Mr. Pat Leahy:

I thank the committee for inviting the Department of Finance to address on the Bill. I will set out the primary rationale for financial regulation and supervision. First, it is to protect consumers, given the complexity of financial products and services and the significant informational advantages financial service providers have compared to the average consumer. Second, it is to protect financial stability and the wider economy, given the substantial negative employment and economic impacts of financial instability events. The Department of Finance believes that the provision of safe deposit boxes is not a regulated financial services activity because safe deposit boxes are a simple product that all customers can comprehend; essentially, there are no significant information asymmetries in favour of the provider of the product. Safe 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.

The Department notes the preparation of a detailed and comprehensive Bill and has a number of initial observations to make on the draft Bill. As the Department understands the Bill, it is intended that financial institutions would establish a registry of property deposited in safe deposit boxes in relevant financial institutions. The proposed register would have detailed information relating to the provisions outlined in the Bill, such as details related to the examination of unclaimed property by relevant institutions and possible retention of unclaimed property by the director of the National Museum of Ireland. The draft Bill sets out the conditions under which the deposited property shall be considered unclaimed and the methods by which it is intended to unite the safe deposit box with its rightful owner. The Bill sets out a notification procedure for the provision of information with regard to ownership of safe deposit boxes and provisions for the publication of that notice. The Bill provides for a process for the examination of unclaimed property and for an indemnification process for the Minister for Rural and Community Development. The Bill also provides for a process for the retention of unclaimed property by the director of the National Museum of Ireland, including examination and retention of unclaimed property by the director and dealing with claims for unclaimed property. The Bill also provides for the possibility of the sale of unclaimed property and the transfer of moneys received to the Dormant Accounts Fund by the institutions. There are issues within this Bill that are not directly relevant to the Department in the evaluation of the cultural or historical significance of objects that may be contained in safe deposit boxes or otherwise maintained within the custody of financial institutions.

The Department sees value in the broad aims of the Bill in seeking to determine whether there are items of historical and-or cultural value in financial institutions and providing a process whereby these items could be recovered. The Department thinks the Bill could focus more on the recovery of potential historical and-or cultural items. Such an approach would likely provide a stronger public interest rationale and legal basis. This approach could involve an assessment of items in the safe deposit boxes or otherwise in the possession of financial institutions, transfer of items considered to possess historical or cultural merit based on appropriate analysis and items retained by these cultural institutions on a safekeeping basis and returned to individuals who make a valid claim to ownership. Under the proposed approach, there would be no assessment of the value of most items where it was not possible to locate an owner and nor would such items be sold and the resulting amounts transferred to the Dormant Accounts Fund. The financial institutions would continue to be responsible for safeguarding items originally entrusted to them for safekeeping. The Department proposes this approach for the following reasons: it is not obvious that there are significant items of value in safe deposit boxes that could be put up for sale to be passed to the fund.

One source of evidence as to what is contained in these boxes is the 2019 Deloitte report, Dormant Assets Review: Identifying Potential Additional Dormant Assets. The report indicates that one bank opened 100 safe deposit boxes belonging to deceased customers with no identifiable next of kin. The contents of the boxes included a broad range of items such as old currency, title deeds, savings, death and marriage certificates, wills, personal correspondence, keys and one item of jewellery. The report indicated that none of the items were valuable. Deposit boxes could contain a wide variety of different assets, some with potentially little value. The variety of assets would dramatically increase administration costs, as the assets will likely be physical assets that must be carefully handled, valued and stored. As there is no information available to the Department or the Central Bank on the number of safe deposit boxes in existence, it is important that costs for the State and the private sector potentially incurred by this Bill be considered and balanced against the potential benefits. In the event of people coming forward to claim financial assets such as deposit accounts from dormant accounts, the State can always pay out. However, if the State sold unique assets, it is unlikely to be able to subsequently replace the asset or satisfy the affected person with adequate compensation. Likewise, the State is likely to be liable for any mistakes made, for example, if assets were misclassified as suitable for sale or if the State disposed of items which may have a low face value, for example, notes or coins, but with a high monetary value. Any damage to assets as part of the cataloguing process or when stored by the State could potentially make the State liable for compensation. It is noted that there would be a process for notifying potential next of kin of assets held in safe deposit boxes. The right and ability of the State to sell assets not deemed to be of cultural significance would need careful legal consideration. Even with the passage of time, there must be some doubt whether such sales are possible or permissible, given the property rights involved. Other legal issues to be considered include potential breaches of the right to privacy, potential breach of contract and consideration of the law of bailment. The Deloitte report recommended that safe deposits continue to be excluded from the Dormant Accounts Fund due to the lack of clarity regarding the materiality of the asset and the complexity of the legal and practical implications of opening dormant safe deposits. In the event that there are assets of limited value and there is a contractual relationship between the depositor and the financial institution, safeguarding of the contents of safe deposit boxes should remain with the financial institutions.

