Andrea Watkins

Prospect Of Negative Interest Base Rates

The UK banking industry could be about to step into unknown territory as a negative interest base rate looms ominously on the horizon.

This is driven by Mark Carney, Governor of the Bank of England warning after the Brexit vote that UK base rate could be cut.

The BOE left rates unmoved in July, but there is strong speculation that cuts will come soon with the prospect that the base rate will change for the first time since 2009 in August.

Cuts could see the rate match the current European Central Bank at 0% or over time go into the negative. Something that can be seen currently in the rates of Switzerland, Denmark and Sweden.

Negative Interest Base Rate Impact

The prospect of lower rates has triggered RBS and Natwest to warn that its business customers may face negative interest rates on credit balances. The banks wrote to their 1.3m business and commercial banking customers to warn of potential charges should there be a negative base rate.

A spokesman clarified that there was no precedent for charging negative rates and that the bank had no plans to do so. This pre-emptive move has received a lot of coverage in the media and may affect SME confidence with the prospect of having to pay for a credit balance unlikely to be popular.

The base rate may not reach negative levels, but two of the UK’s major banks preparing customers for the prospect is a clear indication that the finance and leasing sectors are preparing for the possibility.

VIP Apps Consulting has extensive experience within the leasing and financial services industry with the knowledge capabilities and operational track, to help organisations implement the process changes, optimisation and innovation to realise the financial value in a customer driven market. 

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