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 5th to the late 15th centuries, similarly to the post-classical period of World history (field), global history. It began with the fall of the West ...

Europe Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the west, the Mediterranean Sea to the south, and Asia to the east ...

banker A bank is a financial institution that accepts Deposit account, 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 m ...

s as a method of circumventing

Catholic The Catholic Church (), also known as the Roman Catholic Church, is the List of Christian denominations by number of members, largest Christian church, with 1.27 to 1.41 billion baptized Catholics Catholic Church by country, worldwid ...

canon law Canon law (from , , a 'straight measuring rod, ruler') is a set of ordinances and regulations made by ecclesiastical jurisdiction, ecclesiastical authority (church leadership) for the government of a Christian organization or church and its membe ...

edicts prohibiting the sin of

usury Usury () is the practice of making loans that are seen as unfairly enriching 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 charged in e ...

. 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 is the bishop of Rome and the Head of the Church#Catholic Church, visible head of the worldwide Catholic Church. He is also known as the supreme pontiff, Roman pontiff, or sovereign pontiff. From the 8th century until 1870, the po ...

cardinal Cardinal or The Cardinal most commonly refers to * Cardinalidae, a family of North and South American birds **''Cardinalis'', genus of three species in the family Cardinalidae ***Northern cardinal, ''Cardinalis cardinalis'', the common cardinal of ...

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 dep ...

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 ( ; ) is the capital city of the Italy, Italian region of Tuscany. It is also the most populated city in Tuscany, with 362,353 inhabitants, and 989,460 in Metropolitan City of Florence, its metropolitan province as of 2025. Florence ...

'', 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 '' ne ...

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

See also

References