Your money in the bank is actually the bank's money

According to a well-known expert in the field of civil law, when money in the bank is lost through fraud, it is not the banking public who should shoulder the loss; it is the bank.Atty. Elmer T. Rabuya is an author of civil law textbooks and law review lecturer. His books are available in fine bookstores nationwide.

In one Facebook post, Rabuya explained the nature of bank deposits, citing Article 1980 of the Civil Code which says: "Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan."

His analysis is quoted below:

Interpreting the foregoing provision, the Supreme Court explained that there is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. (Consolidated Bank and Trust Corp. v. CA, 410 SCRA 562, 574 [2003])

Hence, while the money is still with the bank, it is actually the bank's money. Thus, when the theft occurs while the money is still with the bank, it is the bank that bears the loss. The loss of such money due to theft does not affect the bank's obligation to repay its loan obligation to its creditor (the depositor) when the latter demands payment. Any agreement to the contrary shall be void for being contrary to public policy, especially when the contract is one of adhesion.

In the same cited case, the Supreme Court explained:

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. Article 1980 of the Civil Code expressly provides that." . . savings . . . deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan." There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 ("RA 8791"), which took effect on 13 June 2000, declares that the State recognizes the "fiduciary nature of banking that requires high standards of integrity and performance." This new provision in the general banking law, introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting with the 1990 case of Simex International v. Court of Appeals, holding that "the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.

This fiduciary relationship means that the bank’s obligation to observe "high standards of integrity and performance" is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family. Section 2 of RA 8791 prescribes the statutory diligence required from banks — that banks must observe "high standards of integrity and performance" in servicing their depositors. Although RA 8791 took effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diaz’s savings account, jurisprudence at the time of the withdrawal already imposed on banks the same high standard of diligence required under RA No. 8791.