Examination of Witnesses (Questions 102
TUESDAY 5 JUNE 2007
KNIGHT CBE, MR
Q102 Chairman: Good morning and welcome
to our inquiry into unclaimed assets within the financial services
system. Can you identify yourselves for the shorthand writer,
please, starting with Adrian?
Mr Coles: Adrian Coles, Director
General of the Building Societies Association.
Mr Cornish: Iain Cornish, Chairman
of the Building Societies Association and Chief Executive of Yorkshire
Ms Knight: Angela Knight, Chief
Executive of the British Bankers' Association
Mr Chisnall: Paul Chisnall, Executive
Director of the British Bankers' Association.
Q103 Chairman: You are all welcome.
The BBA and the BSA have worked closely with the Government in
designing proposals for an unclaimed assets scheme. Is that because
you recognise a need to do something or, rather, you fear that
the Government might impose a less flexible system if you do not
show your eagerness to act? Adrian, how about you, since you smiled?
Mr Coles: Thank you, Chairman,
for the friendly approach; I was encouraged by you to smile. I
think we are taking part in it because we believe that something
should be done about dormant accounts. There are significant amounts
of money, amounting to hundreds of millions of pounds collectively,
across the widely defined banking system in dormant accounts.
Banks and building societies are doing a lot to reunite customers
with dormant accounts, with lost accounts, but if, after all the
efforts of the banking system, it is not possible to reunite,
then it is probably sensible to move along the lines suggested
in the consultation document that the Treasury put out, the introduction
of which was signed by myself and Angela as well.
Q104 Chairman: Angela, you mentioned
in your submission about the experience of the Irish scheme. As
a committee we visited the Republic of Ireland and took evidence
on it. What was your experience of the Irish scheme?
Ms Knight: It clearly works well,
but there are two issues which we discussed with the Irish scheme,
and I believe that you will no doubt have had the same comment
as well, Chairman. The first is that they were very much in favour
of a 15-year period, because that fits in with the right sort
of experience, but they were concerned about the way that the
Irish scheme had operated in terms of the definition of what was
a dormant account and what was not, and there it was entirely
transactional based, which is all right as far as its goes but
does not necessarily give the flexibility that fits in with what
individuals do and individuals in conjunction with their financial
services company. We think that if we go for the same sort of
rigidity that dormancy is based only on a transaction issue, then
we will end up with what has happened in the Irish scheme, and
that is some accounts being put to dormancy where actually the
financial institution did know the individual. So, we want a bit
of flexibility within how we define dormancy, and that is what
we have said to you in our response.
Q105 Chairman: The Irish scheme was
a compulsory scheme; it was mandatory. Would you like the same
Ms Knight: The thing that we have
proposed, as you know, is a scheme that operates within a statutory
framework, and one of the reasons for proposing what we have proposed
is that actually a lot of it is what is working at the moment.
Adrian has just mentioned the fact that the Building Societies
Association and ourselves have been running, let us call it, a
reunification project, call it what you like, for now about six
years, and certainly as far as the BBA is concerned, we are getting
literally thousands and thousands of hits on our website. We have
done a lot of work, brought together something like 40,000 people
with their money. They did not know where their money was. It
seems to us that what is operating now does operate well. We have
got, I think, 42 banks that are all signed up to itthat
is just about everybody that we know who offers accounts. So,
when you have got a system that operates, when you have got a
procedure that has been working for some years, when you have
got the numbers that we have got in terms of both helping people
find their institution, getting people reunited, I would say that
to build on what we have got is probably the best way forward.
Q106 Chairman: You will be aware
that in the Irish scheme the Bank's initial estimates of dormant
balances was in the region of three million euros but the eventual
figure transferred was just under 200 million euros, in fact 186
million euros. Can we expect, therefore, to see a much larger
pool of transfers in the UK?
Ms Knight: I do not think it is
quite like for like as far as the Irish scheme and the UK scheme
are concerned in terms of who is in that Irish pool, because they
have put the Post Office in there and that is the same, or equivalent
in this context, of National Savings. National Savings is not
in there as far as we are concerned. Secondly, perhaps I could
explain what we have done as the BBA and why we think the figures
that we have provided to you are reasoned and sensible ones. We
have been back and checked with our members now two or three times,
so we have got some real substance for the figures that we have
presented to you. We gave you 250 to 350 million, Chairman. The
second thing is that there has been quite a lot of merger, acquisition,
takeover within the UK, there has be a lot of activity over a
number of years of banks with refurbishing their databases, refurbishing
their systems and, as I say, bringing customer bases together.
The third thing is that people are much more aware of what is
happening right now about dormant accounts. This inquiry and,
indeed, the original government announcement has wised people
up. There will be a lot more attention given to this area when
the reunification programmes are launched. Right now we are seeing
double the number of hits, double the number of contacts we had
before. The estimate we have given you of 250 to 350 is based
on substance and we have been back a couple of times to get confirmation.
Q107 Chairman: You mentioned reunification
of funds. 40% of the funds in the Irish scheme were returned to
account holders as part of that reunification exercise. Do your
estimates take into account the likely reclaim of funds by customers?
Mr Chisnall: No, they do not.
The figures that we have given are the amount that we believe
currently is the stock of unclaimed moneys in bank and building
society accounts. Clearly, we were proposing there would be a
reunification exercise before an unclaimed assets scheme.
Q108 Chairman: You have not got figures
Mr Chisnall: We have not. It is
in the future. All I would add is if we look at the scale of the
figures that we have given to you, we believe that that reflects
the high level of reunification that has already taken place than
actually had already existed.
Q109 Chairman: The 400 million total
that you are talking about transferring will obviously be less
if there is going to be a reunification of 40%, will it not?
