No negatives from Ulster Bank’s rate glitch

Cantillon: Bank’s customers in the Republic benefitting from fact that RBS’s IT systems don’t allow it charge negative interest rates

It's not too often that customers of Ulster Bank have benefitted from the bank being on the hind tit of its parent Royal Bank of Scotland.

Back in 2012, when the RBS's IT network went into meltdown, 600,000 Ulster Bank customers found themselves at the back of the queue in accessing their money as payments were first sorted out at RBS and its NatWest division in the UK.

However, the Financial Times reported over the weekend that Ulster Bank is not currently able to routinely impose negative deposit rates on big corporate clients – at a time when banks across the euro zone, including AIB and Bank of Ireland, are charging businesses to hold their money.

Ulster Bank's systems were built at a time when it was "unthinkable" that a bank would charge a customer to hold a deposit, an IT consultant was cited as saying. However, with the euro-zone economy in the doldrums, the European Central Bank (ECB) has set the benchmark by cutting its deposit rate to minus 0.5 per cent last month as its main rate remained at zero.


Negative interest rates aren’t an issue – for the moment, at least – in the UK, where the base rate is 0.75 per cent. Ulster Bank has implemented a manual workaround that allows it to charge a small number of its largest corporate depositors a negative rate on an ad hoc basis.

A spokeswoman for the bank told Cantillon that it is "expanding this capacity" and that it will "keep this pricing under constant review". Ulster will no doubt find other ways to squeeze customers to make up the millions of euro it is losing by not being able to routinely charge negative rates.

Meanwhile, noises from Bank of England policymakers are growing louder that UK rate cuts are in store under all Brexit scenarios – though there’s little talk, for now, of its rates falling below zero.

If they do, RBS will be certain to sort out its computers post haste.