Negative interest rates could spell the end of free bank accounts, experts warned after the Bank of England gave its clearest indication yet that the controversial policy could be introduced.
The Bank has written to UK lenders' chief executives asking them to set out their readiness for negative rates, raising the prospect of an unprecedented move below zero as the recovery begins to slow.
It could trigger massive losses for lenders. According to analysts and grandees, in an extreme scenario banks could be forced to start charging millions of customers a monthly fee.
Sir Philip Hampton, who was chairman of taxpayer-backed Royal Bank of Scotland at the height of the financial crisis, said: "In the case where negative rates are significant and prolonged, and are charged on current accounts of ordinary earners, I think there’s likely to be a strong customer reaction and pressure to make the revenues fit the costs with more transparency. That probably means fees.
"The alternative could be negative interest rates on bigger deposits. That mainly hits the better off who can usually afford it but also pensioners and other savers. But these events often lead to something fairly radical."
Threadneedle Street has already slashed rates to an all-time low of 0.1pc, wrecking banks' profits and landing savers with a return of close to zero on their deposits.
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