PM says money will be used to establish Disaster Relief Fund
NASSAU, BAHAMAS – The government is expected to cash in on millions that remain in dormant bank accounts in The Bahamas.
Prime Minister Dr. Hubert Minnis revealed in the House of Assembly on Wednesday that the government was advised by the Central Bank of the Bahamas, that based on legislative proposals, the Treasurer would receive an initial flow of at least $41.3 million assessed at the end of June 2018, and a further steady stream of transfers as funds meet the 17-year threshold for extinguishment of claims, should they not be claimed.
The prime minister was giving his contribution to the Banks and Trust Companies Regulation (Amendment) Bill, 2018, and the Central Bank of the Bahamas (Amendment) Bill, 2018.
These bills will jointly seek to introduce necessary and important reforms to the dormant account regime in The Bahamas. Both bills were passed in the House of Assembly last night as the Banks and Trust Companies Regulation Amendment Act, 2018.
A dormant account is defined as one in respect of which banks record no customer transactions or contact for a period of seven years. The amendments will set the timeframe for people to claim and access funds in their dormant accounts at 17 years, and establish provisions for the use of funds after those claims are extinguished.
As it now stands, the number of dormant accounts as of the end of June 2018, totalled 42,452 with a corresponding value of approximately $88.716 million, the prime minister revealed.
But that’s not all.
Of these 42,452 accounts, 34,528 were Bahamian Dollar accounts which were valued at $18.921 million. Therefore, the average size for Bahamian Dollar accounts was $548 compared with $7,837 for US Dollar equivalent balances.
According to the prime minister, there were 32, 542 accounts or 77 per cent of the aggregate number of accounts, having a value of $500 or less—for a total of $3.875 million in dormant funds. Of this total, Bahamian Dollar accounts represented 80 per cent or $3.116 million.
Dormant accounts with values exceeding $500 and meeting the proposed 17 years dormancy threshold for extinguishment of claim, totalled 5,724, bearing a value of $37.4 million. Of this amount, Bahamian Dollar balances numbered 2,994 at a value of $7.584 million, which represented 52.3 per cent of the total number of accounts, but only 20.3 per cent of the value.
By comparison, balances in US Dollar equivalents, at $25.0 million and 2,519 in number, accounted for a lesser 44.0 per cent of the number of accounts but a dominant 67 per cent of the value.
The prime minister revealed that since 1989, claims have totalled $29.8 million or approximately one-quarter of the $118.5 million in original balances transferred to the Central Bank.
The corresponding percentage for Bahamian Dollar claims is 19.2 per cent and for the US dollar equivalent component, 22.0 per cent.
Meanwhile, the prime minister said it is not the Government’s intent to view the funds as a windfall to meet normal budgetary operations, but the Government is proposing to use the funds to establish a Disaster Relief Fund.
“And while the Government, within its long-term fiscal sustainability plans, is intent on setting aside some 0.5 per cent of GDP annually, commencing in 2020 for disaster relief, this recommended use of the dormant account funds provides an excellent opportunity to establish the proposed Disaster Relief Fund at a credible initial level and demonstrate to Bahamians and the international community our seriousness in mitigating this material risk to fiscal sustainability and economic resilience,” the prime minister said.
The prime minister said any responsible government must plan accordingly, and when presented with an opportunity such as this [dormant account windfall], it must resist the temptation for short-term measures, and instead do the right thing with this windfall.
He said when the Bahamas is hit by another hurricane or series of hurricanes, the government would not have to scale back its expenditure and plans in key policy areas to divert resources to hurricane response and restitution.
“Thus, in keeping with best practices, my Government will develop an appropriate governance framework for the proposed Disaster Relief Fund which will be used to address immediate disaster response needs and the restoration of public infrastructure,” the prime minister said.
“The structure, utilization and reporting on this Fund will compare to international standards of accountability and transparency.
“Further, all Bahamians can rest assured that the enabling framework for this Fund will come to Parliament and be enshrined in legislation,” the prime minister said, adding that until this legislation is in place, the government will allow the Central Bank to segregate the funds and continue to manage them on behalf of the Disaster Relief Fund.
Dormant accounts legislation was introduced in The Bahamas in 1989.
The legislation required all banks to transfer dormant account balances to the Central Bank, which is charged with the custody and administration of these balances.
Since the legislation was introduced, there have been no changes to the regime.
Over the years, both the banks and the Central Bank have experienced numerous challenges with different aspects of the administrative regime for dormant accounts.
The main issues were how to deal with:
- Funds/assets, such as checks, money orders, precious metals and securities that are excluded from the very narrow definition of dormant account;
- How to treat securities that qualify as dormant;
- How interest is to be paid on claims of dormant accounts;
- What should happen to dormant accounts that may never be claimed; and
- What should be the recordkeeping requirements of various aspects of the regime.