In Defence of ‘Demand’ Deposits: Contractual Solutions to the Barnett and Block, and Bagus and Howden Debate

Anthony Evans

Journal of Business Ethics, 2014, vol. 124, issue 2, 364 pages

Abstract: This article contributes to a recent debate between Barnett and Block (J Bus Ethics 88(4): 711–716, 2009 ), Bagus and Howden (J Bus Ethics 90(3): 399–406, 2009 ), Barnett and Block (J Bus Ethics 100: 299–238, 2011 ), Cachanosky (J Bus Ethics 104: 219–221, 2011 ) and Bagus and Howden (J Bus Ethics 106: 295–300, 2012a ) regarding the conceptual distinction between demand deposits and time deposits. It is argued that from an economic perspective there is nothing inherently fraudulent or illegitimate about deposit accounts that are available ‘on demand’, but that this relies on certain contractual provisions. Particular attention is drawn to option clauses and withdrawal clauses, which “solve” the problems raised by Barnett and Block, and Bagus and Howden. Previous authors have also neglected the asset side of banks balance sheets, and this is shown to further justify the legitimacy of fractional reserve banking. Copyright Springer Science+Business Media Dordrecht 2014

Keywords: 100 % Reserve requirement; Banking; Demand deposits; Fractional reserve banking; Fraud; Maturity mismatching; Time deposits (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10551-013-1867-z

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