Between £400 million and £500 million is currently held in dormant bank and building society accounts in the UK where, for whatever reason, a financial institution has lost contact with an account holder. A large proportion of this money will never be reclaimed by its rightful owner. The Government, working with the banking industry, has therefore proposed the establishment of an unclaimed assets scheme to put these dormant accounts to productive use whilst continuing to recognise the ongoing rights of customers to reclaim their accounts at any stage.
We consider the Government's proposals for the scheme and dispute its arguments for pursuing a voluntary approach, whereby banks and building societies will be under no obligation to participate. We also examine whether consumer interests will be adequately safeguarded and whether the Banking Code is the appropriate regulatory vehicle. Transparency will be a vital component of the unclaimed assets scheme, and we set out minimum requirements for external auditors to verify participation by the financial institutions.
In relation to the proposal that dormancy should be identified after 15 years of no customer activity, we consider that 15 years is too long but welcome the fact that all forms of customer activity will be recognised, not merely customer-initiated transactions. Such non-transaction activity should be defined and evidence must be retained by the financial institutions to prove an account's dormancy.
We then consider the scope of the scheme. On the grounds of equity between financial institutions, and in the absence of compelling arguments to the contrary, we recommend that National Savings & Investments (NS&I) be included in the scope of the scheme, whilst urging the Government to investigate proposals for the scheme to include other classes of unclaimed asset, including insurance.
The existing reclaim arrangements run by the British Bankers' Association (BBA), the Building Societies' Association (BSA) and NS&I have had some success in reuniting dormant accounts with their customers. However, the multiplicity of search mechanisms may discourage some customers from reclaiming their dormant accounts: a single search facility would be a significant improvement in this area. We urge the Government to investigate how such an interface could be adopted in order to unify the existing systems run by the BBA, the BSA and NS&I.
There is some uncertainty about the level of funds which might be released by the scheme. Nevertheless, we examine the Government's proposals for disbursement, including the local disbursement option for small building societies. By choosing youth services and financial capability and inclusion as the primary recipients of funds, the Government will miss an ideal opportunity to improve the financial strength of the third sector. We see a clear need for a Social Investment Bank, the establishment of which relies heavily on it receiving significant funding through unclaimed assets. We are disappointed at the lack of
public consultation on the priorities for disbursement.