Businesses react angrily as RBS tells business customers: We may charge you to hold your deposits if interest rates go negative

 
Emma Haslett
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RBS and Natwest said they may charge businesses to hold their deposits (Source: Getty)

Businesses have reacted angrily after RBS and its subsidiary, NatWest, wrote to business customers to warn that they may have to charge them to hold deposits if interest rates go negative.

In a letter to business and commercial banking customers, the lender wrote that it was making a number of changes to their terms and conditions - including one which will charge interest on deposits if the Bank of England's base rate goes negative.

"Global interest rates remain at very low levels and in some markets are currently negative," it wrote.

"Dependent on future market conditions, this could result in us charging interest on credit balances."

The Institute of Directors (Iod) accused it of over-reacting.

“With heightened levels of business uncertainty due to Brexit, charging businesses to hold their money will only add fuel to the fire," said Michael Martins, economist at the IoD.

"The thought behind negative interest rates is to incentivise people to spend their money, but RBS’ letter may only agitate businesses at a time when uncertainty has put profit margins under pressure.

Mark Carney has made it clear that the Bank is not considering negative rates at the moment. There is no need for banks to pre-empt a decision that may not happen, especially at a time when confidence is fragile”.

Mike Cherry, national chairman at the Federation of Small Businesses (FSB) added: "The FSB’s latest research shows small business confidence is already at a four year low. Firms are less optimistic, cutting headcount and curbing investment intentions.

“When the Monetary Policy Committee meets next week to decide on interest rates, we would call on them to do everything possible to consider the implications of changing interest rates for smaller firms and the self-employed looking to maintain or grow their business."

Earlier this month the Bank's monetary policy committee raised eyebrows by holding rates at 0.5 per cent in the aftermath of the Brexit vote.

But while it is widely expected to be cut next month, few expect it to fall below zero.

Mark Carney, the Bank's governor, has previously ruled out negative rates, saying it has "other options".

"​One of the things we have been looking at... is the ability of those institutions [building societies] to build an appropriate capital base," he told MPs on the Treasury Select Committee (TSC) back in February.

"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."

In a separate statement, RBS said it has no plans to begin charging now.

"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," an RBS spokesperson said.

"We have no current plans to pass negative rates through to personal or business customers."

Shares in RBS were down 2.5 per cent at 185.8p in early trading.

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