By Huw Jones

LONDON (Reuters) – Banks told the Bank of England they would need at least six months to work out how to respond to sub-zero rates, which experts say could see borrowers paying less interest, savers receiving less, and even charges imposed on current accounts to recover profit.

Investors have scaled back their bets that the British central bank will implement sub-zero rates anytime soon amid hopes of an economic recovery later this year, leading to a rise in the pound and British government bond yields.

Nonetheless, the BOE’s Prudential Regulation Authority (PRA), headed by BoE Deputy Governor Sam Woods, has been consulting with banks and reported findings on Thursday.

Banks said their “legacy” systems were not built to handle a negative rate, but that a majority of them would be able to implement “tactical” or short-term workarounds in time.

“These tactical solutions… do not necessarily result in a negative rate on retail products such as mortgages and current or savings accounts,” Woods said.

“The PRA understands that the majority of firms would be able to implement tactical solutions to accommodate a negative Bank Rate within six months, without material risks to safety and soundness.”

Permanent or costlier strategic changes would take 12 to 18 months, he added.

Wood said the PRA will now engage with firms with the aim of having them able to implement a negative Bank Rate at any point after six months.

David Postings, CEO of banking industry body UK Finance, said negative rates would require “considerable changes” to systems and starting to work out how to implement them now will give maximum flexibility in the future.

Much of the work will be on ensuring readiness of tracker mortgages, which move in tandem with base rates, to reflect any sub-zero rates.

Bankers say negative rates would crimp their ability to make profit and could lead to banks charging millions of customers in Britain for corporate and even current accounts.

(Additional reporting by Iain Withers; Editing by Alexander Smith and Alexandra Hudson)