“If nothing else, it’s a cost in productivity. It gets more difficult and expensive to complete transactions. You really turn the clock back.”Robert Palombi, managing director at S&P Global, noted that negative rates can incentivise pension funds or insurance companies to increase their investment risk profile, which in turn can enable riskier borrowing by companies, fuelling a negative feedback loop.“Negative interest rates lead to excessive risk-taking, which could create more credit pressures and possibly defaults that have a deleterious impact on the economy, and creates the need for more stimulus,” he said.However, he said such a scenario can be avoided if the negative rates policy is successful in stimulating economic growth. Negative interest rates set by central banks run the risk of making prudent asset allocation “impossible” for pension funds and other long term investors that relay on bonds for part of their portfolio, according to S&P Global.David Blitzer, managing director, index management, at S&P Dow Jones Indices, said a negative policy rate by a central bank will spread negative interest rates across the economy, which could lower bank profits but also hurt other financial institutions.“Insurance companies and other non-bank financial institutions facing long term liabilities at fixed nominal rates will suffer,” he wrote in a contribution to an S&P report on the range of impacts of negative interest rates. “Pension funds and other long term investors which rely on bonds for part of their portfolio will find prudent asset allocation impossible.”Overall, if negative interest rates spread beyond major financial institutions, society would return to being “cash-only”, said Blitzer.