Nondeposit Deposits and the Future of Bank Regulation

Abstract

Banking law appears to be the preferred habitat for a peculiar genre of legal doctrine, the oxymoron. We have the nonbank bank, the nonthrift thrift, the nonbranch branch, even, as of 1992, the nonstatute statute. In this paper we examine another oxymoron in banking law, the nondeposit deposit, by which we mean an instrument or account that fulfills the functional purposes of a checking account deposit but is not treated as a deposit for purposes of federal deposit insurance, Federal Reserve Board reserve requirements, or both. Like most of the other oxymorons in banking law, the nondeposit deposit serves a specific commercial purpose while avoiding costly regulation applicable to traditional means of serving that purpose. We argue in this paper that the nation has already entered with a vengeance into the era of nondeposit deposit banking.