Examination of Witnesses (Questions 160
TUESDAY 5 JUNE 2007
KNIGHT CBE, MR
Q160 Mr Mudie: You are still squirming
a wee bit, Angela.
Ms Knight: I beg your pardon,
George, I am not meaning to.
Q161 Mr Mudie: How many institutions
are not participating deliberately that you have approached as
the association and they have said, "No, we are not doing
Mr Chisnall: There are a small
number of niche institutions that have a particular client base
and some of them were party to the BBA scheme. What they discovered
is that to the degree that people are making claims through the
BBA because they were not sure of which institution was holding
their account, none of those claims were against their institution
and, therefore, they could not see why they had to search against
the BBA form but they have provided contact details, and if people
contact us and say, "I think we have got an account with
this bank. We do not see it listed on your form", then we
can advise those people how to get in touch with that bank. So,
it is not the case that anybody has deliberately removed themselves
beyond our scheme, it is just simply that they do not consider
there is relevance.
Q162 Mr Mudie: The Irish experience,
they tell us, cost a great deal in admin. Faced with the admin
costs, I know you have been running this scheme but this scheme
is different in terms, why are you so sure that you can do this
voluntarily? Grant Thornton said when it is voluntary, and even
the Irish said that. In fact you would lecture me on this,
Angela, in your old days, about a level playing field. Here is
a situation where there is an incentive to opt out because you
have got to save a lot of money over your competitors. The Irish
said it was marvellous because everybody knew the game and everybody
went under the same regulations. Why are you going for voluntary?
Ms Knight: As I said at the start,
George, it is because there is a scheme that is currently up and
running, there is history in this area already in the UK, there
is substance to what we have done and so we thought, and still
continue to believe, that the best thing is to continue.
Q163 Mr Mudie: It is a very short
history, though, is it not? It was a history that was triggered
off after Gordon Brown started making statements that he was minded
to do this, and suddenly
Ms Knight: No, no, six years our
schemes have been going.
Q164 Mr Mudie: Six years. Gordon
Brown has been Chancellor for ten?
Ms Knight: Yes, but he has not
been talking about this for 10 years.
Q165 Mr Mudie: I think he has, you
Ms Knight: Six years' experience
is certainly longer than what was happening in Ireland because
they did not have the experience there. It does seem to us that
it is better to build on what we have got rather than create something
wholly different. Ultimately it is for you all to decide, not
for us to decide. Nevertheless, if you have got something that
works, why not continue with it?
Mr Coles: The key advantage of
a voluntary scheme is flexibility (you can change it more rapidly
than if it is a statutory scheme), cost (typically it is cheaper
in admin terms to run a voluntary scheme than it is to run a statutory
scheme which might require lots of institutions to change their
arrangements) and the third advantage is response to new circumstances.
I am sure if the Irish looked at their scheme again, they would
want to include customer-initiated activity. They have got to
change the law to do that. If you have got a voluntary scheme,
then it is much easier to reach agreement to make those changes.
Q166 Mr Mudie: There is some question
that some of your building societies will have to have a vote
amongst members for a voluntary scheme to operate. Is this so?
Mr Coles: No. Can I say, first
of all, that all 60 building societies in the UK are members of
the BSA and members of the BSA scheme, so our scheme has 100%
coverage of every building society in the UK. As far as voting
is concerned, each individual building society will have to decide
whether it wishes to participate in this scheme. It may bewe
are not certain yet because it is a complex legal areathat
some building societies will have to change their rules to preserve
membership if the money in a dormant lost account is transferred
to the reclaim fund and then the customer turns up again, say,
after 22 years. There is some doubt about whether membership of
the building society is maintained throughout the entire 22 years.
If that requires a rule-change in building societies, then building
society members do have to vote in favour of a rule-change, but
there is no question of building society members having to vote
in order to enable the building society to take part in this scheme.
Q167 Mr Mudie: But if they voted
against the rule-change, what would be the repercussions there?
Mr Cornish: Still to participate
in the scheme but the membership rights of the accounts would
be potentially compromised.
Q168 Chairman: Angela, we do not
want to fall out with you.
Ms Knight: I am glad to hear that.
Q169 Chairman: You are too dangerous
a person to fall out with. What you have been saying to me just
seems pure marshmallow. You say that it is foreign but you have
been doing it for six years, but here we have a press announcement
from Halifax in February saying that the Halifax has undertaken
a series of activities to reunite relevant customersmailings
to dormant account customers, national and regional newspaper
advertising, claim forms in all Halifax and Bank of Scotland branches,
a dedicated website, and they have also got third-party search
engines being employed. The Halifax, let us be blunt, have jumped
the gun and they have got a competitive advantage. They are the
only one out front at the moment that is doing something.
Mr Coles: They are the only ones
who have announced something, Chairman. I have given you some
examples of banks and building societies doing things.
Q170 Chairman: Do not tell me there
are financial institutions with big marketing budgets that do
not announce anything. The Halifax are the only ones in the field,
Angela. Come on, let us be honest.
Ms Knight: Yes, they are.
Q171 Chairman: The others are sitting
back at the moment.
Ms Knight: I do not think they
are sitting back, but, you are right, that Halifax has gone out
and it has made a big publicity announcement and that, as far
as we are concerned, is a very good initiative. Are the others
going to follow? Are the others keen to get reunification underway?
