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Britain's RBS warns customers of possible charges on deposits
[LONDON] State-backed Royal Bank of Scotland (RBS) has told more than a million business customers that it may have to impose charges on deposits, potentially becoming the first British bank to introduce negative interest rates.
The Bank of England is expected to cut interest rates to a record low next week, prompting RBS to write to about 1.3 million business customers this month with the warning that they may have to pay the bank to look after their money if the base rate slips below zero.
"Global interest rates remain at very low levels and in some markets are currently negative," RBS said in one of the letters.
"Dependent on future market conditions, this could result in us charging interest on credit balances."
An RBS spokesman said that the bank had no plans to impose such charges but could take action if the base rate enters negative territory.
The Bank of England is expected to deliver extra stimulus to the economy next week by cutting the base rate from 0.5 per cent to cushion the expected blow from last month's referendum vote to take Britain out of the European Union.
The central bank surprised markets in July by holding back from making its first rate cut since 2009, but minutes of the Monetary Policy Committee's meeting showed that most policymakers expected to back an unspecified package of measures to boost the economy in August.
A source at RBS said the bank had written to customers to alter the terms and conditions of their contracts to avoid having to pay borrowers interest if rates turn negative.
Six of the world's central banks have introduced negative interest rates, most notably the Bank of Japan and the European Central Bank.