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{{g}}''Not'' a little pot of [[cash]] with your name on it sitting in a vault in a wood-paneled office in Pall Mall, however much this figment of the popular imagination rides on, even in the minds of those — certain [[credit officer]]s at [[investment bank]]s, for example — who really should know better. | {{g}}''Not'' a little pot of [[cash]] with your name on it sitting in a vault in a wood-paneled office in Pall Mall, however much this figment of the popular imagination rides on, even in the minds of those — certain [[credit officer]]s at [[investment bank]]s, for example — who really should know better, a [[deposit]] in a [[bank account]] is a form of on-call [[indebtedness]] where a customer lends its [[money]] to a [[bank]]. Yes: that’s right: ''you'' [[lend]] money to the ''[[bank]]''. Once you do this, ''it isn’t your [[money]] anymore''.<ref>This startles people. It has even been known to startle senior credit officers. For a patient explanation see our article on [[cash]].</ref> The [[bank]] pays you [[interest]] in return. This is, in large part, how [[bank]]s fund their lending activity. You know how, in ''Hamlet'', Polonius says to Laertes “neither a borrower or a lender be”? Well, banks are ''both''. | ||
All this is neatly explained in the [http://www.legislation.gov.uk/ukpga/2008/31/notes/division/3 explanatory notes] to the [[Dormant Bank and Building Society Accounts Act 2008]]: | |||
:''A [[deposit]] in a [[bank]] or [[building society account]] constitutes a [[debt]] owed by the bank or building society to its customer. '''Although banks and building societies are free to make use of money received from customers''' (subject to prudential rules which aim to ensure the institution always retains an adequate capital base) '''the institution remains liable to repay the debt to its customer indefinitely'''. '' | :''A [[deposit]] in a [[bank]] or [[building society account]] constitutes a [[debt]] owed by the bank or building society to its customer. '''Although banks and building societies are free to make use of money received from customers''' (subject to prudential rules which aim to ensure the institution always retains an adequate capital base) '''the institution remains liable to repay the debt to its customer indefinitely'''. '' | ||
To recap: a bank [[deposit]] is basically a ''[[loan]]'' to the [[bank]], repayable [[on demand]] (if an ordinary [[deposit account]]) or at the end of the agreed term (if a [[term deposit]]). | |||
===Who can take [[deposit]]s?=== | |||
Only regulated [[credit institution|credit institutions]] are allowed to accept deposits. They are a topic of some debate when banks and financial institutions enter into financing concepts with a [[cross default]] in them. | |||
===Limitation Act 1980=== | |||
This gives a (demand) bank deposit special status under the [[Limitation Act 1980]], since it is not payable at any time, unless it is asked for, so the [[limitation period]] never begins to run. | This gives a (demand) bank deposit special status under the [[Limitation Act 1980]], since it is not payable at any time, unless it is asked for, so the [[limitation period]] never begins to run. | ||
===Is this the same as [[client money]]?=== | |||
Yes - and no. With [[client money]], the person to whom you pay the money doesn’t ever hold it, but merely looks after it for you by depositing it in their name but on your behalf in a [[bank]] somewhere else. ''That'' bank is therefore the borrower. You are still the [[lender]]. | |||
{{sa}} | {{sa}} | ||
*[[Cash]] | *[[Cash]] — a much misunderstood thing | ||
*[[Limitation Act 1980]] | *[[Limitation Act 1980]] | ||
*[[Credit institution]] | |||
*[[Dormant Bank and Building Society Accounts Act 2008]] | *[[Dormant Bank and Building Society Accounts Act 2008]] | ||
*[[Client money]] | *[[Client money]] | ||
{{ref}} | |||