High street banking group warns of negative interest rates if base rate declines
26 July 2016
High street banking group, NatWest and Royal Bank of Scotland (RBS) warned over one million of its customers that they could be charged negative interest rates if market conditions changed.
In a letter outlining the changes in terms and conditions to 1.3 million customers, the banking group warned its business and commercial customers might be charged in the event of negative interest rates.
The letter warned, "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."
An RBS spokeswoman said there was no precedent for charging personal customers' negative interest rates and it had no plans to do so.
She 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."
In mid-July the Bank of England's Monetary Policy Committee voted to retain the current base rate at 0.5 per cent. The rate fixed in March 2009 had prevailed since then.
However, Bank of England governor Mark Carney had dropped hints that the central bank might cut interest rates over the summer months from this already historic low.
Meanwhile, fears have been voiced that the move could see savers remove their money from the bank - and that other banks could follow suit.
Pensions expert Baroness Altmann told the Daily Telegraph, "Negative rates would be very dangerous, especially for ordinary savers.
"The danger is many people will just think, I'm going to put the money under the mattress. That could have security risks, especially for older people.
"You don't want your life savings out of the bank, you want them somewhere safe.
"But if the bank is going to charge you for keeping your money, and every day you have it there it is worth less and less, you can see why people would say, I'm not going to do that."