Amendments to the Banks and Other Financial Institutions Act, 2004 have been proposed to stop the trend by empowering the Central Bank of Nigeria to assume control of such funds after a stipulated period of inactivity or dormancy.
A public hearing organised by the House Committee on Banking and Currency on a bill seeking to address the issue opened in Abuja on Monday.
The new bill is entitled: ‘A Bill for an Act to Amend the Banks and Other Financial Institutions Act to among other things, establish a deposit fund at the central bank for standardisation and management of dormant accounts in accordance with international best practices and for other related matters’.
The committee, which is chaired by Mr. Chukwudi Jones-Onyereri, said billions of naira belonging to Nigerians were held by the banks owing to a number of factors, including incarceration of the account owners, ill-health and death.
Lawmakers noted that banks could resort to abusing the funds by converting them to other uses without the knowledge of the account owners or their heirs.
“We in the House of Representatives have always pride ourselves for dispassionate argument, devoid of party lines, at least as much as humanly possible. It is with this same spirit that I hope stakeholders here present will argue their cause, with none but the Nigerian spirit and interest at the fore,” Jones-Onyereri stated.
The CBN is to assume control of the dormant accounts within six months of inactivity, after the account holder has been notified and is still non-responsive.
At the session, the CBN gave its support to the bill, saying that it fell in line with its existing regulations on the handling of such accounts by commercial banks.
An official from the Legal Department of the apex bank, Mr. Kofo Abdulsalam-Alaga, said an accountholders should be notified at inception what would happen to the accounts should they become dormant.
He stated, “We align ourselves with this bill. Banks should start disclosing to customers what will happen to dormant accounts when they are opening such accounts.
“The law should also give the CBN express powers to make regulations for the management of these funds.”
But, the Nigerian Deposit Insurance Corporation disagreed with the CBN over which organisation should warehouse the funds.
According to the NDIC, it is part of its primary duties to insure bank depositors’ funds and not the CBN.
The NDIC was represented by the Secretary of its Board, Mr. Belema Taribo, who made a spirited case for the corporation to keep the funds.
“These are funds at risk. They are dormant. The money should be warehoused by the NDIC, being that we are the insurer of funds,” Taribo argued.
He informed the committee that the incidences of unclaimed funds or dormant accounts were real, including accounts operated by government agencies.
Taribo added that despite the introduction of the Treasury Single Account, dormant agency accounts still existed and must be mopped up for proper management under the new law in view.
The NDIC seized the opportunity to raise the alarm over rising cases of non-performing insider loans, which he said constituted the highest percentage of non-performing loans in the banking industry.
It warned that the banking sector was being negatively affected by loans offered to directors and their family members by the banks.
Taribo told lawmakers that the position of the NDIC had been that the Banks and Other Financial Institutions Act should be amended to “prohibit directors and insiders from accessing loans in their banks.”
“This is almost crippling the banking sector. We had a bill on it, which we sent to the National Assembly to amend the BOFI Act in this respect, but I don’t know what happened to the bill,” he added.
However, lawmakers blamed regulators, primarily the CBN, for allegedly looking the other way, despite being aware of the insider abuses.
For instance, Jones-Onyereri recalled that under extant regulations, a director was not entitled to a loan above N50,000.
He added, “But, we know that directors are accessing billions of naira and nothing is happening to them. The CBN can’t claim not to be aware of these abuses. As a House, we have resolved that these abuses can no longer go unchecked.
“We are going to amend all the ridiculous penalties in the BOFI Act to spell out stiffer penalties for offences. The banks can pay some of these fines as they are today without bathing an eye. Such fines as N50 or 100. I believe when you have a fine like N20m, a bank will have a second thought before committing any infraction.”