Foundation trusts' bank charges could be as much as quadrupled over the next year as banks hike up the costs of providing overdraft facilities.

One foundation trust finance director told HSJ that Barclays Bank had increased the charge it was proposing to levy on its working capital - or overdraft - facility from 0.3 per cent of the value of the limit to 0.6 per cent. That would double the annual charge for a typical foundation trust's£13m facility from£39,000 to£78,000.

But in addition to the arrangement fee, the bank was also asking for a further 0.6 per cent charge on any element of the facility not used, leaving the average foundation paying up to£156,000 in bank charges before it even started to incur interest on any of the overdraft used.

Liquidity rules

The bank charges are controversial because foundations rarely go into their overdraft facility yet must have one arranged to satisfy Monitor's rules on liquidity.

Some NHS finance directors have proposed the Department of Health should set up its own bank for lending between foundation trusts.

That would dramatically lower the cost of any borrowing as the government can borrow at a lower rate than commercial banks.

But regulator Monitor said it was not aware of any proposals for this.

Rates at other banks have also increased since last autumn. Royal Bank of Scotland - which received a£20bn Treasury bailout last year - is asking foundations for 0.8 per cent, more than double the rate charged up to last autumn.

A Monitor spokesperson said: "We're aware of increases and have been expecting them at some point given the current pressures on banks.

"We have always advised foundations to carefully assess their realistic working capital requirements based on future business needs as paying for unnecessary working capital facilities does not represent a good use of public funds."

A Barclays spokesperson said the bank worked with trusts to offer "tailored arrangements and discounts based on each client's specific circumstance".

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