Does Mr Carney have the guts to go negative? That is the big question facing the banking sector: whether the Bank of England governor will follow his counterparts at the European Central Bank and request that commercial lenders pay to lodge their money with the good folks at Threadneedle Street.
The major high-street banking groups have been reworking contracts and communicating with clients about how they would pass on negative rates to their clients. In other words, charging for deposits, with Royal Bank of Scotland (RBS) providing prior warning to 1.3m corporate customers.
The Financial Times reported that even a 25 basis point cut to the current 0.5 per cent core rate could lead to banks passing on negative rates. Banks' net interest margins have been restricted by the shrinking of the gap between the shorter-term rates at which they borrow, and the longer-term rates at which they lend.
