Lending

NatWest and RBS warn small firms of charge on holding deposits

Fred Heritage | 26 July 2016 | 8 years ago

NatWest and RBS opened the possibility that interest could be charged on deposits if the Bank of England's base rate falls below zero.
NatWest and RBS opened the possibility that interest could be charged on deposits if the Bank of England’s base rate falls below zero.
NatWest and the Royal Bank of Scotland (RBS) have warned UK business customers of the possibility theyll be charged for holding deposits, should UK interest rates drop into negative territory.

In a letter to business and commercial customers, RBS and its English operation NatWest announced that several changes would be made to its terms and conditions, including one that would allow for interest to be charged on deposits if the Bank of England’s base rate falls below zero.

The letter read: Global interest rates remain at very low levels and in some markets are currently negative. Dependent on future market conditions this could result in us charging interest on credit balances.

However, in a separate statement, an RBS spokesperson told Business Advice the letter was a precautionary measure, with the majority of customers particularly small business owners highly unlikely to be affected.

we have no plans [right now] to pass negative interest rates through to personal or business customers, said the spokesperson.

we will consider any necessary action in the event of the Bank of England base rate falling below zero, but will do our utmost to protect our customers from any impacts.

In what was considered a surprising move by some commentators, the Bank of England’s monetary policy committee held interest rates at 0.5 per cent earlier this month, in the wake of the Brexit vote on 23 June.

While many think it likely that interest rates will be lowered further as Britain approaches the autumn, few foresee the base rate to drop below zero.

Governor of the Bank of England Mark Carney has previously dismissed the possibility of negative interest rates.

Citing other options, Carney told a Treasury select committee in February this year that the country’s capacity top withstand lower interest rates was made stronger by the ability of banks and building societies to build up capital bases.

In a statement to the committee Carney said: Because they had built up capital in the last several years, it is now our judgement that we could, if necessary, lower bank rate. It is not yet our judgement that it could go negative.

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Topic

Lending

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