The Department also notes the proposed role for the Central Bank. The Bill proposes a role for the Central Bank in monitoring institutions in the discharge of its obligations under the legislation, taking enforcement action where institutions have failed in the discharge of their responsibilities under the Bill, assisting the Minister for Rural and Community Development in respect of regulations making disclosures from the register and consenting to the disposal of assets unsuitable for sale and determining an appropriate means of disposal of such assets. It is not obvious that these roles are consistent with the mandate of the Central Bank or are within its specific expertise. In particular, the specific expertise of the Central Bank in respect of section 23(3), consenting to the disposal of assets, is not obvious. Likewise, we see the enforcement processes and ensuring institutions engage with the director of the National Museum of Ireland as a matter for legislation involving cultural institutions, not the Central Bank. The Central Bank has a specific role with regard to safe deposit boxes. Under regulations made on foot of EU legislation signed by the Minister for Finance in February 2022, the Central Bank is required to establish and maintain a central register of information on safe deposit boxes and bank and payment accounts. The register identifies the holders and beneficial owners of bank and payment accounts and safe deposit boxes in Ireland. However, this is for the purpose of establishing links between suspicious transactions and underlying criminal activity. The register, operated by the Central Bank, assists competent authorities seeking to prevent and combat money laundering and terrorist financing. The register ensures that flows of money can be properly traced to individuals, entities and illicit networks at an early stage. With the exception of this specific purpose, the Central Bank does not have a role in supervising institutions in respect of their management of safe deposit boxes. It is not clear that the roles envisaged in the Bill for the bank would be accommodated by the legislation providing for this specific purpose. It is worth noting that any involvement, as this Bill envisages, in the imposition of new functions and power on the bank will require consultation by the Department of Finance with the European Central Bank, ECB, on such a legislative proposal.

As stated, there is relatively limited available information on safe deposit boxes. An approach which focused on recovering items of historical and-or cultural value may yield results for the State and avoid the difficulties of dealing with the sale of specific items. As of now, there is no evidence that there are items of specific value suitable for sale, even if the legal issues involved could be addressed. The cost benefits of running an evaluation and sale process also need to be considered. With regard to Part 2 specifically, which deals with the proposed register of deposited property, there are significant requirements set out for financial institutions in respect of the establishment of the register of possessions held by financial institutions. The Department considers that if there is agreement and this process were simplified to only consider articles of cultural or historic importance, the need for the detailed register might be mitigated or eliminated entirely. In such cases, the items could be classified as culturally or historically important, subject to consultation with the relevant authorities, and then there would be efforts to locate owners before the item is transferred to the State. It would only be when an item of cultural or historic importance was found and it was planned to transfer it to the temporary custody of the State that there would be a need to seek to locate a beneficiary. The register could then be in respect of that item and not every item held by the financial institution. There may be other items of concern but we need to await the final direction of the Bill before providing more detailed comments. I hope the above analysis is of assistance to the committee and I will attempt to answer any questions that the committee may have.