A major high street banking group has warned more than one million of its customers could be charged negative interest rates if market conditions change.
In a letter setting out changes in terms and conditions to 1.3 million customers across NatWest and Royal Bank of Scotland (RBS) business and commercial banking, the banking group warned it might charge customers in the event of negative interest rates.
The letter, which was not sent to customers of Ulster Bank which is owned by RBS, 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.”
A RBS spokeswoman said there was no precedent for charging personal customers negative interest rates and that 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 keep the base rate at 0.5%, where it has been since March 2009.
But Bank of England governor Mark Carney has hinted previously that the central bank may slash interest rates over the summer months from this already historic low.
Financial markets reacted sharply to the UK’s Brexit vote in June, with the pound plummeting in its immediate aftermath.
Mr Carney said in his personal view ‘’some monetary policy easing will likely be required over the summer’’, signalling a rate cut may be necessary as markets adjust to the reality of Brexit.
Prominent commentators on personal finance have said the move could see savers remove their money from banks.
Pensions expert and outgoing pensions minister 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.”