Mr Cornish: Perhaps I can give
some practical insight based on our own experience. Our starting
figure, based on a trawl through our computer records and transactions
that customers have initiated, was around about £11-12 million.
We have now started manually going through all the paper files,
going back, obviously, many years, to see if there is any evidence
of other customer activity which would give us grounds to believe
we could reunite customers with their assets, and certainly for
the larger balance accounts we are finding that roughly half of
those accounts, we believe, we will be fairly straightforwardly
be able to reunite people with their money; so our estimate might
actually come down by 40-50%.
Q110 Chairman: In that case, rather
than £400 million, it could be £200 million transferred
to unclaimed assets.
Mr Coles: Chairman, I should say
at this stage, the BSA has increased its estimate over the last
few weeks since we submitted written evidence to you of the amount
in building society accounts.
Q111 Chairman: You said £50-70
Mr Coles: We said to you £50-70
million, and building societies have been looking more carefully
over the last four weeks or so, as we have initiated another inquiry
of our members on how much money is involved, and our latest estimate,
based on revision by one or two large societies, is now £150
million but still ignoring any potential reunification activity
of the type that Iain has just been talking about.
Q112 Chairman: That is a three-fold
increase. Does that apply for the banks then, Angela?
Ms Knight: No. We rechecked ourselves
very recently, both directly with the major banks and then with
a selection of smaller banks, and we are sticking with our current
estimate. To just underline what has just been said, if I may,
Chairman, that 250 to 350 million which we have given as our estimate,
and it is a reasoned estimate, we do not know how much of that
will be reclaimed during a reclamation exercise. We are just not
Q113 Chairman: Do your estimates
include those accounts in which the institution has identified
that the customer is active despite there being no record of transactions,
for example, by voting in AGMs or contacting the bank by telephone?
Mr Coles: The definition that
we try to use is "lost account", not just "dormant",
not just where there has been no activity but where the institution,
the building society in our case, just cannot contact the customer.
Building on Angela's point from earlier, it is important that
the UK scheme, as compared to the Irish scheme, includes voting
at AGM, a call to a call centre, a visit to a branch, even when
there has been no activity on the account, because what we really
want to isolate here is not dormant accounts, it is absolutely
lost accounts where there is no chance at all of the customer
having any relationship with the institution because they have
just totally disappeared.
Q114 Chairman: What about the banks
on that point?
Mr Chisnall: Again, our figure
is the current stock of moneys sitting in dormant accounts according
to the definitions proposed. I think, as we have already said,
there are reasons why the figure does not look to be a comparable
basis to the Irish scheme, the point being that there has been
a lot of reorganisation within the UK banking systemthere
have been demutualisations, there have been mergers. On each of
those instances there will have been customer reunification and,
therefore, what we are saying is we think that a lot of that reunification
that took place in Ireland has already taken place as far as the
UK banks are concerned. In terms of the 250 to 350 million, there
will be some of that money in which the customer will be traceable,
but I think it will be a lower proportion than you saw in Ireland.
Q115 Mr Fallon: For people who count
money, you seem remarkably hazy about how much is actually there.
I am not quite clear, Mrs Knight. In paragraph 35 you say your
figure is corroborated "by cross-reference to the experience
of the Irish scheme" and then you cannot say whether or not
40% of it would in fact be reunited. So, is it corroborated or
is it not corroborated?
Mr Chisnall: We think it is corroborated
because what we have done, we have made estimates before reunification
and, of course, when the Irish scheme actually started to look
at their numbers, they came up with a far clearer view of what
they had got in there than at the start. Where we were trying
to get some sort of feel, which I thought was the right thing
to do as the BBA, is to whether the numbers we were receiving
were in the right sort of ball park or not, in addition to going
back to our members, we looked to see what was the reality once
the Irish banks had started to really focus on this (what was
the reality of their numbers versus the reality of ours) and,
therefore, we did come up with numbers that we felt broadly comparable.
Q116 Mr Fallon: What is the answer
to my question? If you are 350 million, what percentage will be
reunified, do you expect? Is it 40%, or is it lower?
Ms Knight: No, it will be lower
than that because of the reasons that my colleague, Paul Chisnall,
Q117 Mr Fallon: So what will it be?
Ms Knight: And that is that a
lot of the work which the Irish banks had not actually undertaken
has already been done by our members. It is very difficult to
give you an answer to the question, because you are asking me
what is going to be the effect of individuals getting in touch
with institutions with which they have had no contact for a number
of years, but where we do believe that there is a real need to
ensure that there is a difference between us and the Irish scheme
is this definition of dormancy: because if it is only transaction
based, then we would be saying more of this money will not be
reclaimed, and we do not think that that is quite right. We think
the right thing to do is, where there is knowledge of the individual,
regardless of whether a transaction has taken place in 15 years,
that individual has a right to their account.
Q118 Mr Todd: If the money is passed
over to the reclaim fund and then the account holder is identified,
will there be any cost in reactivating the account? How are you
intending to maintain a record of that account and any interest
that might be earned on it?
Mr Coles: It is up to the institution
to keep a record of the account, and it will be up to the institution
to keep a record of the account even when this new scheme comes;
so I do not think the introduction of the scheme will have any
particular implications for customers. This is very much behind
the scenes as far as the customer is concerned. They will still
be able to reclaim their money in the same way.
Q119 Mr Todd: I was suggesting there
will be some implications for you, in that there may be some costs
involved in reactivating an account which you had placed into
some sort of different
Mr Cornish: The costs, I do not
think, will come at the point of reactivation, they will come
in doing the systems work to identify these accounts and the costs
will come in actually doing the reunification exercise. Once that
has been done, when a customer walks in, the marginal cost of
essentially reactivating the account at that point will be the