Saturday, 12 September 2015
Who owns money deposited at banks?
Bit of a minor semantic argument this, but Positive Money claimed yesterday that banks “own” the money that their customers deposit. And Richard Werner claimed likewise.
My counter argument was to ask where the law is that allows banks to refuse to return depositors’ money or refuse to honor cheques even when there is money in relevant accounts.
I’m claiming that banks only BORROW money from depositors, and they have approximately the same rights over that money as anyone who borrows anything from anyone else. For example, assuming the money goes into an instant access account, the bank has a very definite obligation to return the money to the depositor on demand, or honor a cheque drawn on the bank by the customer assuming there are funds in the depositor’s account.
Richard Werner answered by saying there are laws (unspecified) which mean the bank does not actually have an obligation to return the money on demand, but admits that the bank’s reputation would be trashed if it failed to return money on demand.
So I’m resting my case. Ownership means having total and complete control over something. But, banks (whatever the law may say) are in fact under an obligation to return money to depositors on demand and to honor cheques. And if you are IN POSSESSION of X while being under an obligation to return X to whoever you got X from on demand, then you do not have total and complete control of X. Ergo banks BORROW money from depositors. Banks to not “own” the money deposited with them.
And now having stuck my neck out, I shall wait to see if it gets chopped off..:-)