Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 160 - 179)



  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 this"?

  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 know.

  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 be—we are not certain yet because it is a complex legal area—that 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 customers—mailings 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 well.

  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 any—

  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 produce consistency?

  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 activity.

  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 Association, Andy.

  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 that?

  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.

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