Banks Wake Up to Dormant Accounts

David Zaken, supervisor of banks. (Flash 90)
David Zaken, supervisor of banks. (Flash 90)

Banks in Israel will soon be required to monitor dormant accounts and notify customers at least annually and to maintain the value of the funds held in their accounts, Globes reported.

The new measures are being put forward in draft legislation published by Supervisor of Banks David Zaken.

The proposals include the re-definition of “inactive deposit” 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 15 billion shekels in inactive deposits at Israel’s five major banks, including 3.9 billion in deposits that have been inactive for more than five years or whose owners have passed away.

Under the proposed changes, a 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.

Banks will have to try to locate holders of inactive accounts by sending notices, by telephone or other means.

In addition, the banks must invest the money sitting 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.