| Dormant funds in banks, building societies to be used in charity |
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LONDON: British banks will be handing over several hundred millions of pounds lying with them in dormant accounts to charities, under a plan announced by chancellor Gordon Brown Monday.
Brown said in his pre-budget report to the Parliament that banks and building societies have agreed that funds lying unoperated and in unclaimed accounts will be diverted to help improve youth services and finance education. The banks and societies concerned will have an option to focus on their own local community charities, he said.
Accounts remaining unoperated for 15 years will be rendered as dormant accounts.
While the banks have not opposed the idea first mooted some two years ago, they were concerned on a definition of what constituted a dormant account. The banks also did not want to take on the responsibility of administering the charities.
The government is disturbed by reports that some banks are using the unclaimed cash to improve their profit figures. It has set up a Commission on Unclaimed Assets, headed by Apax Partners' former chairman Sir Ronald Cohen to look into how best to return or distribute the money. The commission has backing from eight charities, including the Rowntree Foundation and the Carnegie Trust.
The commission will consult the banks and consumer groups before making its recommendations next June. Funding for worthy causes is expected to begin by 2007.
The commission has said its priority is to return the money to its rightful owners, who will always be able to reclaim deposits. In case this is not possible, the commission will decide how best the funds can be used. The commission has estimated that such funds could be in the range of 5 billion pounds in U.K. banks alone. Research has shown that building societies could be holding around 50 million to 70 million pounds, belonging to accounts that remained unoperated for 15 years .
Experiences in Ireland and some other places show that in 60 per cent of the cases the money had been returned to the account holders.
A Treasury spokesperson said the government will decide where the unclaimed money should go. The first effort will be to trace the actual owners, she said.
Brown revealed that the government is working with seven leading companies to launch a national youth community service with an initial finance of 100 million pounds. It would fund the "gap years" volunteering in Britain and abroad for young people who could otherwise not afford this -- and fund part-time and full-time community service in every constituency. Every local authority will also get on average 500,000 pounds to set up a young people's fund, which Brown said would be used for "amenities and activities run by young people, decided by young people".
Brown also announced a National Sports Foundation, modelled on the Football Foundation's successful investment in football facilities.
Posted
on : Tue, 06 Dec 2005 10:50 GMT | Banking News
By : Paula Jenkins
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