The answer is: "Yes." The issue that we have discussed
very carefully with our members is that a programme of that sort
will take place as and when we know when the legislation is going
to be passed. We do not want to fall out with you either, Chairman.
Q172 Chairman: We are not really
informed, but you have gone some way to telling us that not much
has been happening?
Ms Knight: We do not think that
people at all have been sitting back. I have given you some figure
and I will present you with pleasure with the figures over the
last six years. Is there room for a big exercise to ensure that
as many people as possible come forward? The answer is: "Yes."
Will that take place? The answer to that is, "Yes" as
Mr Cornish: We are actively seeking
to reunite people with their lost assets. We have not made public
announcements. We are going through our own files trying to find
Q173 Chairman: I do not want to go
on, but the experience in Ireland (and we went there) is that
you are not going to get anywhere if you do not have a public
show. That is the point. So, doing things quietly at the moment
has not got us anywhere. We still have a long way to go.
Mr Cornish: That is true.
Q174 Mr Love: We normally follow
the Chairman, so I would say you do not want to fall out with
him? I want to go on to another aspect of this, which is that
it is going to be a self-regulatory scheme according to the Government's
proposals within institutions, all signing up to an amended Banking
Code. There are some concerns about whether this will produce
consistency, both in effort and in performance of all the institutions
in both identifying the dormant accounts and collecting the money
properly from them. How do you respond? How confident are you
that that sort of voluntary self-regulatory scheme will actually
Ms Knight: We think it will, but
you are right that we will need to look at the Banking Code and
make sure that there are the right and proper changes to ensure
that that consistency takes place. But we have come here in the
full knowledge of our members, with their full support; we have
been engaged right the way through the discussions with the Treasury
in respect of their consultation (indeed, I have signed the front
of that consultation). So, this is all about getting the right
scheme together, getting it as quickly as possible in place so
we get people back together with their money.
Q175 Mr Love: Let me press you. As
Mr Mudie indicated earlier on, not all of your members are taking
part in your existing scheme. As the Chairman has already said,
the Halifax is, if you like, launching out way ahead of the rest
of your members, so consistency is not part of the game at the
moment. How are you going to ensure consistency in the future?
Ms Knight: Perhaps to go back
a moment, as I said to the Chairman a moment ago, do we agree
that there will need to be a good publicity campaign in a variety
of forms that is going to work? The answer is: "Yes, of course
we do", and in answer to, "Is everybody signed up to
what we are doing at the moment?", my colleague, Paul Chisnall
says there are some niche players, but that does not mean they
are not participating should there be an individual who has lost
their account or lost their contact with that institution. How
do we bring about the uniformity? The first is that, of course,
there will be a statutory framework that goes around this scheme,
second, we need to agree how it works, third, we have the Banking
Code in which both the principles and, indeed, the detailed guidance
and information to the institutions is contained within the Banking
Code, the information on the detail goes into the Banking Code,
and the subscribers to the banking code are the banks and, indeed,
the building society. So, we think, collectively, we are following,
if you like, a pretty good path of how that Banking Code works
and, indeed, how this type of self-regulation within a statutory
framework operates. You have, if you like, a totally similar example
related to this in the money laundering legislation, for example,
which is guidance that is undertaken by the industry within a
statutory framework, but it does provide, as Adrian said, that
additional flexibility that may well be required as the scheme
works its way through the year, two years, three years.
Mr Coles: It is worth adding that
the Banking Code Standards Board has got a very good record of
ensuring compliance with the existing Banking Code, and we think
they will do a good job in relation to this new responsibility
that they are taking on.
Q176 Mr Love: I take it from what
you say to me that there have been some stresses and strains with
the Banking Standards Board, but I shall not go into that topic
today. I wanted to ask the Building Societies Association following
on from this, the Banking Code, of course, is voluntary, so all
we will have is an optional scheme regulated by an optional regulator.
Do you see any problems with that?
Mr Coles: No, we think it can
work and we think the advantages that I was talking about before
(the cost-effectiveness, flexibility, ability to change to new
circumstances) will outweigh any possible disadvantages. Every
single institution will not act exactly the same in relation to
this scheme. Some building societies, for example, will not have
a record of someone who voted at the building society AGM 13 years
ago, and they will not have that record of customer initiated
Q177 Mr Love: In terms of credit
card companies, there have been some difficulties with the Banking
Code Standards Board in relation to bringing them into the fold.
Do you foresee any problems with the odd rogue institution that
does not follow the form of all the others?
Mr Coles: There are certainly
no rogue institutions in the membership of the Building Societies
Q178 Mr Love: I am no accountant,
but as I understand it, you can only derecognise a liability to
repay a dormant account where that liability has been extinguished.
Are you confident that the Government's proposals so far are clear
on this matter?
Mr Coles: As far as we can tell,
those government proposals, if they are enacted, will give institutions
the ability to strike liabilities off their balance sheet. If
that legislation does not work, then this scheme cannot work,
so we have got to get that right between us.
Q179 Chairman: You do not demur from
Mr Chisnall: No, that is exactly
why we need the legislation, because international accounting
standard 39 within the body of the standard says you can derecognise
liabilities of this nature providing you have a statutory discharge,
and therefore, providing that Parliament can provide the statutory
discharge, these amounts can be transferred and the moneys can
be spent on community causes.