Banks should be allowed to raid “dormant accounts” left unclaimed by depositors to provide themselves with more capital during the financial crisis, according to a West Midlands MP.
John Maples (Con Stratford) urged the Government to let banks use funds which savers had forgotten about, as stock markets across the world plunged and a major rift opened up between Britain and its European partners.
Flanked by the Prime Minister in the House of Commons, the Chancellor Alistair Darling stressed the need for countries to act together to tackle the crisis.
Mr Darling told the Commons: “I’ve always been clear that each country needs to do whatever is needed to deal with its own particularly circumstances.
“However, I also believe that wherever it is possible to do so, countries should work and act together to maintain stability.”
London’s FTSE 100 Index closed last night almost eight per cent down - representing the biggest decline since the aftermath of Black Monday in October 1987.
A host of the UK’s biggest banks were rocked by turmoil across the European banking sector, with Royal Bank of Scotland nursing a 22 per cent fall.
In the US, Wall Street’s Dow Jones Industrial Average traded below the 10,000 mark for the first time in more than three years.
In Asian markets, Japan’s Nikkei 225 average slid more than four per cent to a four-year low, while in Hong Kong the Hang Seng tumbled five per cent.
Speaking in the Commons, Mr Maples urged the Chancellor to reconsider new laws currently going through Parliament which will give the Government the power to seize funds from any bank account which has not been touched for 15 years.
If customers have not initiated any activity on the account, such as depositing or withdrawing money, the cash could be transferred to the Big Lottery Fund, for distribution to good causes.
The aim is to use the money to provide opportunities for young people and provide more cheap housing for rent.
But Mr Maples said the plans would rob banks of up to £500 million in the “safest and solidest deposits” just when they needed it.
Referring to the legislation, he said: “That Bill was conceived when the situation was very different to what it is now.”
Instead of giving the cash to good causes, the banks should be allowed to use the money themselves, he said. Under the Government’s plans, depositors would still be allowed to reclaim the funds if they came forward after it had been put to use. Mr Darling told him the proposal would be considered.
HBOS, the banking group behind Halifax and Bank of Scotland which is set to merge with Lloyds-TSB, is holding £821,922 in dormant accounts in the West Midlands, despite running a publicity campaign urging customers to reclaim their money.
Mr Darling also hinted that depositor protection for savers may rise again from the planned £50,000 limit.
He pledged to do “whatever is needed” to maintain financial stability and announced the Bank of England would today inject a further £40 billion into the financial system to ease the credit crunch. The Chancellor added: “All practical options must remain open to us.”
But there were signs of a growing row over European nations such as Germany and Ireland going it along to offer blanket protection to savers.
The Chancellor demanded a united approach, telling the House of Commons: “When member states take unilateral action, it does have a knock-on effect.”
The Prime Minister spoke to German Chancellor Angela Merkel yesterday amid confusion over the extent of the German government’s commitments to protect bank deposits.
Germany appeared to offer a guarantee all private savings accounts, following similar moves by Ireland and Greece, over the weekend - placing Mr Brown under pressure to do the same.
But yesterday it emerged that the promise was simply a statement of intention by Ms Merkel, and there were no plans for Germany to offer savers a legally-binding guarantee.
Meanwhile, West Midlands businesses have urged the Bank of England to cut interest rates on Thursday.
Birmingham Chamber of Commerce and Industry said only a cut of at least 0.25 per cent would show that the Monetary Policy Committee and the Treasury were working in tandem to help shore up business confidence.
Katie Teasdale, the Chamber’s senior policy adviser, said: “While it would be naïve to suggest that a cut in interest rates will single-handedly solve the problems the UK economy faces, it should help to assure companies that we can weather the storm.”