Reply to post:

Most of the world still dependent on cash

LucreLout Silver badge

@The Onymous Coward

Interesting. On what basis is it you presume (incorrectly as it happens) that negative interest rates would benefit bankers?

Depending on the make up of debt issued, they might help governments, though that is unlikely. They might help debtors, though that too isn't very likely because most loan agreements recently have a floor below which their rates don't drop regardless of base rate.

Banks are required to hold massive volumes of cash or cash like instruments in order to meet their regulatory capital demands. Topping that up to meet both the expanding regulatory requirement, and the losses sustained by holding the balance at the BoE would be non-trivial.

And that is quite aside from the dire economic performance such a situation telegraphs. The risk weighting on existing loans would soar, adding once again to capital adequacy requirements.

Banks don't want negative rates: They're not good for business.

The reason for turning rates negative is to encourage businesses to invest their cash piles in the economy, which is a regrettable simplification of global finance that is unlikely to work.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019