Corporate Banking Clients Uneasy Amid Negative Interest Rates

Royal Bank of Scotland (RBS) is warning its corporate clients that it may soon be charging them to hold cash in their accounts, an unnamed source told Reuters this week.

The news surfaces as the U.K. market braces for the potential of negative interest rates. Earlier this month, the Bank of England’s Monetary Policy Committee cut the base rate to 0.25 percent, a report by Forbes said. On Friday (Aug. 19), an unnamed source said RBS will begin charging some of its largest corporate clients in response to negative interest rates already charged by clearing houses.

An unnamed source said RBS will look to charge clients that trade futures and options contracts, which are processed through these clearing houses. Reuters said RBS could not be reached for comment.

The European Central Bank’s decision to establish a negative deposit rate is part of a broader effort to encourage banks to lend, reports noted, and to encourage bank clients to move their funds from deposit accounts and invest elsewhere.

While large corporate clients of RBS may be impacted, Forbes also said small businesses may see an impact from negative interest rates.

That’s because, while consumers are offered free retail banking services and large corporates have the power to negotiate better deals on their bank services, SMEs, Forbes said, are caught in the middle.

“Stuck between the two, however, small businesses have often been overcharged, damaged by unfair terms and conditions and been deprived access to conditions,” the publication stated.

Amid the threat of negative interest rates and charges for keeping cash in their bank accounts, small businesses are being encouraged by the Federation of Small Businesses (FSB) to switch banks should their current providers begin charging them.

“We would encourage small firms themselves to take action and consider whether it’s worth switching to a more competitive business current account,” said Mike Cherry, national chairman of the FSB.