The Bank of England has written to financial services bosses to find out whether they are ready for zero or negative interest rates.

In the letter, Prudential Regulation Authority chief executive Sam Woods stresses that he is not asking firms to ready themselves for this eventuality, but rather seeking to find out what operational steps need to be taken to enable firms to implement such a measure safely.

He says: “For a negative Bank Rate to be effective as a policy tool, the financial sector – as the key transmission mechanism of monetary policy – would need to be operationally ready to implement it in a way that does not adversely affect the safety and soundness of firms.”

But he insists: “This structured engagement is not indicative that the [Monetary Policy Committee] will employ a zero or negative policy rate.”

Nor is the regulator “asking firms to begin taking steps to ensure they are operationally ready to implement a negative Bank Rate”.

Instead, Woods says that by responding to the survey questions attached, it will help the PRA and firms “to identify whether there are any technical operational challenges associated with the implementation of a zero or negative Bank Rate, and to consider how best to prepare and prevent any unintended operational disruption that could be associated with a change should the MPC decide it was appropriate”.