HSBC may implement negative interest rates
HSBC has joined RBS and Natwest in warning UK business customers that they may be hit with negative interest rates. HSBC, however, will only charge funds held in foreign currency, not sterling. While both banks have said they do not plan to charge personal current account customers negative rates, analysts have speculated that, in the future, personal customers with large balances may be charged.

HSBC’s move emerged a day after 1.3million NatWest business customers were also warned they could be hit with negative interest rates

HSBC becomes second bank to plan charges for withdrawing money

HSBC has become the second bank to threaten to charge customers for having their money.

The UK's biggest banks has changed its rules to give chiefs the option of forcing firms to effectively pay for having funds in their accounts.

HSBC said the charge could only apply to funds held in foreign currencies, not in pounds.

The bank, which made £520 profit a second in the first three months of this year, made the change to its terms and conditions in February this year.

HSBC’s move emerged a day after 1.3million NatWest business customers were also warned they could be hit with negative interest rates.

Neither HSBC or NatWest said they planned to charge personal current account customers negative rates.

But Charlotte Nelson, from the website Moneyfacts, warned: “If one bank were to do it, I could see others following suit.”

Mortgage expert Ray Boulger said: “Eventually personal customers with large balances could be hit, but the banks may decide that is going too far and take the hit themselves.’

NatWest, part of the taxpayer-saved Royal Bank of Scotland, added the option to its terms and conditions in the wake of the UK’s vote to leave the EU.

The bombshell result triggered warnings that the UK could plunge back into recession.

The Bank of England is expected to respond by halving its base rate to 0.25% at its next meeting on August 4 to try to boost the economy.

Some economists warn the rate could even fall to zero at some stage.

Any such move would hit lenders’ profits which, experts warn, they could claw back through charging customers negative interest rates.

HSBC’s change is buried in its updated terms and conditions for business customers.

It states” If the credit interest rate for a currency goes below zero, we may charge you a negative interest rate.”

The charge would apply if an overseas central bank cut rates before zero on any funds customers have in that country’s currency, for example euros or dollars.

HSBC said: “We don’t currently intend to charge negative interest on such deposits, but would let business customers know if we decide to do so in the future.”

An RBS spokesperson 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.

“We have no current plans to pass negative rates through to personal or business customers.”

However Mike Cherry, national chairman at the Federation of Small Businesses, said the threat of negative rates was “deeply concerning” for firms.

He added: “The FSB’s latest research shows small business confidence is already at a four year low.”

Negative rates Q&A

Q: What are negative interest rates?

A: For savers and current account customers it’s where they’d theoretically pay a rate of interest for having money in their account. It’s the complete opposite of what happens now, although some accounts don’t pay any interest.

Q: Is that likely?

A: Experts say not at this stage, as customers could take their money out in a flash.

Q: So why is it being talked about now?

A: Because NatWest and HSBC have inserted the option of it in their terms and conditions for business customers. One reason is to claw back higher costs, although it’s a gamble as those customers could vote with their feet too.

Q: What are those higher costs?

A: NatWest and HSBC have both blamed the possibility that central banks could cut their base rates to below zero.

Q: Why does that matter?

A: Lenders keep funds in central banks. They don’t have to but use it as a way of transferring money between one another. They also earn interest on that money. At the moment, that’s 0.5% from the Bank of England. If its base rate went to below zero then they would have to start paying for the privilege. The same goes for central banks in other countries.

Q: What’s the point of cutting base rates to below zero?

A: The theory is that lenders would rather dish the money out to households and businesses, at even lower borrowing costs, than having it sitting in central banks costing them money.