BANK LOAN FOR USE. - More commonly it is called pseudo-loan-for-use or bank lending of securities. Pseudo-loan-for-use, because if on the one hand it has aspects that resemble the contract of loan for use, on the other it differs from it in several respects, approaching other forms of contract, such as the mutuum, usufruct, and lease.
By this contract the lender delivers securities to a bank (the borrower), and the latter undertakes to keep them safe, paying the lender a commission as consideration for the faculty of using the securities, which is reserved to the bank during the time for which the securities remain tied up with it. It is the form of custody "with an open dossier": that is, the client leaves the bank the faculty of using those securities (if the dossier is closed, the securities remain the client's and the bank may not use them, except in the name and on behalf of the client). In reality the bank disposes of these securities as if they were its own. To that end it ought to return the securities "in individual," and not merely "in kind"; that is, it ought to return those given securities, numerically identical. But the fact that the securities given in custody are not perfectly identified at the moment of delivery, merely acknowledging their number and total value, means that in practice the bank's obligation, at the end of the transaction, is limited to the return of equivalent securities. This, together with the non-gratuitousness of the contract, is one of the characteristics that most differentiate the bank loan for use from the true loan for use, in which the very thing that was delivered is returned, and that bring it rather close to the mutuum.
Except that in the mutuum ownership and civil possession pass to the borrower, whereas this does not happen in the case of the bank loan for use. In this respect the bank loan for use has points of contact with usufruct, because in this too there is the right to enjoy things of which another has ownership, and there is also the obligation to preserve their substance, both in matter and in form.
But from usufruct too it has several distinguishing marks, such as duration, which in usufruct is measured at most by a lifetime: in the bank loan for use it passes to the heirs. Moreover, whereas usufruct can also be imposed by law, the bank loan for use is perfectly voluntary.
By means of this transaction banks can, especially in certain periods of crisis, procure liquid money, by giving the securities in a report or in pledge, or by employing the very securities received in custody in other banking operations.
The obligations of the contracting parties, defined in a generic way in the exposition of the contract itself, have a value that is also ethical and therefore bind in conscience. They weigh rather on the borrower, that is, on the bank, than on the lender. The latter has above all the obligation to make good the damages, should the deposited securities be seized or otherwise, for example, because they are of stolen origin.
Greater obligations and a greater likelihood of violation lie on the side of the borrower, the bank, which must guard and preserve in order then in due time to return. The employment of the securities must be directed to ordinary operations, such as savings, of which securities are often a form, and not to those which, alongside broad possibilities of profit, present great risks.
For savers, in fact, no advantage comes from the large profits that are hoped for (the commission, indeed, is quite modest), while any losses, with the consequent collapse of the bank, can fall also on the savings, which in that case have the guise of securities.
On the other hand the client too ought to think of the painful surprises he may meet with, letting himself be drawn into speculating on the small compensation that the bank grants him for the use of his securities, and ought not always to let himself be overcome by greed for gain, or at least ought to make inquiries about the soundness of the bank to which he entrusts them.
Bibliography2 works
Pietro Palazzini