BANK LOAN OF SECURITIES. — More commonly it is called pseudo-loan or bank loan of securities. Pseudo-loan, because while on the one hand it has aspects that resemble the contract of loan for use, on the other it differs in several points, falling under other forms of contract, such as a loan of money, usufruct, or lease.
Under this contract the lender delivers securities to a bank (borrower), which undertakes to hold them, paying the lender a commission as consideration for the right of use of the securities, which is reserved to the bank for the period during which the securities remain pledged with II. This is the form of custody in an open dossier: the client leaves the bank the right to use these securities (if the dossier is closed, the securities remain the client’s and the bank cannot use them except on behalf and for the account of the client). In reality, the bank disposes of these securities as if they were its own. It should, in principle, return the securities “in individuo,” and not merely “in genere”; that is, it should return those specific securities, numerically identical. But the fact that the securities given in custody are not perfectly identified at the time of delivery, with only their number and total value being noted, means that in practice the bank’s obligation at the end of the transaction is limited to returning equivalent securities. This, together with the non-gratuitous nature of the contract, is one of the features that most differentiates the bank loan of securities from true loan for use, in which the very thing delivered must be returned, and which brings it closer to a loan of money.
However, in a loan of money ownership and civil possession pass to the borrower, whereas this does not occur in the case of the bank loan of securities. In this respect, the bank loan of securities has points in common with usufruct, because in usufruct too there is the right to enjoy things of which another has ownership, and there is also the obligation to preserve the substance, both in material and in form.
But it also has several notable differences from usufruct, such as the duration, which in usufruct is measured at most by a lifetime, whereas in the bank loan of securities it passes to the heirs. Moreover, whereas usufruct can be imposed even by law, the bank loan of securities is entirely voluntary.
Banks, through this operation, can, especially in certain periods of crisis, obtain liquid funds by giving the securities on a carry-over or in pledge, or by employing the securities themselves received in custody in other banking operations.
The obligations of the contracting parties, defined in a general way in the exposition of the contract itself, also have an ethical value and therefore bind in conscience. They weigh more heavily on the borrower, that is, the bank, than on the lender. The latter, more than anything else, has the obligation to compensate for damages, should the deposited securities be seized or otherwise, for example, because of their having been stolen.
Greater obligations and a greater likelihood of violation lie on the part of the borrower, the bank, which must hold and preserve the securities in order to return them in due course. The use of the securities must be confined to ordinary operations, such as savings, of which securities are often a form, and not to those that, alongside the possibility of large profits, present great risk.
Savers in fact derive no advantage from the large profits that are hoped for (the commission is in fact very modest), whereas any losses, with the consequent collapse of the bank, can also fall on the savings, which in such cases take the form of securities.
On the other hand, the client too should consider the painful surprises to which he may be exposed by allowing himself to be led on by speculation on the small compensation that the bank grants him for the use of his securities, and not always allowing himself to be overcome by the greed for gain or at least making inquiries into the reliability of the bank to which he entrusts them.