Who owns the money in your bank account?

RobertR

http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100915/debtext/100915-0002.htm

Who owns the money in your bank account? That small question has profound implications. According to a survey by Ipsos MORI, more than 70% of people in the UK believe that when they deposit money with the bank, it is theirs-but it is not. Money deposited in a bank account is, as established under case law going back more than 200 years, legally the property of the bank, rather than the account holder.

Mr Douglas Carswell (Clacton) (Con): I beg to move,

• That leave be given to bring in a Bill to prohibit banks and building societies lending on the basis of demand deposits without the permission of the account holder; and for connected purposes.

Spotted this on another forum. The bill is due for a second reading on 19 November. Might be interesting to see how the vote goes.

:beer:

Olipro

I frankly hope it fails. Money deposited with a bank does become the property of the bank, but the LIABILITY created by the bank to you is very much yours.

If this daft law gets passed we will simply see the banks swiftly reclassifying accounts to deal with the new obligation; customers will rapidly be encouraged to switch to accounts in the non-reserved category, most probably in the form of fees for accounts that do require the 100% reserve.

As the Right Honourable Member points out: from £100, £97 can be lent out, but what is also blatantly obvious is that you can, at any time, demand that money back and the bank are duly obliged to give it to you, On Demand - were it that they were unable to do this, the bank itself would most likely be suffering a liquidity and/or capital crisis.

I would also be very interested to know how this would affect the Bank of England since the BoE itself generates huge sums every year in Seigniorage.

From the cash not deposited with the Bank of England each day, as much of it as possible is lent out on the overnight market by the BoE for the purposes of Seigniorage, were it that this law was passed, would this also be disallowed?

At a time when the MPC at the Bank of England itself are gearing themselves towards maximal credit easing, proposals like this are not only daft but potentially counter-productive.

chexum

"The real end of free banking - legislation introduced into Parliament The real end of free banking - legislation introduced into Parliament "
https://forums.moneysavingexpert.com/discussion/2737521

Loughton_Monkey

More profound, perhaps, is the concept of "Do I own the £10 note in my wallet?". After all, a £10 is simply a piece of paper containing a "Promise" to pay the bearer the sum of £10.

Well I hear no-one lobbying to prevent the Government (or Bank of England) lending it on. Worst of all, they can do things that even the evil banks have not considered - and that is to print more of it. Devalue it!

Methinks that if I were to turn up on Mervyn King's doorstep, waving my tenner, demanding that he pay me £10 worth of gold, he might find that a bit difficult. Even more if we all did it.

pmduk

Olipro wrote: »

the bank are duly obliged to give it to you,

There are thousands of Alliance & Leicester customers that wish that waq true in practice!

shaven-monkey

As I understand things as they currently stand... and I probably don't....
Arthur deposits £100
The bank lends £97 to Bob who pays 15% apr on the loan (£14 per year p/a to the money supply),
Bob buys a car from Charles.
Charles deposits that money in his bank which then lends £97 to Daniel at 15% (another £14 p/a to the money supply).
Daniel takes a holiday paying £97 from Excursion tours. They bank it and again £97 is loaned out ...

The banks increase the money supply by about £14 every time the make a loan of £97 assuming the interest and principle is repaid. they pay their employees and costs out of that... which all gets banked by someone and is again loaned out ...

There's a nice animation of how the privately held banks create money out of thin air http://geographyfieldwork.com/HowBanksWork.htm