The Bank of Israel will require the banks to take active measures at least once a year to locate customers with whom contact has been lost and to maintain the value of the funds held in their accounts, under draft legislative amendments published by Supervisor of Banks David Zaken.
The amendments include several items. First, the definition of "inactive deposit" will be changed to "inactive account". The current definition of "inactive deposit" is a deposit in shekels or foreign currency for which ten months have passed since the last instruction was received from the deposit owner. Under this definition, there are NIS 15 billion in inactive deposits at Israel's five big banks, including NIS 3.9 billion in deposits that have been inactive for more than five years or whose owners have passed away.
Under the proposed amendment, the bank will consider the customer's account as a whole, rather than the individual deposit. Only when contact with the account owner has been lost will the account be defined as inactive. This will cover accounts with no activity for nine months, or renewable deposits with no activity for two years.
The banks will be required to report the number of inactive accounts and the amounts held in them in their annual financial reports.
When a customer is considered as holding an inactive account, the banks will be required to seek to locate him or her by sending notices, by telephone or other means, verification of the customer's address with his residential address in the Population Registry or with other addresses in other accounts belonging to the owner in the bank, and so forth. The banks are required to repeat these location actions, as relevant, at least once per year.
Expanding banks' commitments to customers
In addition, a bank must invest the money in inactive accounts. The Bank of Israel proposes several investment rules, including that funds in a current account will be invested in a renewable monthly deposit for one year, after which they will be invested in makams that mature in 36 months from the date of purchase; funds in a renewable deposit will be invested at the end of the deposit term in makams that mature in 3-6 months from the date of purchase; and funds deposited in a foreign currency account will be deposited in a renewable monthly term deposit in the same currency or indexed to the same currency.
"This is an important and necessary amendment that will strengthen the public's trust in the banking system and will increase the banks' commitment to their customers," said Zaken.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013
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