mounted police officers sit in outside the royal exchange and the bank of england in london on june 17 2020 london the bank of england said thursday british banks will need at least six months to prepare for a shift into negative interest rates the boe asked british banks in october about their preparedness for negative interest rates having revealed in september that it was exploring the possibility of taking rates below zero if necessary in a letter to lenders published thursday sam woods the head of the banks prudential regulation authority said a majority of banks would need time to alter systems and processes and implement strategic or tactical solutions on the basis of firms responses to this exercise the pra understands that the majority of firms would be able to implement tactical solutions to accommodate a negative bank rate within six months without material risks to safety and soundness woods said in the letter the pra will now engage with firms on their development of tactical solutions with the aim of having all authorized firms prepared to implement a negative rate regime after six months the bank clarified however that it is not suggesting that negative rates are inevitably being introduced negative rates effectively pay businesses and individuals to borrow money and penalize banks for depositing cash therefore in theory encouraging them to invest and spend more actions that can help the economy to grow however they exert further downward pressure on banks profit margins which if passed on to customers could fail to have the desired effect there is no need for negative interest rates because theyre bad for savers and bad for banks we can look at the impact on the eurozone for proof of this said neil mackinnon global macro strategist at vtb capital in a research note mackinnon suggested that since the onset of the pandemic the heavy lifting has been done by the governments fiscal stimulus once the lockdowns are gradually lifted in response to a successful vaccine programme fiscal support can pave the way for getting the uk recovery back on track he added