Global bank HSBC is setting a single annual overdraft rate of 39.9% for its U.K. customers, as it scraps daily charges for people who go into unarranged borrowing on their account.

The new interest rate on both arranged and unarranged overdrafts comes into place on March 14, 2020, and will be charged on the amount borrowed.

HSBC currently charges between 9.9% and 19.9% of interest on arranged overdrafts.

The bank is removing the £5 ($6.57) daily usage fee for unarranged overdrafts and reducing the monthly maximum cost for using an unarranged overdraft to £20 from £80.

HSBC is also introducing a £25 buffer on the amount people can borrow interest free, where they won't be charged on their arranged overdraft below this limit. This applies to HSBC Advance, Bank Account and Current Account.

This buffer goes up to £500 for its Premier account customers and £1,000 for its Jade account customers.

HSBC said the changes mean using an overdraft will be cheaper or cost the same for seven out of 10 of its U.K. customers.

The bank has close to 9 million current account customers in the U.K., known as checking accounts in the U.S., though the changes will not apply to those with student accounts which have an interest-free overdraft or the Basic Bank account which doesn't offer an overdraft.

Madhu Kejriwal, HSBC U.K.'s head of lending and payments, said the bank was aiming to make its overdraft charging structure "easier to understand" and "more transparent."

The changes come as U.K. regulator, the Financial Conduct Authority (FCA), introduces new rules on overdrafts.

Earlier this year, the FCA announced that it would be clamping down on the "dysfunctional" overdraft market and from April 6, 2020, it would be banning banks from charging higher prices for unarranged overdrafts compared to arranged borrowing.

The new rules will prevent charging structures based entirely on daily fees and stop models using a mix of an interest rate plus daily or monthly usage fees.

Instead it is requiring banks to price overdrafts with a single annual interest rate.

The regulator found that banks made more than £2.4 billion from overdrafts alone in 2017, 30% of which came from unarranged borrowings. Unarranged overdraft fees can be more than 10 times as high as charges on payday loans in some cases, it said.

U.K. bank Nationwide Building Society also moved to a single annual overdraft interest rate of 39.9% in November, again scrapping its £5 daily fee on unarranged borrowing.

Last week, Brazil's monetary policy committee capped interest rates on overdrafts. Central bankers said banks would not be able to charge interest rates over 150%, or 8%, as of January 6, 2020, according to a Reuters report. The average rate on borrowing is currently 306%, it was reported.