Negative interest rates have been the rage with central banks around the world, with Bank of Japan being the latest one to join the bandwagon in an attempt to stimulate their economy. Will negative interest rates come to Singapore and will banks pay negative interest rates on our bank deposits?
Just to bring everyone on the same page before I answer the 2 questions, central banks are banks for consumer banks operating in the country. Consumer banks like DBS collect deposits from companies and individuals with excess funds, loan out the majority to other companies and individuals to fund their investments and purchases, and deposit a small portion with the central banks. It is a requirement for consumer banks to set aside some money with the central banks to ensure they have adequate resources to handle bad loans and stay solvent in times of crisis. Under the normal scenario of ......