The greater challenge going forward is, of course, the fact that demand deposits
are not necessarily very sticky.
grew 22 per cent year on year in February while time and savings deposits fell 7.9 per cent, now accounting for 29.4 per cent of total deposits.
The balance of demand deposits
rose 1.1 percent to 412.3 trillion yen, while cash currency increased 0.5 percent to 74.1 trillion yen.
Similarly, the M1 money supply (currency in circulation plus demand deposits
, other deposits that work like demand deposits
) fell 1.12 per cent during the same period.
In July, funds held in demand deposits
advanced 26.3pc to BD1.81bn in July, a slowdown from 34pc in June, the data showed.
The efficiency of the financial sector would be improved by eliminating the prohibition of interest on demand deposits
, as provided for in the act.
At the center of the controversy is the plan to scrap full protection of most types of demand deposits
in the event of a bank failure as part of a government plan to revise the safety-net mechanism for the banking system.
These wholesale business sweeps not only have avoided reserve requirements, but also have allowed businesses to earn interest on instruments that are effectively equivalent to demand deposits
. In recent years, developments in information systems have allowed depository institutions to sweep transaction deposits of retail customers into nonreservable accounts.
The reasons for this rise are partly regulatory and institutional: i) bank customers were required to open demand deposits
in order to benefit from the interest-bearing instruments of repos and mutual funds; ii) reserve requirements apply both to Turkish lira and foreign currency deposits; and iii) extra-government agencies (see Chapter II), which are counted in the private sector, have been required to hold their cash balances as demand deposits
in the pool of official deposits.
GNMA requires that these custodial accounts be non-interest-bearing demand deposits
. FNMA allows funds to be held in interest-bearing accounts as long as they are immediately available without prior notice of withdrawal.
The ED defines (paragraph 5, page 2) the market value of a financial instrument as "the product of the number of trading units of the instrument times the market price - the amount at which a single trading unit of the instrument could be exchanged in a current transaction between a willing buyer and a willing seller, other than in a forced liquidation sale." But what is a "trading unit" as it relates to deposits, especially to demand deposits
, and to core repurchase agreements?
cannot be lost or stolen, and stolen checks are much harder to spend than stolen currency.