With the Bank of England Base Rate falling to a quarter of a per cent, NatWest has written to approximately 850,000 of its business customers warning that interest rates may imminently go negative.
The effect would be that businesses would be charged to hold funds with the bank. However, one of the possible reasons for the change is the chance that the Bank of England could take its base rate below zero per cent in an effort to encourage banks to lend more.
The effect would be to charge high street banks for depositing funds with the Bank of England and thereby creating an incentive for them to lend more to businesses and consumers.
In an interview with This is Money, NatWest 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.”
The National Chairman of the Federation of Small Businesses, Mike Cherry, said: “The warning from NatWest and RBS will be deeply concerning to small firms.”