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The RBS banking group has warned 1.3 million customers they could be charged negative interest rates if the Bank of England cuts base rates below zero.
The group, which includes NatWest, wrote to its business and commercial account holders about the potential changes, which mean they could lose money even when they are in credit.
The letter said: "Global interest rates remain at very low levels and in some markets are currently negative.
"Dependent on future market conditions, this could result in us charging on credit balances."
The Bank of England's base rate currently stands at the historically low rate of 0.5%, where it has been for more than seven years - and some economists believe it should be cut further to stimulate the economy.
Source: Sky News
From October 1st, the Dutch bank [ABN Amro] is adjusting its conditions to state that the bank can give negative interest rates to account holders with a business checking or -savings account, ANP reports.
Source: NL Times
(Score: 4, Informative) by jmorris on Wednesday July 27 2016, @11:43PM
When putting money in interest-bearing accounts with a bank, you do NOT have cash on deposit, withdrawable on demand.
Lemme correct that to "When putting money in a bank, you do NOT have cash on deposit, withdrawable on demand."
That is what they advertise but it isn't entirely true, You are giving the bank a loan at zero (or laughably low) interest with a duration of zero in that, in theory, you can withdraw (or more typically write checks against it) it the same day. They then do 'maturity transformation' on your money and loan it out in longer term loans at much higher interest while keeping a small portion of deposited money in a reserve against net withdrawals combined with 'drawing authority' at a FED bank to cover the event the reserve isn't large enough to cover a short term run on the bank.
They make their money off the 'maturity transformation' by giving you low interest on the short term money you loan (i.e. deposits, short term CDs) them and charging higher on the long term loans. When stated that way the problem becomes obvious, they are making promises they can't actually keep and papering it over with a small reserve and a credit line from a larger bank who is only playing the same game on a larger scale. And it is unstable, which is why the history books are filled with 'banking panics', 'bank runs' and other phrases that means the same thing. It is a pyramid scheme. Just that would be unstable enough to go boom from time to time but then they double down on the stupid with credit creation and a whole host of recent innovations in 'financial instruments.'
Credit Default Swaps are really stupid. They only become important when things go sideways and the usual bank rules have failed... which is when you are supposed to cash them in to cover it.... assuming all of the people holding them aren't ALSO caught in the same cocked up economy that caused you to need to fall back on them in the first place. So what the existence of the things mean is that if more than one or two banks are hosed, EVERYBODY is hosed. Which is actually kinda genius in an evil way because such a mutually assured destruction system makes everyone 'too big to fail' and summons the FED's helicopter money.