A report published this month by the International Centre for Monetary and Banking Studies and the Centre for Economic Policy Research discusses the future of negative or near-zero interest rate policies. So what are some of the effects that corporate treasurers need to look out for?

The European Central Bank (ECB) became the first major central bank to lower one of its key policy rates to negative territory in June 2014, following in the footsteps of Sweden’s Riksbank, the first central bank to introduce negative interest rates to bolster its economy. Since then, Japan, Switzerland, Denmark, Bulgaria and Hungary have followed suit. The interest rate for the ECB's deposit facility is now -0.4 per cent.

The move towards negative rates has been criticised because it makes it “difficult for central banks to cut rates further and provide needed economic stimulus”, according to the Geneva report. This year's report goes on to say that this situation is likely to be with us for some time: “Although there is a limit to how far below zero interest rates can go, it is likely that rates could go somewhat further than what has been done so far without adverse consequences.”

But there are some consequences that corporate treasurers should be aware of and no doubt most already are – but they are worth commenting upon.

Banks charging for deposits

One consequence of negative or near-zero interest rates is that banks are starting to charge large depositors for holding their cash. From 10 October this year, Bank of Ireland will start charging a rate of 0.1 per cent to customers who hold deposits greater than €10 million or have multiple deposit accounts with it. RBS has also announced plans to implement negative rates for large depositors. Banks in Denmark and Switzerland have made similar moves.

Pensions savings

While only the biggest depositors are likely to be affected, negative interest rates will also affect private company pensions. Gemma Tetlow writes in the Financial Times that “this may, perversely, lead people or their employers to save rather than spend more.”

Currency depreciation

Another consequence of negatives rates is the possibility of currency depreciation, to which treasurers will need to stay alert and hedge accordingly. However, it's not a given that currencies will lose value when the central bank brings in a negative rate. While Sweden and Denmark both saw their currencies depreciate in value, boosting exports, Japan has not benefited in the same way because the yen continues to be seen as a strong 'haven' currency.