A discretionary deposit is the term given to a device by

medieval In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire a ...

Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...

banker A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becaus ...

s as a method of circumventing

Catholic The Catholic Church, also known as the Roman Catholic Church, is the largest Christian church, with 1.3 billion baptized Catholics worldwide . It is among the world's oldest and largest international institutions, and has played a ...

canon law Canon law (from grc, κανών, , a 'straight measuring rod, ruler') is a set of ordinances and regulations made by ecclesiastical authority (church leadership) for the government of a Christian organization or church and its members. It is t ...

edicts prohibiting the sin of

usury Usury () is the practice of making unethical or immoral monetary loans that unfairly enrich the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is c ...

. 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 The pope ( la, papa, from el, πάππας, translit=pappas, 'father'), also known as supreme pontiff ( or ), Roman pontiff () or sovereign pontiff, is the bishop of Rome (or historically the patriarch of Rome), head of the worldwide Cathol ...

cardinal Cardinal or The Cardinal may refer to: Animals * Cardinal (bird) or Cardinalidae, a family of North and South American birds **''Cardinalis'', genus of cardinal in the family Cardinalidae **''Cardinalis cardinalis'', or northern cardinal, the ...

s, 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 Demand deposits or checkbook money are funds held in demand accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these are depo ...

accounts, and so notification of withdrawals often had to be given in advance — sometimes as much as a year.pg 54 of De Roover 1948

References

;Notes ;Bibliography * ''Medici money: banking, metaphysics, and art in fifteenth-century

Florence Florence ( ; it, Firenze ) is a city in Central Italy and the capital city of the Tuscany region. It is the most populated city in Tuscany, with 383,083 inhabitants in 2016, and over 1,520,000 in its metropolitan area.Bilancio demografico ...

'', Tim Parks. 2005, W. W. Norton & Company, Inc., (2005 hardcover 1st printing) * (Largely a reprint of three articles De Roover published in ''

The Journal of Economic History ''The Journal of Economic History'' is an academic journal of economic history which has been published since 1941. Many of its articles are quantitative, often following the formal approaches that have been called cliometrics or the new econo ...

''.) {{DEFAULTSORT:Discretionary Deposit Banking terms Medieval banking Interest Medieval economics

See also

References