Mr. Eoin Dorgan:

I thank the committee for inviting the Department to address it in regard to the matter of abandoned safety deposit boxes and the law. I am accompanied by my colleague, Ms Fidelma Cotter, and we look forward to hearing the committee’s analysis of the issue. As per the committee’s correspondence, the lead Department in regard to the Dormant Accounts Act is the Department of Rural and Community Development, so that Department will lead on any amendments to the Act. The Department of Finance will feed into possible amendments as part of the normal Government decision making process.

The Department of Finance's analysis is that the provision of safety deposit boxes is not at this time a regulated activity and, as such, neither the Department nor the Central Bank have detailed information on these activities. Given the limited information available, the Department welcomes any analysis that the committee can make available. To be of assistance in advance of its analysis being provided, I will briefly set out the primary rationale for financial regulation and supervision under the Central Bank Acts, which has two overarching objectives. The first is to protect consumers, given the complexity of financial products and services and the significant informational advantages that financial service providers have compared with the average consumer. The second is to protect financial stability and the wider economy, given the substantial negative employment and economic impacts from financial instability events.

Based on these core principles of financial regulation and supervision, it is difficult to justify the regulation of safety deposit boxes from either a financial consumer protection or financial stability standpoint. This is because, first, safety deposit boxes are a very simple product that all customers can comprehend and, essentially, there are no significant information asymmetries in favour of the provider of the product. Second, safety deposit boxes do not provide a financial stability risk as there is no ability for the providers of the service to leverage the contents of the boxes. If they were doing so, they would fall within the definition of providing a banking service and, as such, would be regulated.

In the event of legislative proposals on this matter, it is likely there will be cost implications for either the State or the private sector and, as such, a cost-benefit analysis must be conducted. Obviously, given the multiple competing pressures on public funds, any costs to the Exchequer from proposals must be considered as part of the annual Estimates process in comparison with all Government social and economic programmes. If costs are to be imposed on the private sector, a clear policy and principles rationale will be required to justify legislative changes that have cost implications for that sector. It is vital that the benefit to the common good is clearly articulated and, preferably, quantified.

As set out in the Secretary General’s letter to the joint committee, there is a significant difference between dormant accounts - and similar assets such as unclaimed life assurance policies - and abandoned safety deposit boxes. The existence of dormant accounts in banks is generally of significant benefit to banks as these dormant accounts offer perpetual liquidity to the bank, which is a very significant benefit especially in periods of financial stress, whereas the maintenance of dormant safe deposit boxes is generally a cost to banks, as they must incur the cost of maintaining the deposits for no benefit, or a minimal cross-selling benefit.

The benefits arising to banks, as opposed to the State, from dormant accounts was a key rationale for the Dormant Accounts Act, which brought these accounts under the management of the State for use in community development projects but also ensured repayment of the accounts if the owner or the owner's successors were subsequently identified. However, the inverse of that policy rationale would apply for safety deposit boxes, which are a significant cost to the holder and would also be a cost for the State if they were to be taken into State ownership.

There are a number of additional interlinked factors that require careful consideration in regard to any proposal to bring assets in safety deposit boxes within the remit of the Dormant Accounts Fund or to make the assets subject to statutory reporting. One factor is insufficient information. There is no information available to the Department or the Central Bank on the possible contents of safety deposit boxes in existence throughout the banking sector, or possibly the wider storage sectors. This makes it very difficult to accurately quantify the number of assets that could be covered by the extension of the Dormant Accounts Fund and the likely cost implications for the State or private parties or both. A second factor is the protection of delicate contents. The National Archives and National Museum will be better positioned to advise on how best to open and review the contents of these boxes or the stores where they are held, given the passage of time will mean the majority of these assets may be in poor condition. In addition, the potential transfer or cataloguing or both of these assets on the basis of a State instruction could cause damage, thus potentially making the State liable for any compensation. The third factor is multiple asset classes. The contents of these deposit boxes could be a wide variety of assets, as opposed to solely “money-deposits”, which is currently the asset class covered by the Dormant Accounts Act in terms of deposits and life assurance policies. The variety of assets would dramatically increase the administration costs for any extension of the Act as the assets will likely be physical assets that must be carefully handled, valued and stored, as opposed to merely deposits or cash, which is a single asset class and a store of value. In addition, in the event of people coming forward to claim assets, the State can always pay out deposits.

If, however, the State was to sell unique assets to fund community development activities from the Dormant Accounts Fund, it is unlikely that it would be able to replace them subsequently or satisfy the person affected with adequate compensation. In addition to the cost of opening the boxes, there is an extensive transfer cost involved in taking control of the contents of safe-keeping deposit boxes, as opposed to a straightforward bank transfer of dormant accounts. With regard to the transfer of liabilities to the State, as mentioned previously, the private banks are liable for the safe keeping of deposit boxes, which at this point is most likely to be a loss-making activity. Any proposal that the State take ownership of them would involve the transfer to the State of the cost of keeping the assets.

There is also a significant number of complex legal and constitutional considerations on which others are best placed to advise such as the exact definition of storage that would apply; the risk of challenge as this effectively would amount to the confiscation of private property; adjudication on inheritance disputes and so on. If the committee seeks to further progress the matter, it may be worth its while considering alternative statutes that would allow the State to access safety deposits in order to identify and take control of assets that could be considered to be key historical artefacts. It is likely such an approach would provide a stronger public interest rationale and legal basis.

As I said, the relatively limited information available on safety deposit boxes makes it very difficult to conduct the necessary cost benefit analysis. A high level consideration of the issues mentioned indicates that it is difficult to see how a proposal to make safety deposit boxes subject to the Dormant Accounts Act or a statutory cataloguing requirement would pass a fullex-antecost benefit analysis, given the existence of definite costs and risks compared to the very uncertain benefits.

I hope this analysis is of assistance to the committee. We will attempt to answer questions it may have.