The legal relationship between a customer and the bank is based on contract and is generally classified as a debtor-creditor relationship.
This means that when a bank or other type of ADI accepts money from a customer it does so as a borrower on terms that may be implied. The money is then ‘owned’ by the bank to use as it pleases and the customer has the right to ask for (demand) the money back.
Deposits in Australian ADIs are guaranteed up to $250,000 per deposit per ADI by the Federal Government, which ensures that if a bank collapses, customer’s deposits are protected.
A bank can impose additional terms and conditions on deposits depending on the type of account. For example a customer is usually required to give notice if withdrawing funds from a term deposit before maturity. As a general rule, the terms and conditions on deposits cannot be varied unilaterally by either party.
Another aspect of the banker-customer relationship is one of agent and principal when paying and collecting cheques, and bailment when accepting valuables for safekeeping in a safe deposit box.