NatWest may set negative interest rates for accounts

They could hit firms for being in credit!

A MAJOR high street bank yesterday signalled the introduction of negative interest rates by warning customers it may have to levy charges for deposits.

In a shock letter, details of which emerged last night, NatWest – part of the taxpayer-backed Royal Bank of Scotland empire – changed the terms and conditions for 850,000 business customers.

The switch could mean an account holder with £1,000 in a NatWest account could see that shrink to £999 or less within 12 months as the bank charges a negative rate of interest.

Millions of customers with savings accounts in Britain are already suffering from historically low returns, with many popular savings accounts paying close to zero.

Last week the Financial Conduct Authority named and shamed HSBC, First Direct and the Post Office as having easy access accounts that in some circumstances pay no interest.

Many banks have been criticised for so-called ‘teaser rates’ which lure customers before slashing back the benefits once the cash has been deposited. In its letter to customers – seen by The Guardian – NatWest said: ‘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, the bank said it had no plans to make changes to the terms and conditions of personal account holders to allow it to charge negative rates.

Last night one treasurer of a local community council, who received a letter but asked not to be named, told The Guardian: ‘Can they do that, is it legal? The letter goes on to say that they “value our relationship with you”, but I may need to review how much I can afford to have a relationship with them!’ The prospect of banks levying a charge on deposits rather than paying interest turns traditional banking upside down. Savings expert Ray Boulger said: ‘It is going to make businesses much less keen to hold significant balances in their accounts. If NatWest start doing this, other banks are likely to follow. Eventually personal customers with large balances could be hit, but the banks may decide that is going too far and take the hit themselves.’

The European Central Bank already charges other banks 0.4 per cent to deposit cash, while the Swiss National Bank charges domestic banks up to 0.75 per cent. Last week, ABN Amro, a major Dutch bank, told customers that because of ‘exceptional market conditions’ it may be necessary to charge negative interest rates in the future.

The Bank of England has chosen to hold base rate at 0.5per cent, but in the City it is widely anticipated that governor Mark Carney will cut the rate to 0.25 per cent next month. Questioned by MPs in April, Mr Carney said: ‘We think we could move base rate closer to zero but have not said we have an appetite for negative interest rates.’