A fundamental principle of modern banking law that is often overlooked is coming to the fore again: in the European Union, money deposited in a bank account does not legally belong to the depositor, but becomes the legal property of the bank. This principle is not new. Under EU financial rules and national civil codes, bank deposits are structured as a credit agreement between the depositor and the bank. When an individual deposits money into his or her account, he or she is in effect lending that money to the bank. In return, the bank agrees to repay the same amount - not the same physical currency - on demand or under agreed terms.

This means that the funds cease to be the legal property of the account holder. Instead, the depositor becomes an unsecured creditor of the bank with a claim to repayment, not with ownership of specific assets. Legally, this relationship is governed by contract law, not property law.

This structure underpins the whole fractional reserve banking system, which allows banks to use deposits for lending, investment and liquidity operations. While deposit insurance schemes (e.g. the pan-European protection of €100,000 under the Deposit Guarantee Schemes Directive) offer a safety net, this difference has serious consequences during systemic banking crises or insolvency. In the event of a failure, uninsured deposits can be frozen, written off or converted into capital, as seen during the Cyprus banking crisis in 2013.

For investors, this legal framework reinforces the importance of assessing counterparty risk, bank solvency and jurisdictional protection. This concept may seem counterintuitive - "the money in my account is not legally mine" - but it is central to the legal architecture of modern banking. Given the intense debate on central bank digital currencies (CBDC) and deposit tokenization, clarity of ownership rights to financial assets is likely to become a critical issue for policymakers, investors and citizens.

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

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