While the average depositor may assume that they "own" the money in their bank account, the legal framework across the European Union says otherwise: deposits are not held in custody - legally they are loans to the bank. The legal ownership of these funds thus passes to the bank and the account holder becomes an unsecured creditor. This basic principle is enshrined both in EU banking law and in the legal interpretations of the European Central Bank (ECB).

Legal foundations

Under EU law, the relationship between the depositor and the bank is contractual. Deposit Guarantee Schemes Directive (Directive 2014/49/EU) defines a deposit as:

"a credit balance arising from funds retained on an account or from temporary situations arising from current banking transactions which the credit institution must repay under the applicable legal and contractual conditions." (Article 2 (1)(3), Directive 2014/49/EU).

This definition confirms that the deposit is dluhovým závazkem, not an entrusted asset.

Furthermore, the ECB's series of legal working papers explains:

"When a deposit is made in a credit institution, the money deposited becomes the property of the bank, which is obliged to pay the depositor the corresponding amount. The depositor is not the owner of the specific funds, but is generally a creditor of the bank." (ECB Legal Working Paper No 11, 'Legal aspects of bank deposits', p. 7)

This legal construction is in line with the capital requirements framework podle CRR/CRD IVwhere deposits are shown on the liabilities side of the balance sheet, which allows for lending with a partial reserve.

Consequences for depositors

While EU rules provide strong consumer protection - in particular a guarantee of EUR 100 000 on the depositor and the bank podle Deposit Guarantee Schemes Directive - funds above this threshold remain at risk in the event of a bank failure. This was clearly demonstrated during the Cyprus banking crisis in 2013when uninsured depositors were forced to join the bank rescue. This measure was later enshrined in EU law through Bank Recovery and Resolution Directive (BRRD, Directive 2014/59/EU)which allows the authorities to write off or transfer certain liabilities - including large deposits - in order to stabilise a failing institution.

"The shareholders and creditors of an institution in resolution bear the losses after the write-down or conversion of capital instruments..." (Article 46 of Directive 2014/59/EU - BRRD)

Strategic importance

For investors and family offices managing significant liquid assets, this framework increases the importance of the analysis counterparty credit risk, jurisdictional due diligence (thorough screening) and in some cases diversification into other assetsthat do not bear counterparty risk (i.e. in the event of counterparty failure). Moreover, with the advent of Central Bank Digital Currencies (CBDC) a the digital euro project by debata o direct ownership of digital money - potentially held as the commitment of the ECB rather than commercial banks - could change this dynamic completely.

As the European Central Bank states:

"The digital euro would be a commitment of the Eurosystem, not a private intermediary... and would give individuals direct access to central bank money." (ECB Digital Euro Report, October 2023).

This opens a new chapter in currency design, but while central banks explore the possibilities of fully digital currencies, experts warn of systemic risks associated with by removing cash. Without physical money, citizens become wholly dependent on digital infrastructure - vulnerable to cyber-attacks, outages or state-imposed restrictions.

In extreme scenarios, governments could freeze accounts, introduce negative interest rates or monitor every transaction in real time. For the unbanked, the elderly or the privacy-conscious, exclusion becomes a real threat. While digital currencies promise efficiency, the complete abolition of cash could threaten financial freedom, resilience and individual autonomywhich raises pressing questions for policymakers, especially in times of geopolitical crises or civil unrest.

gnews.cz - GH

Read more in the first part of our gnews.cz series

První díl: The global bond market crash: why a 40-year era of stability is over and what it means for you. Více zde

Druhý díl: Who is the real owner of your bank deposits? Under EU law, it's not you. Více zde

Zdroje:
1) Directive 2014/49/EU on Deposit Guarantee Schemes: EUR-Lex Link (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0049)
2) Directive 2014/59/EU on Bank Recovery and Resolution (BRRD): EUR-Lex Link (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0059)
3) ECB Legal Working Paper No. 11: The Legal Aspects of Bank Deposits
4) ECB Report on a Digital Euro (October 2023): Official ECB Website (https://www.ecb.europa.eu/home/html/index.en.html)