How Banks Can Deal with the Implications of Negative Interest Rates

Here’s what financial institutions need to know if the Fed decides to push rates into negative territory

Faced with the pandemic-induced economic crisis already unfolding, banks and financial institutions need to prepare in case we see negative interest rates in the coming months.

For the executives leading those businesses, that means thinking about how their customer bases—retail and commercial—would react and whether the systems and models they have in place can handle this possibility. U.S. Federal Reserve Chairman Jerome Powell, in the early days of the COVID-19 crisis, said negative interest was not “appropriate” policy—but with millions of Americans out of work and businesses shuttered, who’s to say what will happen next.

For bankers, it’s time to chart a course.