In all cases where passbooks have been presented the balances were found to be correct.

Your Sub-Committee are of the opinion that it is desirable to continue this investigation, as circumstances permit, and that in those cases where the balance is over £50, and no response has been made to the request, further efforts to trace the depositor and obtain the passbook should be made.

As this report shows, the Birmingham Municipal Bank shared these tenets regarding accounting inconvenience and security risk and decreed that if an account contained a credit balance of less than £1, then after six years (later three years) of inactivity the account, and all similar accounts, would be transferred to a single ‘holding’ account entitled “Dormant Accounts Under £1”. As accounts with a balance of less than £1 earned no interest, they were literally a hindrance when attempting to balance ledgers, and especially so at the Annual Balance. Their continuation in the form of ledger sheets/cards benefited neither Bank nor depositor and even with the advent of computer-accounting, these dormant accounts unnecessarily occupied ‘file’ space.

Depositors themselves were generally unaware of these ‘back office’ systems and if presenting a passbook either to close or continue use of such an apparently unimportant account, a depositor would often be surprised by, even suspicious of, the delay involved in tracing the record. An experienced cashier would recognise immediately that dormancy was a factor, but for the inexperienced there was a possible trap in assuming it to be so. Although ostensibly the account held a balance of less than £1, the passbook alone would not reflect the fact that the depositor may have reduced the account balance during a year of otherwise important activity, during which time interest would have accrued, this interest having then been ‘capitalised’ in the Bank’s ledgers at the year end. Every year thereafter, further interest would accrue, making the seemingly nominal balance in the unused passbook much greater. In this way, a different type of Dormant Account was potentially being created, a type dealt with in succeeding paragraphs. In practice, however, a mere Dormant Account Under £1 caused few problems, although sometimes entailing obtaining a fresh signature, with normal safeguards.

The more important Dormant Account Over £1 became the title of a completely different record, which demanded much greater attention to its administration. For the reasons explained in the previous paragraph, a depositor could be completely unaware of the fact that his/her account may have been credited with annual interest on a sum believed by the depositor to be purely nominal, whilst only the Bank knew it to be otherwise. Several other reasons existed for the fact that accounts containing balance of more than £1 had lain inactive for long periods: a depositor could have died without their legal representatives knowing that an account existed; similarly a depositor might have mental illness and be unaware of the continuing existence; more simply, an account might be a ‘nest-egg’ that a depositor did not wish to disturb and was content to leave unattended. The mere existence of these unused accounts created a hazard. The reason? Potential fraud by an outsider or (Heaven forbid!) an insider.

Therefore, an entirely separate accounts ledger was created and entitled “Dormant Accounts Over £1” and therein were placed annually (ie transferred from their normal ledgers) all accounts on which no transaction (apart from annual credits of interest) had occurred for ten years. Not only was this separate ledger created, but in tandem a Dormant Accounts Over £1 Register was opened, this forming the basis for strict control over any activity, financial or otherwise, occurring on any of the affected accounts. Each account entry in the Register was dated and given a separate serial number in addition to its normal account number. Any ‘movement’ on the account such as a new signature; a transaction; a request for a withdrawal, or transfer to another branch, required not only proof of identity of the customer, but also the verifying signatures of two officers of the Bank, before the account could be activated and restored to the ‘live’ ledger section. If all the criteria were met the required transaction could take place. No action or lack of care could be allowed to jeopardise the security of the depositor’s funds and following a routine notification to Head Office, a detailed inspection of the Register and the relevant account was always a priority for a visiting Bank inspector. All the different stages of the transaction or activity would be verified by the inspector and marked with the inspector’s official stamp. Only one type of transaction circumvented proof of identity required from the depositor and that was the formal notification of the death of the depositor, in which case a solicitor or a proven legal representative would be required to produce the normal authority to deal with the account. Even then, in its initial stages, any necessary action would still require the verification of two Bank officers.

The balances on some of these Dormant Accounts over a £1 could be substantial, particularly in the case where a depositor had died without their legal representatives knowing that an account existed, eg the account passbook not being found amongst the deceased’s effects. Additionally, the compounding of interest on the account’s balance may have continued for many years – a factor particularly relevant to those financial organisations established well before the BMB. It has been estimated that there is over £1 billion (some sources suggest up to £20 billion!) in unclaimed money sitting in dormant accounts in banks and building societies, and in National Savings’ products.

The total value of the BMB dormant balances is unknown, although it is known that periodic returns (see below) were required from branches so as to establish the latest figure. But, to whom do these balances belong? During the BMB’s existence, the liability was shown in the Bank’s Balance Sheet under ‘Amount due to credit of Depositors’. Later TSB administrations considered transferring dormant funds into Reserves, ie adding the sum to accumulated profits, although still retaining the right of individual customers to claim their deposits.

