Japanese Banks cautious over idle cash
Feb. 19--Dormant bank accounts, money that has been left unattended for extended periods, runs into billions of yen, but banks are wary about putting the money to better use, partly because of the huge administrative workload involved.
Some government officials are considering using the money to assist start-up companies and for other purposes.
Whether this plan will bear fruit is unclear as opinions in the Cabinet are divided.
"[We should consider] how we can use this money. Financial institutions are reluctant to take risks," Motohisa Furukawa, state minister for national policy, said at a press conference after Friday's Cabinet meeting.
His remark was aimed at Katsunori Nagayasu, chairman of the Japanese Bankers Association, who adopted a cautious stance about such a move at a press conference Thursday. Nagayasu is also president of Bank of Tokyo-Mitsubishi UFJ.
Furukawa reportedly wants to emulate other countries, which use dormant funds to assist welfare organizations and for other public interest purposes.
Since 2010, the British government has transferred money in dormant bank accounts into a state-controlled fund that is used for social welfare programs.
In 2008, the South Korean government allowed banks to start donating money in dormant accounts at their discretion to a fund to assist welfare organizations.
But opinions in the Cabinet of Prime Minister Yoshihiko Noda are far from unified.
"The issue needs to be discussed from a wide range of perspectives, including how to ensure depositors are not inconvenienced, as well as how to shoulder the costs to manage dormant accounts and deal with property rights," Shozaburo Jimi, state minister for financial services, said at a press conference Friday.
The bankers association has its own rules on which bank accounts are dormant.
Under these rules, an account is considered dormant if there is less than 10,000 yen in it and there have been no transactions for at least 10 years, or if there is more than 10,000 yen in an account but the depositor cannot be contacted.
Though banks record the money in dormant accounts as part of their profits, they still say the money belongs to depositors, Nagayasu said.
If a depositor wants to make a withdrawal, a bank will honor the request regardless of how long the account has been left unattended, and declare the amount as a loss for the bank.
Banking sources say about 10 million dormant accounts totaling about 85 billion yen are found annually. Of this amount, about 35 billion yen is refunded a year.
Therefore, the total outstanding amount of money in dormant accounts continues to rise, the sources said.
Japan reportedly has a much larger number of bank accounts--at 1.2 billion--than many other countries, placing a heavy financial burden on banks to maintain them, a financial industry source said.
If legislation stipulating that dormant accounts with outstanding amounts of under 1,000 yen--believed to account for most of them--can be used for other purposes, the burden on financial institutions will be reduced, according to some people in the financial industry.
Some banks say they are receiving many inquiries from depositors on the dormant account issue. The depositors ask such questions as "Is my account considered dormant?" and "What will my money be used for?"
The government is thinking about maintaining the current system, allowing depositors to withdraw money even if the accounts are regarded as dormant.
But coming up with a system that will not cause the depositors to lose faith in the financial system is essential before money in dormant accounts can be utilized, experts say.
Sunday, February 19, 2012
By Yu Toda, The Yomiuri Shimbun
Some government officials are considering using the money to assist start-up companies and for other purposes.
Whether this plan will bear fruit is unclear as opinions in the Cabinet are divided.
"[We should consider] how we can use this money. Financial institutions are reluctant to take risks," Motohisa Furukawa, state minister for national policy, said at a press conference after Friday's Cabinet meeting.
His remark was aimed at Katsunori Nagayasu, chairman of the Japanese Bankers Association, who adopted a cautious stance about such a move at a press conference Thursday. Nagayasu is also president of Bank of Tokyo-Mitsubishi UFJ.
Furukawa reportedly wants to emulate other countries, which use dormant funds to assist welfare organizations and for other public interest purposes.
Since 2010, the British government has transferred money in dormant bank accounts into a state-controlled fund that is used for social welfare programs.
In 2008, the South Korean government allowed banks to start donating money in dormant accounts at their discretion to a fund to assist welfare organizations.
But opinions in the Cabinet of Prime Minister Yoshihiko Noda are far from unified.
"The issue needs to be discussed from a wide range of perspectives, including how to ensure depositors are not inconvenienced, as well as how to shoulder the costs to manage dormant accounts and deal with property rights," Shozaburo Jimi, state minister for financial services, said at a press conference Friday.
The bankers association has its own rules on which bank accounts are dormant.
Under these rules, an account is considered dormant if there is less than 10,000 yen in it and there have been no transactions for at least 10 years, or if there is more than 10,000 yen in an account but the depositor cannot be contacted.
Though banks record the money in dormant accounts as part of their profits, they still say the money belongs to depositors, Nagayasu said.
If a depositor wants to make a withdrawal, a bank will honor the request regardless of how long the account has been left unattended, and declare the amount as a loss for the bank.
Banking sources say about 10 million dormant accounts totaling about 85 billion yen are found annually. Of this amount, about 35 billion yen is refunded a year.
Therefore, the total outstanding amount of money in dormant accounts continues to rise, the sources said.
Japan reportedly has a much larger number of bank accounts--at 1.2 billion--than many other countries, placing a heavy financial burden on banks to maintain them, a financial industry source said.
If legislation stipulating that dormant accounts with outstanding amounts of under 1,000 yen--believed to account for most of them--can be used for other purposes, the burden on financial institutions will be reduced, according to some people in the financial industry.
Some banks say they are receiving many inquiries from depositors on the dormant account issue. The depositors ask such questions as "Is my account considered dormant?" and "What will my money be used for?"
The government is thinking about maintaining the current system, allowing depositors to withdraw money even if the accounts are regarded as dormant.
But coming up with a system that will not cause the depositors to lose faith in the financial system is essential before money in dormant accounts can be utilized, experts say.
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