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Coutts changes T&Cs to allow for negative interest rates

Coutts changes T&Cs to allow for negative interest rates

Private bank Coutts has written to clients informing them of a change in terms and conditions to allow for negative interest rates on some of its accounts.

In a letter sent to clients at the end of last week, Coutts said it was making changes to potentially allow for negative interest rates. 

‘We are making changes which allow us potentially to apply a negative interest rate charge to our current and deposit accounts and limit the number of accounts you may hold in certain currencies,’ the letter, seen by New Model Adviser®, said.

‘While we do not anticipate any immediate impact regarding this change for most currencies, in the light of the continuing low interest rate environment, we are amending out terms so that we may reflect any additional costs we may incur in providing your account to you.’

The letter also said any changes would come prior to the bank notifying the clients of the decision to move to negative rates.

Coutts is owned by the Royal Bank of Scotland, which last year warned its customers they could be facing negative interest rates if the Bank of England (BoE) cut the base rate to below zero.

Central banks elsewhere in the world, including the European Central Bank, have introduced negative interest rates in recent years to encourage borrowing. 

However, Stuart Newey, head of Banking at Coutts, said the bank expected rates to rise rather than fall lower than 0.25% at this point. 

‘In the unlikely event that the BoE drops interest rates to below zero, we would look to protect our clients as much as we could and currently have no plans to pass negative rates on to them. Indeed, the Coutts house view is that any future change in rates from the BoE will be upwards,' he said.

‘This change in terms and conditions simply brings us in line with the vast majority of other banks and follows similar recent changes at other the banks in the RBS Group. We have been protecting our clients who have Euros deposited with us from negative interest rates since they were first imposed by the European Central Bank in June 2014.’

Julian Penniston-Hill, chief executive at investment management Intelligent Money, which banks with Coutts, said: ‘We have been notified by Coutts of this change to the bank's terms and conditions and obviously we will be keeping a watchful eye on how this proceeds. We already pay banking fees so an additional levy on our deposits would certainly make us reconsider our banking arrangements.

‘Fortunately Intelligent Money's client money accounts are not held with Coutts, as with up to half a billion pounds a year flowing through these accounts we would have had to take immediate action to protect our clients.’ 

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