The Economic and Legal Significance of “Full” Deposit Availability

Bagus, Philipp and Howden, David (2016): The Economic and Legal Significance of “Full” Deposit Availability. Published in: European Journal of Law and Economics , Vol. 1, No. 41 (2016): pp. 243-254.

Abstract

Bank deposits have two characteristics: they are available on demand and at par value. Deposit redemptions face, at least given current technology, a lag between when they are requested and when they are delivered. This fact leads some to argue that as a deposit is not fully available, all deposits are, in fact, loans and that the legal obligation of the bank changes. We argue that this lag does not nullify the original economic intent of the deposit, and hence, does not alter the legal obligations that a depository faces. Deposits must be held safely to ensure that the depositor´s money will be available when an unforeseen event occurs.

• Item Type: MPRA Paper
• Language: English
• Keywords: Deposit availability, Demand deposits, Full availability, Legal obligations in deposit contracts, Safekeeping, Fractional reserve banking
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; K - Law and Economics > K1 - Basic Areas of Law > K10 - General; K - Law and Economics > K2 - Regulation and Business Law > K20 - General; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K40 - General

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