Natwest and the Royal Bank of Scotland (RBS) are mulling applying negative interest rates to business accounts and have warned this could mean charging businesses to hold deposits.
In a letter to just under 1.3 million commercial and business customers, the banks said very low interest rates globally “could result in us charging interest on credit balances”, according to BBC News.
If the move goes ahead it would make them the first UK banks to introduce negative interest rates.
A spokesperson for RBS, which owns NatWest, insisted there are no formal plans to implement the policy as yet. He said: “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.”
The governor of the Bank of England, Mark Carney, warned of a possible interest rate cut after Brexit in a bid to boost the economy. However, he advised that interest rates should not drop any lower than 0.25%.
The UK base interest rate remained at 0.5% earlier this month after Bank of England rejected the possibility of lowering rates.
The Federation of Small Businesses (FSB) has said it is “deeply concerned” about the warning on new charges.
Mike Cherry, national chairman of the federation, said: “Today’s warning from Natwest and RBS will be deeply concerning to small firms. 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 [Bank of England’s] 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.”
He added it’s now “vital” for all finance providers holding deposits for small businesses to do everything they can to update concerned customers about any changes to their Business Current Accounts.