Ulster Bank insists it won't charge to hold deposits
Ulster Bank has insisted that small business customers and ordinary depositors will not be charged for keeping cash in the bank.
Yesterday, Royal Bank of Scotland (RBS), which owns Ulster Bank, wrote to its own UK customers and account holders at its NatWest unit in Britain, to warn them that the banks may begin charging to accept deposits if official British interest rates fall below zero.
The official Bank of England rate is 0.5pc but is expected to be cut at least once this year, beginning as soon as next week.
The ECB's official interest rate, affecting Ireland, is already zero. That hurts bank margins, but so far lenders here have not moved to charge personal and small and medium enterprises (SME) customers to hold onto deposits.
A spokeswoman for Ulster Bank in Dublin said some large institutional customers are already having to pay so-called negative interest rates, because their accounts track the euribor inter-bank rate.
However, she insisted that unlike in RBS' home market, there is no move to extend negative interest rates to SMEs or ordinary savers.
State-backed RBS has written to more than a million business customers telling them it may have to impose charges on deposits, potentially becoming the first British bank to introduce negative interest rates, if the base rate slips below zero.
"Global interest rates remain at very low levels and in some markets are currently negative," RBS said in one of the letters.
"Dependent on future market conditions, this could result in us charging interest on credit balances."
An RBS spokesman said that the bank had no plans to impose such charges but could take action if the base rate enters negative territory. The Bank of England is expected to deliver extra stimulus to the economy next week by cutting the base rate from 0.5pc to cushion the expected blow from last month's referendum vote to take Britain out of the European Union.
A source at RBS said the bank had written to customers to alter the terms and conditions of their contracts to avoid having to pay borrowers interest if rates turn negative.
Six of the world's central banks have introduced negative interest rates, most notably the Bank of Japan and the European Central Bank. (Additional reporting Reuters)