RBS to charge some British corporate customers negative rates

LONDON (Reuters) - Some big corporate clients of Royal Bank of Scotland (RBS.L) face the prospect of paying to hold deposits with the bank from Monday as it becomes the first lender in Britain to charge negative interest rates.

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.

The Edinburgh-based bank has contacted about 70 investment banking customers to warn them of the charges, which are expected to hit clients who trade futures and options contracts that must be processed via clearing houses in Europe, a source close to the bank said.RBS said in a statement it is passing on the negative rates those clearing houses have charged to handle those trades since the ECB cut its base rate earlier this year.

"Due to the sustained low interest rate environment, RBS will now be passing the cost of holding such deposits on to a limited number of our institutional clients," the bank said.

RBS gave no details of the size of the charges.

The ECB has resorted to a negative deposit rate to try to encourage banks to lend to stimulate Europe's economy, which is still suffering from the after-effects of the financial crisis.

Banks are seeking to encourage depositors to shift their cash out of deposit accounts into other financial products.

RBS wrote to a million business customers in Britain last month to inform them it may have to impose charges on deposits if the Bank of England introduced negative interest rates.

Six of the world's central banks have introduced negative interest rates, most notably the Bank of Japan and the ECB.

Laith Khalaf, a senior analyst at the stockbroker Hargreaves Lansdown, said the impact would be limited for most customers.

"We are still a long way from banks imposing negative interest rates on personal customers, which would be a deeply unpopular move," he said.

(Reporting by Andrew MacAskill; Editing by Alexandra Hudson and Adrian Croft)