2018-05-02
Urged by the Bank of Lithuania, commercial banks in the country took action and closed more than a quarter of the clients’ total dormant accounts in half a year. They also assured that, for clients whose accounts are empty and unused for a long time, closing them will cost nothing.
‘We urged banks to take decisive action in dealing with the issue of dormant accounts. This gave fruit – almost every fourth dormant account has been closed. The progress is significant, yet there are still over a million of such accounts today. We appreciate banks’ efforts; however, we will closely monitor the situation and will seek that the number of dormant accounts decreases further,’ said Vytautas Valvonis, Director of the Supervision Service at the Bank of Lithuania.
The Bank of Lithuania has approved a position calling on banks to actively exercise their right to close dormant accounts when no funds are available on them, and ascertain the clients’ needs to hold dormant accounts on which a balance of funds is available since, under contracts, even long unused accounts may cost them.
Following the Bank of Lithuania’s call on every bank in the country, almost 425 thousand dormant accounts of natural persons were closed last year between 1 June 2017 and 1 January 2018. The total number of dormant accounts that have not been used for a year or more decreased by 27% (to 1.1 million) over the period.
At the beginning of the year, the bulk of remaining dormant accounts – almost two-thirds (about 717 thousand) – were comprised of accounts with no funds on them. In some cases, banks would ask clients willing to close their account to cover the accrued debt for the administration of the unused account as this is provided for in the contract. The Bank of Lithuania assessed such practice as faulty.
‘After we presented our position, banks assured they would not require owners of an empty account, where they want to close it, to cover the accrued account administration fee for the previous period. However, banks’ efforts alone are insufficient – it is important that residents take due care of their assets as well. We expect them to perform financial ‘hygiene’ procedures and close unnecessary accounts,’ said Mr Valvonis.
For closing an account, no account administration fee will be required from its holder if the account was not used: this was confirmed by all banks working with natural persons most actively (Citadele, Luminor Bank, Medicinos bankas, SEB, Swedbank, Šiaulių bankas and the branch of Danske bank).
However, if some funds are available on a long-unused account, the administration fee, subject to the terms and conditions of the contract, may further be deducted. At the beginning of the year, there were more than 420 thousand dormant accounts with some balance on them. Residents’ holdings of funds on them amounted to about €400 million – an average €967 per account.
‘While clients tend to forget about both empty accounts and those with funds on them, the latter are recalled sooner. According to information from the banks, accounts with a larger of smaller balance of funds on them were unused for about 2.5 years, while similar empty accounts – for approximately three years on average. However, part of dormant accounts with a balance is arrested, which impedes any actions with them,’ said Aistė Tavorė, Principal Specialist of the Credit and Payment Services Division at the Bank of Lithuania.
As at 1 January 2018, residents had a total of 4.5 million accounts with banks: one-fourth was dormant, 31% of them– arrested.