The Bank of England (BoE) sent shivers through the banking system on Monday (12 Oct) when it wrote to UK banks asking them how ready their financial systems and infrastructure were for a potential move to zero or even negative interest rates.

Britain’s central bank cut UK interest rates to a record low of 0.1% in March and is now investigating the key structural challenges to moving to negative interest rates. The UK’s banks have a parlous record when it comes to technology failures and the BoE was keen to understand the technology challenges the move might present and if banks had any “short-term solutions or workarounds”.

A move to zero rates or beyond will be a costly one for banks and building societies but it’s unlikely to impact most UK consumers; fixed-rate mortgages won’t change while variable-rate contracts generally state that borrowers will never pay less than zero. Institutions and high-net-worth savers might be charged to deposit their money which would, in theory, incentivise investing or spending over saving.