The Central Bank of Nigeria has introduced new guidelines for the
treatment and management of dormant account balances by deposit-taking
financial institutions.
Part of the objectives of the policy,
according to the CBN, is to ensure that dormant account funds are
identified and channelled through appropriate institutions to make them
more productive to the economy and eliminate the possibility of banks
converting dormant account balances to income.
The bank, in a
circular released signed by its Director, Financial Policy and
Regulation Department, Mr. Kevin Amugo, on Tuesday, stated that the
absence of clear guidelines for the management of dormant accounts had
resulted in the disproportionate treatment of such account balances by
deposit-taking financial institutions.
This, it noted, was generating concern among bank account holders, regulators and other stakeholders.
It
said representations received by the CBN from stakeholders on the
subject highlighted the need for the bank to develop a regulatory
framework for the management of dormant accounts for the benefit of the
banking system and the Nigerian economy.
The directive stated,
“It is in view of the above and the imperative to promote transparency
in the financial system that the CBN hereby issues these guidelines to
provide a standard for the treatment and management of dormant account
balances in Nigeria.
“The purpose of the policy is to curb
possible abuse in the operation of dormant accounts, set operational
standards for banks and other financial institutions in line with best
practice, and to reinforce the property rights as guaranteed in the 1999
Constitution of the Federal Republic of Nigeria (as amended).
“A
dormant account shall be a bank account that has no customer or
depositor originated transaction within a specified period of six years
after the last customer or depositor initiated a transaction. However, such an
account shall be recognised as inactive after the first six months of
non-depositor or customer originated transaction in it.”
The CBN
also said, “Accounts shall retain their interest earning status during
the period of dormancy in the bank. Deposit-taking financial
institutions shall continue to monitor accounts that show tendencies of
inactivity and where necessary, initiate actions for their activation or
protection from wrong usage.
“Once dormant accounts exceed a
six-year period, they shall be reported to the CBN along with efforts
made by the obligor bank to locate the owners or their personal
representatives.”
The CBN stated that three months to the end of
the six years, both the account holder and the next-of-kin would be
notified, adding that revalidation of inactive/dormant accounts would
not attract any charge to the account holder as the banks would have
made ample use of the idle funds.
It said, “Dormant account
balances shall continue to be reflected in the books of banks as deposit
liabilities until they are eventually withdrawn by the account holders
or disposed of on their instructions. Dormant account balances shall,
therefore, be regarded as deposits and shall be covered by deposit
insurance.
“In the case of government-owned inactive/dormant
accounts, banks shall notify the relevant government agency of their
existence, with periodic returns of such notification sent to Banking Supervision
Department. Banks are also required to turn over the funds to the
concerned treasury after six years of inactivity.”
The bank said
account opening forms would include the provision of next-of-kin, who
would be contacted at the point of declaring the accounts dormant.
“The
provisions of the guidelines shall take immediate effect. Sanctions for
contravention of the provisions of the guidelines shall be imposed
under Section 60 of the BOFIA (1991) as amended,” the CBN said.