Free Ride Over For UK Business Banking?

Corporates in the U.K. may soon see that their free ride in the financial services space is over.

Reports by Financial Times on Tuesday (July 26) said major financial institutions are considering new fees associated with business bank accounts. HSBC, Lloyds and Royal Bank of Scotland have reportedly added new language in their customer terms that allows them to charge fees to businesses for their deposit accounts.

The publication cited “senior bankers” as explaining that these fees may come into effect should the Bank of England reduce interest rates into the negatives.

According to reports, if RBS begins charging its customers to deposit money, it would be the first U.K. lender to do so. RBS is the nation’s largest business lender.

Lloyds, meanwhile, would charge its small and medium-sized enterprise customers in certain scenarios if those businesses have an annual turnover of more than £25 million. And HSBC warned its business clients that it has reserved the right to charge fees for foreign currency deposits should interest rates fall below zero.

It is unclear whether the Bank of England will move forward with setting interest rates at negative; according to reports, the bank has said that it is not in favor of doing so, if it can avoid it. But some analysts believe banks will begin charging for deposits even if interest rates remain above zero.

“I think it is a real prospect if interest rates are cut by 25 basis points,” one “non-executive director of a High Street banking group” told Financial Times. “The Bank of England is already lending money to banks for new corporate lending at negative rates, so why would banks want to pay up for corporate deposits?”

Another banking executive, Secure Trust Chief Executive Paul Lynam, pointed to the “very thin interest margins” that banks are already working with as evidence that High Street banks could impose fees on deposits.