Financial Times, 22nd April, 2004, page 4.

Blair presses banks on dormant accounts

by Paul J Davies and Eoin Callan

Tony Blair has increased the pressure on the British Bankers' Association to make progress on the treatment of dormant accounts.

The industry association is negotiating with the Treasury about control of an estimated £15bn left unclaimed when account holders move or die. The Treasury is considering legislation if banks do not voluntarily surrender the money to a foundation to give the funds to charities.

The talks are becoming tense because, it has emerged, banks have been adding money from dormant accounts to their profits. Joanna Elson, from the BBA, said yesterday that the big banks could not agree on a way forward. "The arguments are finely balanced between a statutory or voluntary scheme."

But one person close to the negotiations said: "The BBA is bluffing. The banks are testing Gordon Brown's will to act. What we might see next is one of the banks breaking ranks.

HSBC is the only group among the UK's six leading high street banks to say that it has never taken any assets from dormant accounts into its profit line.

Abbey National, Barclays and RBS have admitted to the practice, while Lloyds TSB and HBOS refused to comment.

Mr Blair said the government was looking to the BBA for progress on the issue, in reply to Tony Lloyd, Labour MP for Manchester, for a windfall tax on bank profits.

Mr Lloyd said some ministers wanted to "stop the banks getting away with this". The pressure could mean some banks might be forced to give up hundreds of millions of pounds in previously booked profits.

Estimates of how much cash banks had fed through to the profit line vary. Ian Smith, a partner at Deloitte, said that for most banks it was likely to be less than £100m per year. James Eden, analyst at Commerzbank said that banks such as Barclays or Abbey could easily be taking £20m a year.

None of the six banks the FT spoke to would comment on how much had been taken into profits. However, Barclays revealed that in its 2002 accounts there was an extra windfall of £59m from dormant accounts at Woolwich, the building society the bank bought in 2000.

"An increase of £59m resulted from a revision of the estimated amounts expected to be repaid on banking liabilities in the light of experience since the Woolwich acquisition in 2000 and to align Woolwich with Barclays practice," the report said. One person at a leading bank who declined to be named, pointed to the potentially huge amounts of unclaimed assets held under custody of the government, not only in dormant National Savings accounts, but also in guilts such as war bonds.