Ulster Bank has said up to 18,000 of its customers have been overcharged interest on their accounts.

The bank said it was "an interest overcharging error on our part."

It is writing to business loan and overdraft customers who were affected.

In March 2012, the bank advised customers it was changing the definition of 'Cost of Funds' - a variable component of interest rates on their accounts.

But it has since identified that some customers' accounts did not allow for this change, and they were therefore overcharged.

The bank added that the overcharge is, on average, less than one-third of 1% per year - with the average refund being less than €2,000.

It said the amount of overcharge will vary depending on the length of time a loan has been outstanding, and the amount of the loan.

Customers are not required to take any action.

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Ulster Bank’s managing director of commercial banking, Eddie Cullen said: "We are writing to some business loan and overdraft customers who have been impacted by an interest overcharging error on our part.

"This has led to up to 18k customer accounts being overcharged.

"The overcharge is less than one third of one per cent per annum and the average refund due is less than €2,000.

"We sincerely apologise to our customers for this and although this will take time to fully resolve, we recognise that full resolution is essential for customers and in building their trust in Ulster Bank."

Customers who have queries can contact a dedicated customer helpline online or call 1800-719-874.