Banks told to prep IT systems for possibility of negative rates – Finance – Software
Australia’s financial institutions have been directed to put together their IT methods to deal with the prospect of zero or destructive fascination rates by the close of April future yr.
The Australian Prudential Regulation Authority (APRA) claimed currently that it experienced written to the financial institutions in December past yr regarding the concern and prospective ‘timeframes for rectification [or] mitigation.”
Although noting Reserve Lender of Australia advice that “a destructive cash charge is extremely not likely in Australia,” APRA famous this “does not preclude the possibility of a destructive cash charge in the future”, nor did it preclude getting ready for that prospective eventuality.
APRA claimed that original responses from authorised deposit-using institutions (ADIs) – aka financial institutions – was that they are “typically very well-positioned to deal with zero and destructive market place fascination rates on fiscal market place items such as those typically managed in a treasury process.”
“However, for some ADIs, zero and destructive fascination rates on other items (e.g. wholesale and retail lending and deposit items) would pose operational challenges,” the authority famous [pdf].
“Furthermore, a range of ADIs famous high expenditures and competing priorities as becoming constraints for the implementation of long-lasting answers.”
APRA claimed that a “lack of preparedness” could be material for financial institutions, if zero or destructive rates arrived into participate in, and banks’ technological innovation methods were being inadequate.
“APRA expects ADIs to, at a least, establish tactical answers to put into practice zero and destructive market place fascination rates and cash charge by April thirty 2022,” the authority claimed currently.
“Tactical answers are typically shorter-expression fixes, involving workarounds on the periphery of present methods, together with overrides in downstream methods.”
APRA is using submissions from financial institutions and other stakeholders on the concern until mid-August.
