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| {{a|banking|{{image|Life savings|jpg|Your nest egg, sitting quietly and out of harm's way yesterday}} }}''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. | | {{essay|banking|deposit|{{image|Life savings|jpg|Your nest egg, sitting quietly and out of harm’s way yesterday}}{{Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 Article 5}} }} |
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| 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''.
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| 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]]:
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| :''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'''. ''
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| 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]]).
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| ===Who can take [[deposit]]s?===
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| Only regulated [[credit institution|credit institutions]] — [[banks]], in the vernacular — are allowed to accept [[deposit]]s. They are a topic of some debate when banks and financial institutions enter into financing contracts with a [[cross default]] in them.
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| This is laid down by Article 5 of the [[Financial Services and Markets Act 2000]] Regulated Activities Order 2001, which describes the regulated activity of accepting deposits.
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| ===Short term debt securities ===
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| {{short term debt and deposits}}
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| ===Miscellanea==
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| ===Limitation Act 1980===
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| 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.
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| ===Is this the same as [[client money]]?===
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| 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]]. More particularly, [[CASS 7]] [[client money]] applies only where you hold a money for or on behalf of a client in connection with [[MiFID business - FCA Rulebook Term|MiFID business]] or [[Designated investment business - FCA Rulebook Term|designated investment business]]. So it is a limited case.
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| {{sa}}
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| *[[Cash]] — a much misunderstood thing
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| *[[Limitation Act 1980]]
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| *[[Credit institution]]
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| *[[Dormant Bank and Building Society Accounts Act 2008]]
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| *[[Client money]]
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| {{ref}}
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