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4 February 2021 By Swaha Pattanaik Follow @swahapattanaik

Bank of England boss Andrew Bailey told lenders to be ready to cope with sub-zero interest rates at any point from six months’ time. The weapon will be a handy addition to his arsenal. Covid-19 variants or post-Brexit trade frictions may yet derail the growth rebound he expects.

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The Bank of England said on Feb. 4 that its Monetary Policy Committee had unanimously decided to keep the key policy interest rate unchanged at 0.1% and to leave the size of its total asset purchase programme unchanged at 895 billion pounds.

The BoE also said Britain's banks would need at least six months to prepare for any cut in interest rates to negative territory: “The Prudential Regulation Authority's engagement with regulated firms had indicated that implementation of a negative Bank Rate over a shorter timeframe than six months would attract increased operational risks.”

Minutes of the central bank’s policy meeting, which ended on Feb. 3, said the BoE did not want to send a signal that it intended to push policy rates below zero at some point but that it would be appropriate to start preparations to ensure banks could cope if such a move ever proved necessary in the future.

“…the PRA will now engage with PRA-authorised firms on their development of tactical solutions, with the aim of having firms put themselves in a position to be able to implement a negative Bank Rate at any point after six months,” Sam Woods, a deputy governor at the central bank and the head of the PRA, the Bank of England’s banking supervisory arm, wrote in a letter to banks that was dated Feb. 4.

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