Paulina Duran
3 minute read
SYDNEY, July 12 (Reuters) - Australia s prudential regulator told banks on Monday they must have a plan to deal with the possibility of zero or negative interest rates by April 2022, after a consultation showed such rates could pose operational challenges in some instances.
While the Reserve Bank of Australia has repeatedly said that a negative cash rate in the country is highly unlikely, the Australian Prudential Regulation Authority (APRA) said it is possible that other interest rates determined in the financial markets could fall to zero or below zero at any time.
APRA is thus asking banks to take reasonable steps to prepare for such a scenario and to at a minimum, develop tactical solutions to implement zero and negative market interest rates and cash rate by 30 April 2022.
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Date Time
APRA releases consultation to ADIs on preparedness for zero and negative interest rates
The Australian Prudential Regulation Authority (APRA) has released for consultation a letter to authorised deposit-taking institutions (ADIs) on its draft expectations regarding ADIs’ preparedness for the possibility of zero and negative interest rates.
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APRA tells banks to be ready for negative interest rates
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The prudential regulator wants banks to be prepared for zero and negative interest rates, and has called on them to take all “reasonable steps” to ensure their technology systems can deal with extreme monetary policy settings.
The Australian Prudential Regulation Authority said on Monday it wrote to banks seven months ago asking them to tell the regulator if they would have any issues implementing negative interest rates.
The Reserve Bank has said many times that a negative cash rate would be highly unlikely in Australia. Such a setting could support economic activity, by keeping downward pressure on borrowing rates and exchange rates. But negative rates could also make it harder for banks to lend and encourage saving over spending.
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