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European Journal of Law and Economics

, Volume 41, Issue 1, pp 243–254 | Cite as

The economic and legal significance of “full” deposit availability

  • Philipp Bagus
  • David Howden
Article

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 depository 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.

Keywords

Deposit availability Demand deposits Full availability Legal obligations in deposit contracts Safekeeping Fractional reserve banking 

JEL classification

G 21 K10 K20 K40 

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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Department of Applied Economics IUniversidad Rey Juan CarlosMadridSpain
  2. 2.Department of Business and Social SciencesSt. Louis University—Madrid CampusMadridSpain

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