and the structured survey questions attached to it will help it and firms identify whether there are any technical operational challenges associated with the implementation of a zero or negative Bank Rate, and to consider how best to prepare and prevent any unintended operational disruption that could be associated with a change should the MPC decide it was appropriate.

As part of this work, the BoE/PRA is requesting specific information about firms’ current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration and the steps that firms would need to take to prepare for the implementation of these.

The BoE/PRA are asking for responses by 12 November 2020.