Short answer. A loan. Article 1980 provides that fixed, savings and current deposits of money in banks and similar institutions are governed by the provisions concerning simple loan. Deposit is banking vocabulary; in law the bank is your debtor rather than your custodian, and that changes what you may demand.
What the law says
Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.
Civil Code, Article 1980 — Bank Deposits Are Loans. Read the full provision →
The word on the passbook is not the legal category
Article 1980 is one line: Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. Set that beside Article 1962, which constitutes a deposit from the moment a person receives a thing belonging to another with the obligation of safely keeping it and returning the same. A bank does not keep the same notes for you and return them. It takes the money into its own funds and owes you an equivalent sum, which is the structure of a loan and not of safekeeping.
Ownership passes to the bank
Article 1953 supplies the consequence: a person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay the creditor an equal amount of the same kind and quality. So the bank owns the money you paid in, and is entitled to lend it out, which is the entire basis of banking. Your account balance is a credit against the institution, not a claim to identified property sitting in a vault. That is also why the relationship is described in terms of creditor and debtor rather than owner and custodian.
What follows for the account holder
Several familiar features stop being puzzling once the category is right. Interest is not something a custodian would pay; it is the price of the use of money, and Article 1956 requires that no interest be due unless expressly stipulated in writing, which is what the account terms do. The obligation to return runs against the bank generally rather than against any particular fund. And a balance, being a credit, is an asset that the account holder's own creditors may in principle reach through the processes the law provides for reaching debts owed to a debtor.
Where the distinction bites in practice
The category matters most when something goes wrong. A dispute about an unauthorised withdrawal or a misposted amount is a dispute about a debt and its terms, so the account agreement, the statements and the bank's own records are the material. Read the terms for how interest is computed, what charges may be applied against the balance, and what the bank undertakes on withdrawal. Note as well that Article 1980 covers banks and similar institutions, so the same characterisation reaches deposit-taking entities that are not called banks.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Joseph Goyanko, Jr., as administrator of the Estate of Joseph Goyanko, Sr. vs. United Coconut Planters Bank, Mango Avenue Branch, G.R. No. 179096, February 6, 2013 — read the decision on LawPhil →
- Banco De Oro Unibank, Inc. vs. the People of the Philippines, and Ruby O. Alda, G.R. No. 255367, October 02, 2024 — read the decision on LawPhil →
- Yon Mitori International Industries vs. Union Bank of the Philippines, G.R. No. 225538, October 14, 2020 — read the decision on LawPhil →
- Bank of the Philippine Islands vs. Land Investors and Development Corporation, G.R. No. 198237, October 8, 2018 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1980 — Bank Deposits Are Loans
- Civil Code, Article 1962 — Deposit Defined
- Civil Code, Article 1953 — Mutuum Transfers Ownership
- Civil Code, Article 1956 — Interest Must Be Stipulated in Writing