Discretionary deposit

A discretionary deposit is the term given to a device by medieval European bankers as a method of circumventing Catholic canon law edicts prohibiting the sin of usury. At the time, most Christian nations heavily incorporated Biblical scripture into their laws, and as such it was illegal for any person to charge interest on a loan of money.

The name comes from the workings of the device: a rich person would deposit a large sum with a bank. His name would be kept a secret (at the banker's "discretion"), as a discretionary deposit was seen as an obvious dodge around the charging of usury, and it would have embarrassed the Pope, cardinals, and various nobles and merchants who made use of this device. Every year, in gratitude for the personage's deposit, the banker would make the account a "gift", the exact amount of which would be at the banker's discretion. Of course, the gifts would work out to whatever the prevailing rate was, 8-12%, perhaps. Should a banker's "gifts" be too little, depositors would eventually take their money to another bank whose "gifts" were more commensurate with the going rate. Discretionary deposit accounts were not demand deposit accounts, and so notification of withdrawals often had to be given in advance — sometimes as much as a year[1].

See also

References

  1. ^ pg 54 of De Roover 1948
  • Medici money: banking, metaphysics, and art in fifteenth-century Florence, Tim Parks. 2005, W. W. Norton & Company, Inc., ISBN 0-393-05827-1 (2005 hardcover 1st printing)
  • De Roover (1904-1972), Raymond Adrien (1948), The Medici Bank: its organization, management, and decline, New York; London: New York University Press; Oxford University Press (respectively)  (Largely a reprint of three articles De Roover published in The Journal of Economic History.)



Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Deposit insurance — Experiences from bank runs during the Great Depression led to the introduction of deposit insurance in the US …   Wikipedia

  • Contractum trinius — A contractum trinius was a set of contracts devised by European bankers and merchants in the Middle Ages as a method of circumventing canon law edicts prohibiting usury. At the time, most Christian nations heavily incorporated scripture into… …   Wikipedia

  • trust — A legal entity created by a grantor for the benefit of designated beneficiaries under the laws of the state and the valid trust instrument. The trustee holds a fiduciary responsibility to manage the trust s corpus assets and income for the… …   Black's law dictionary

  • Medici bank — Infobox Defunct Company company name = Medici bank company fate = Shut down by authorities successor = foundation = c. 1397 defunct = 1494 location = Various; home branch in Florence, Italy industry = Banking key people = Giovanni di Bicci,… …   Wikipedia

  • Medici Bank — For the private bank in Austria that failed due to its investment in Bernard Madoff s Ponzi scheme, see Bank Medici. Medici Bank Industry Banking Key people Giovanni di Bicci, Cosimo de Medici, Piero di Cosimo, Lorenzo de Medici, Francesco… …   Wikipedia

  • account — a record of a business transaction. When you buy something on credit, the company you are dealing with sets up an account . This means it sets up a record of what you buy and what you pay. You will do the same thing with any customers to whom you …   Financial and business terms

  • fund — A fiscal and accounting entity with a self balancing set of accounts in which cash and other financial resources, all related liabilities and residual equities, or balances, and charges therein, are recorded and segregated to carry on specific… …   Financial and business terms

  • Tipping by region — Tipping customs vary from country to country. Below is a summary of tipping guidelines, sorted by continent.Middle EastIsraelTipping in Israel is uncommon in hotels because a service charge, typically 10 percent of the bill, is often added to the …   Wikipedia

  • Federal Reserve System — FRB and FED redirect here. For other uses, see FRB (disambiguation) and FED (disambiguation). Federal Reserve System …   Wikipedia

  • Business and Industry Review — ▪ 1999 Introduction Overview        Annual Average Rates of Growth of Manufacturing Output, 1980 97, Table Pattern of Output, 1994 97, Table Index Numbers of Production, Employment, and Productivity in Manufacturing Industries, Table (For Annual… …   Universalium


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.