Description: Try this one on for size: you pay the bank for the privilege of holding your money. Sounds pretty strange doesn’t it? But with stagnant economic growth, central banks in several jurisdictions are crossing the boundary between low interest rates and negative rates – effectively charging banks to place their funds with the central bank. Even in Canada, Bank of Canada Governor Stephen Poloz said that he cold see lowering the bank rate to negative 0.5% if the country was hit “with another major shock.”
Date: February 19, 2016; updated February 20, 2016
1) From your reading of the article, what do you see as the key argument for negative interest rates?
2) What effect will negative interest rates have on some of our accounting calculations?
3) Imagine you are a practicing accountant now with a designation. Many of your clients see you as their key business adviser. What will you tell your clients who have questions over the impact of negative interest rates?