LONDON May 30 Most euro zone banks have assured
their central banks that they are operationally ready to handle
any challenges that would come with an expected move by the
European Central Bank to charge lenders who keep money on
The ECB is expected to announce on June 5 that it will apply
a 'negative deposit rate' for money placed with the central bank
overnight, in a bid to convince banks to lend the money out
"If you borrow at 25 basis points now, and you're returning
the cash at zero... then economically you're no different," said
the head of a money markets at one euro zone bank. "The key
thing is the margin you're getting for the money.
"The bigger issue is the operational impact."
Banks systems have not traditionally been set up to deal
with negative cash flows from money on deposit, but the banker
said the fact the ECB bad been alluding to negative rates for
more than a year had given banks time to prepare.
"Lots of banks would have testing done to see if they're
operationally prepared," he said, adding that his institution
was asked to prove to its regulator that its systems are
operationally ready to handle negative rates.
In almost-identical statements, central banks from Austria,
Ireland, Portugal and Slovakia told Reuters their commercial
banks were operationally ready to handle negative interest
rates, pointing out that the ECB had been publicly discussing
the possibility of negative interest rates for some time now.
Germany's Bundesbank and financial regulator Bafin said all
banks were asked at the end of last year if they were able to
handle negative interest rates, all were either able to do so or
soon would be.
Luxembourg and Latvia's central banks said they had not
asked banks to prepare themselves to handle negative deposit
rates, while Finland's described the issue as "non topical".
Central banks in Estonia, France, the Netherlands and Spain
declined to comment, citing the confidentiality of their
dealings with banks. The seven other euro zone countries'
central banks did not respond to requests for comment.
(Reporting By Laura Noonan Editing by Jeremy Gaunt)