BoE's Broadbent eyes effect of negative rates on banks

FILE PHOTO: Deputy Governor of the Bank of England Ben Broadbent listens to a question during a Reuters Newsmaker event at Canary Wharf in London, Britain November 18, 2015. REUTERS/Neil Hall/Files

LONDON (Reuters) - Bank of England Deputy Governor Ben Broadbent said on Friday that policymakers had to consider whether negative interest rates might have counterproductive effects during times of stress on banks’ balance sheets.

In such a scenario, there could be a risk that banks would cut lending to make up for costs and lower margins due to negative interest rates, Broadbent said.

“Then the question is: are those pressures enough to mean that these mitigating effects - the downside risks of cutting rates below zero - outweigh the benefits?” Broadbent said in a presentation organised by regional agents of the central bank.

The BoE is conducting a review into negative interest rates to see how they might work in Britain.

Reporting by William Schomberg and Andy Bruce