Such a large amount existing ‘in limbo’ in the finance industry in general was bound to attract the interest of a government looking for means to boost socioeconomic projects. In November 2008, the government passed the Dormant Bank and Building Society Accounts Act. One of the major principles of the act is to reinvest this very large amount of unclaimed money back into the community. In contrast with the 10-year rule adopted by the BMB, the government has set the dormant account time period as 15 years - if there has been no customer activity in this 15-year period then the government will collect the money for its community investment plans. The definition of customer activity is contact with the bank or building society or any transactions on the account. Customers who find their dormant accounts can still claim back their money, plus any interest due, even if the account balance has been collected by the government. The Act allows participating banks and building societies to extinguish their liability to a dormant account holder upon transfer of the balance of the account to a reclaim fund. After transfer, account holders will have the right of repayment from the reclaim fund that will need to be authorised by the Financial Services Authority. Account holders will be able to continue/resume their usual relationship with their bank or building society, who will act as an agent of the reclaim fund.

Reclaim Fund Ltd (a wholly owned subsidiary of The Co-operative Financial Services) has been set up to administer dormant funds transferred for use in good causes via the Big Lottery Fund.

As noted above, the number of Active Savings Accounts at March 31st 1976 was 469,997. This total was made up of accounts in the three passbook-based account types as follows:

·        No 1 Department                                         348,813

·         No 2 Department                                           86,058

·         No 3 (Investment) Department                     35,126

·         Total passbook based accounts               469,997

In the case of the No 3 Department, Dormant Accounts under £1 did not occur due to the minimum balance requirement of £1; the commencement date for the department (January 1st 1967) precluded the possibility of Dormant Accounts over £1.

Similarly, the No 2 Department’s short existence (commenced April 1st 1957) meant that Dormant Accounts over a £1 were not an issue. However, a 1963 circular from Head Office (see below), allowed branches to transfer No 2 Department Dormant Accounts under £1 to a Suspense Account. This transfer exercise took place in January and February (plus December from 1960) each year.

The large number of Inactive Accounts (296,764 at March 31st 1976 equates to approximately 5,300 accounts for each year since the Bank’s commencement in 1919), reflects the huge volume of accounts opened and closed each year. Although branches kept detailed records of the numbers of accounts opened, reopened, and closed, these statistics were never published*.

Opening a new passbook account for an individual(s) was a fairly simple procedure, particularly when compared with modern requirements to prove identity and address so as to combat ‘Identity Theft’ and other sophisticated methods of fraud. The new depositor’s full name and address were entered by a staff member on the next available, pre-numbered, ledger sheet/card, and a specimen signature obtained. Before the 1970s, it is unlikely that the new depositor would be asked for their telephone number – very few BMB customers would have possessed a telephone. The staff member then entered the customer’s name in abbreviated form (eg Mr B M Bank) on a new passbook, pre-numbered to match the ledger sheet/card. The initial deposit was processed and entered in the passbook.

In the case of Joint Accounts, in addition to taking two (or more) specimen signatures, the depositors’ instructions as to whether withdrawals were to be made on one, or all signatures, was obtained.

Except for the production of a Marriage Certificate to amend a name on an account, there was little requirement for production of documentation regarding the account title. However, with the increasing number of immigrants opening accounts from the 1960s onwards, the production of such an applicant’s passport was found useful to ensure the depositor’s name was recorded correctly – and recording the passport number was also an aid in establishing identity on later withdrawals.

Some branch managers adopted a policy of noting certain customer characteristics on the ledger sheet/card as an aid to identification – eg: ‘Depositor Left-Handed’ or ‘Tip of Right Index Finger Missing’.

An index card was created for each person opening an account, and these were filed in alphabetical order in cabinets designed for the purpose. These cards enabled the depositor’s account number to be established without reference to his/her passbook. Reference to these index cards was a requirement of the account opening procedure, to establish if the applicant already had an account, or had previously held an account that was now closed. However, this procedure was not followed diligently, and thus probably contributed significantly to the number of Inactive Accounts.

Closed Accounts could be reopened by merely reusing the ledger sheet/card and passbook. However, the depositor was probably reluctant to admit to already having an account (either closed or with a small balance) if he/she had mislaid the passbook – a charge of 6d (2½ p) was made for a replacement passbook.

The closure of a passbook account was, again, a simple procedure. The main difference to dealing with a straightforward withdrawal (check the passbook balance against the ledger; verify the depositor’s signature), would be the calculation of the amount of interest (‘Closing Interest’) that had accrued on the account since the commencement of the financial year. Although, as the Bank’s range of services increased, it became more necessary to check what the implication would be on these services, that closure of the account would bring. Examination of the ledger sheet/card would ascertain if the depositor had a Home Safe; had made a Nomination; had Standing Orders in place; or received credits from an employer, etc.

Periodically, ledger sheets/cards relating to closed accounts were removed from the current ledgers and filed with other closed accounts, and with ledger sheets/cards full with transactions. The ledger sheet/card, being the fundamental record of the Bank’s transactions with its depositors, was not considered an item that could be destroyed, until the sheer volume of them resulted in a change of policy in the 1960s. This policy change resulted in ledger sheets/cards being microfilmed and then destroyed after basic details relating to the account’s operation were noted on the relevant index card. These basic records, plus the microfilm details if necessary, were sufficient to enable the Bank to investigate a common form of claim: a passbook with a balance that had not been altered for many years. Although potentially this could be a Dormant Account, in many cases the passbook had been reported lost, a replacement issued, and the account closed.