Make Good Use of Dormant Account Money [2012/02/10]
Make Good Use of Dormant Account Money
I think it may be possible to mobilize public opinion to back a plan on utilizing the funds from dormant bank accounts. This is the topic I addressed in my opinion piece published in Sankei Shimbun, reprinted below.
A dormant account is a savings account that has not been used for an extended period of time. Most people who work in banking and finance know of the existence of these accounts, but few realize that the money in them is ultimately absorbed as profit by financial institutions. Savings in dormant accounts and accounts opened using an alias, which was legal until 2002, is believed to total well above 100 billion yen (1.2 billion dollars), thus offering a potential “hidden reserve.” In Britain and South Korea, funds have been set up to use the money from dormant accounts to support a range of social welfare programs. Japan should create a similar system as soon as possible.
A New Hidden Reserve
Most dormant accounts are low-balance accounts with less than 10,000 yen (120 dollars) opened by people before they were married. However, there are also a large number of high-balance accounts. A number of years ago, postal savings accounts bearing the names of animals as the account holders were a hot topic in the newspapers.
In Japan, savings accounts are classified as “dormant” when no deposits or withdrawals have been made from them in five to ten years. After the specified number of years elapses, notification is sent to the account holder and the savings becomes the property of the financial institution. Reclaiming money in an account is not easy. The account holder must submit the bankbook and name seal used to open the account, identify the branch name, and go through other troublesome procedures.
When the address of the account holder cannot be verified or no forwarding address exists, as is true in the case of alias accounts, the remaining money becomes the property of the financial institution.
Dormant accounts are found in all countries. The period of time before an account is classified as dormant ranges from three to seven years in the United States, depending on the state; seven years in Australia; and up to ten years in Canada. In countries where the savings become the property of the bank or other financial institution, serious concerns have been raised as to the propriety of this and various strategies have been devised to deal with the problem.
Britain, for example, established a fund in 2010 with the savings from accounts in which no transactions had been made during the past 15 years. It is now making available 53.0 billion yen (636 million dollars) for projects run by nonprofit organizations and social entrepreneurs. South Korea, meanwhile, established a foundation in 2008 through donations of money from dormant bank and postal savings accounts; and about 14.0 billion yen (168 million dollars) is being used to fund welfare programs with these funds.
Changes are underway in Japan, too. At the end of 2009, Hiroki Komazaki, chairman of Florence, a nonprofit organization founded to assist working parents, proposed that a fund be set up with dormant account money at as early a date as possible. In January 2011, Yasuo Tanaka of the New Party Japan remarked during a House of Representatives session that “legislation must be revised so that the funds in dormant accounts can be transferred from financial institutions to the central government.” Prime Minister Naoto Kan then voiced agreement, saying that this ”is one way the money could be used” and that he would “like the opposition parties to also consider the idea.”
Hundreds of Billions of Idle Yen
According to the Financial Services Bureau, Japan’s three megabanks, including the Bank of Tokyo-Mitsubishi UFJ, absorbed 24.2 billion yen (290 million dollars) as profit from dormant accounts in fiscal 2008 (April 1, 2008 to March 31, 2009) and 30.3 billion yen (363.7 million) in fiscal 2009. Of the total among these three institutions, about 40% was claimed by account holders and returned. Not even the Japanese Bankers Association knows how much the nationwide total is, however. A number of experts, including Komazaki, have put the figure at close to 100 billion yen (1.2 billion dollars), but I believe it may be two or three times that amount if money in alias bank and postal accounts is included.
The establishment of a fund for dormant account money is now being considered by the Cabinet Office’s Council for the Promotion of the New Public Commons. The Japanese Bankers Association and six other federations have submitted documents to the council expressing their opposition, maintaining that allowing funds to be transferred out of banks and other institutions without the consent of the account holders would damage the credibility of the finance system.
Their argument, however, is mere sophistry. Most of the money in dormant accounts is the property of individual account holders, and it is hard to justify its absorption by financial institutions.
The Great East Japan Earthquake left nearly 20,000 people dead or missing. Banks have set up desks to answer questions of the people in the affected areas. It would be an affront to people whose lives were cut short by the tragedy if the savings accounts they used regularly up until the earthquake ultimately ended up as dormant accounts.
As of June 2011, Japan’s national debt stood at 943 trillion yen (11.3 trillion dollars). The country is on the brink of financial collapse. As the pool of available funds dries up, it will be necessary to use what we have more effectively, uncover hidden resources, and shift some of the burden from the public to the private sector in order to maintain and improve welfare and community services.
The Finance Industry’s Social Responsibility
Though I do not wish to sound as if I am blowing my own horn, I would like to note that after the Great East Japan Earthquake, the Nippon Foundation distributed money to people who lost loved ones, launched 18 FM stations to air disaster-related broadcasts, built temporary housing for people with disabilities, provided support for 700 NPOs, and dispatched student volunteers to the area. Central and local governments are bound by various legal restrictions, which hinder the speed with which their programs can be instituted. The private sector has much more flexibility and can work more quickly. All we need is a system in place for using dormant account money, since we already have the know-how to make use of the funds.
The Financial Services Bureau should stop allowing financial institutions to classify dormant account funds as profit at the end of each fiscal year, and make public the details on how much money is in postal and bank accounts, including alias accounts.
Finance is the lifeblood of the state and a public matter. This is why public funds have been used to overcome financial crises. I am certain that a move to use the money in dormant accounts for the public good rather than let it become the profit of individual banks will foster greater public appreciation of the finance industry’s corporate social responsibility and make it easier to gaining the approval of savers.