CBN introduces new guidelines on dormant accounts

CBN introduces new guidelines on dormant accounts

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The Central Bank of Nigeria (CBN) 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.