Royal Bank of Scotland Group Plc, Britain’s largest taxpayer-owned lender, said some of its biggest trading clients must pay interest on collateral as a effect of low central bank interest rates.
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The move, announced by the bank on Friday, is linked to the European Central Bank’s negative deposit rate and not to the Bank of England’s decision this month to cut its main lending rate to a record low 0.25 percent.
Bank of Ireland will charge 0.1 per cent on those deposits and the plan will affect about 100 customers, the person said.
Ulster Bank is already charging large corporate clients which have products priced off Euribor, which turned negative a year ago, a person familiar with the lender’s strategy said.
The FT reported that RBS, bailed out by the United Kingdom government during the financial crisis, had written to customers in its investment banking division to warn that it will impose negative interest rates from Monday.
“However, due to the sustained low interest rate environment, RBS will now be passing the cost of holding such deposits onto a limited number of our institutional clients”, the spokesman added, clarifying that futures are entered into by sophisticated financial investors that are looking to hedge risk.
RBS said in a statement it is passing on the negative rates those clearing houses have charged to handle those trades since the European Central Bank cut its base rate earlier this year.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: ” The move by RBS reported today would appear to only affect a relatively limited number of investment banking clients.
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According to the Irish Times, the financial institution – which is 14% State-owned – has informed its corporate and institutional customers that, from October, it will apply a negative interest rate of 0.1% for deposits of €10m or more from October.
