Business owners banking with NatWest and RBS could be charged for deposits

The high street banks have announced that they are considering charging interest on credit balances if interest rates remain at "very low levels"

NatWest and the Royal Bank of Scotland (RBS) have this week warned business customers that they may introduce negative interest rates – effectively charging businesses to deposit money – if global interest rates continue to remain at “very low levels”.

In a letter issued to the banks’ combined 1.3 million customers, NatWest and RBS said they 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.”

While personal customers of both banks won’t be impacted, charities and community groups will be as they are considered business customers.

The Federation of Small Businesses (FSB) national chairman, Mike Cherry, has said the warning “will be deeply concerning to small firms” while Made Simple Group CEO, Howard Graham, has commented that the news “will be a worrying sign for micro-businesses with small margins and limited options in terms of how they use their capital”:

“Both lenders are clearly taking precautions in the event of interest rates turning negative, but the strategy could backfire if businesses begin to vote with their feet and abandon the traditional loyalty, so common among business customers, in search of free banking.

“That said, if rates do turn negative, it is conceivable that all of the big banks will eventually go down this route. In a seemingly never-ending climate of very low interest rates, they are struggling to make money and this could be the way that banking goes.”

The news comes in the same week as Virgin Money’s announcement that it is halting its plans to start lending to small and medium-sized businesses due to the anxieties following the Brexit result.

Speaking yesterday to Reuters, Virgin Money chief executive, Jayne-Anne Gadhia, said: “The future is more uncertain for the economy and for businesses in general, so we think the time isn’t particularly right for us to get involved in this new asset class.”

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