MORE than two of every five bank accounts in Jamaica are dormant/inactive, according to data from the Bank of Jamaica (BOJ).

The BOJ, responding to queries from the Jamaica Observer, said that at the end of September, there were over 2.14 million accounts in banks and building societies that were dormant/inactive. The figure corresponds to 40.2 per cent of accounts at the 10 deposit-taking institutions supervised by the BOJ – eight commercial banks, one merchant bank and one building society. In total, there are more than 5.3 million accounts in deposit-taking institutions in Jamaica. Eighty-four per cent are savings accounts. Demand accounts and time accounts with 13 per cent and 3 per cent of the total, respectively, made up the rest.

The BOJ data also show more than 87 per cent of the total dormant/inactive accounts being held at commercial banks. The country’s sole building society, VM Building Society had 275,040 dormant or inactive accounts, equivalent to 13 per cent of the total. Cornerstone Trust & Merchant Bank had 98.

“The percentage of dormant accounts is in line with the industry standard presented by the Bank of Jamaica,” the National Commercial Bank Jamaica (NCBJ) told the Business Observer. Under BOJ classifications, an account becomes dormant if no activity (deposit or withdrawal) has taken place for a period of at least six months. Each deposit-taking institution defines the specific period of inactivity on an account before it is deemed to be dormant and that period can go from the minimum six months up to 5 years, the BOJ noted in its response. At NCB, an account is classified dormant “after 36 months of no customer-induced transactions,” after which they are then subject to review in compliance with internal procedures.

Accounts become dormant due to a number of reasons including death of the account holder, people changing banks without properly closing an old account or others who simply forget that they have the account. For instance, you might open a new savings account and make an initial deposit, then later forget about this account.

“You also have people who migrate and leave the account. I know people who have left here and gone overseas leaving their accounts in the process. But there is a lot of reactivation of dormant accounts especially during the summer months. Some did not travel during the COVID period so that account has no activity on it for one reason or the other,” one banking executive, who declined to be named for this article, told the Business Observer.

Still, the number of dormant accounts at the end of September was lower than it was at the start of the year by 6.5 per cent, though the sums held in these old accounts swelled by more than $1.49 billion from the start of the year or an average $166.2 million each month to $20.3 billion. The average monthly increase so far in 2023 is the highest since deposits in dormant/inactive accounts rose at a pace of $528 million per month in 2020. All the growth in dormant/inactive accounts took place in commercial banks. Building societies and merchant banks saw a decline in the number of accounts that were classified as being dormant/inactive at the end of September.

According to the data some 60 per cent of dormant accounts falls between one and seven years with the median duration for these accounts being 4.8 years. Ninety-four per cent of dormant/inactive accounts also have funds which have not been claimed for under 15 years. Only six per cent, a figure totalling more than 128,000 accounts, was over 15 years, though it is not clear how much money are in those accounts.

As part of regulatoons, funds left unclaimed for more than 15 years are transferred to the Government if the owners of these accounts do not come forward to claim them within a year after efforts to reach them through the Gazette and newspaper fail. “However, owners can retain access through application to the accountant general who keeps a record of all moneys that have remained unclaimed in the possession or under the control of a deposit-taking institution,” the BOJ pointed out.

Since 2017, financial institutions as a matter of policy ceased charging fees against these accounts though they continue to accrue interest as per the terms and conditions associated with the account.

Deposit-taking institutions the BOJ said are also required to implement the same or enhanced due diligence around the operations of these accounts, so as to ensure that they are not used as a vehicle for fraudulent activities as per its guidance to the sector.

While banks no longer charge fees to these accounts, following an outrage a few years ago, the banks still have to maintain them, though the cost be negligible.

“The annual cost to maintain dormant accounts can vary based on factors such as the number of accounts and the specific services associated with each account. It is our policy to minimise costs while ensuring compliance with regulatory requirements and providing the necessary level of customer service,” NCB told the Business Observer.

It is understood that it costs banks up to US$o.10 per year to maintain an account with the figure dipping to about US$o.8 per account over one million.

“That money is negligible in the scheme of things, its not a cost that we worry about,” another executive, who also declined to be named, said.

Banks use a core system provider which maintains the account and the maintenance fee is influenced by the number of accounts on the system.