A man wearing a face mask walks past the Bank of England in London. File photo/Reuters

The Bank of England asked banks on Monday for information about their readiness for zero or negative interest rates, following up on its announcement last month that it was considering how to take rates below zero if needed.

“As part of this work, we are requesting specific information about your firm’s current readiness to deal with a zero Bank Rate, a negative Bank Rate, or a tiered system of reserves remuneration - and the steps that you would need to take to prepare for the implementation of these,” Deputy BoE Governor Sam Woods said in a letter to banks.

“It is important for the Bank, PRA, and firms to understand the implications of these potential approaches to implementing a zero or negative Bank Rate, since the MPC may see fit to choose various options based on the situation at the time,” he said.

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Woods said he wanted to know if there were any technology challenges to implementing zero or negative rates.

The BoE set a deadline of Nov.12 - a week after its next monetary policy announcement - for banks to respond to its request for information on the impact of negative rates.

Woods echoed recent comments by BoE Governor Andrew Bailey by saying the central bank's look into the impact of taking rates to or below zero was not a sign that it would cut borrowing costs to those levels.

The BoE is widely expected to announce on Nov.5 that it is increasing its bond-buying programme again to help Britain's economy as it tries to recover from its record slump earlier this year caused by the coronavirus lockdown.

Reuters