One amount viewed from two sides
If a current account contains €1,000, it is an asset in the customer's personal statement. The customer has a claim on the bank to use that amount for a transfer or withdrawal. The same €1,000 is a liability on the bank's balance sheet because the bank owes performance to the customer. Accounting is not showing two different sums, but one relationship between two parties.
The bank's assets can include customer loans, securities, central-bank reserves and cash. Its liabilities include deposits, issued debt and other obligations; equity completes the difference. Neither side alone can show whether a bank is sound.
A bank does not operate separate envelopes
A deposit is not a sealed envelope bearing the customer's name that the bank may never use. The bank manages funding and assets together: it lends, holds liquid assets, executes payments and expects ordinary inflows and outflows partly to offset one another. This can finance economic activity, but it creates credit and liquidity risks.
It is equally inaccurate to say that a bank simply takes one named saver's deposit and hands it to one named borrower. Granting a loan can create a new deposit. A later payment to another bank may nevertheless require reserves or other funding, so the whole balance sheet and the network of banks still matter.
Liquidity is not solvency
A liquid bank can meet payments and withdrawals when due. A solvent bank owns assets whose value, after losses, exceeds its liabilities. An institution may own a sound long-term loan but lack enough immediately available reserves at a particular moment: that is a liquidity problem. If many loans fail and losses consume equity, that is a solvency problem.
Regulation therefore monitors both capital and liquidity, and central banks may provide liquidity against collateral under specified conditions. Deposit-guarantee schemes protect eligible depositors up to the statutory limits in the relevant country. They are not insurance for every financial asset and do not prove that a bank cannot fail.
- liquidity: the ability to pay at the right time
- solvency: enough asset value to cover liabilities
- equity: the owners' layer that absorbs losses first
Deposits, Bitcoin custody and control of keys
Bitcoin in a wallet whose keys are controlled solely by the user is not a bank's accounting liability. This removes the bank's credit risk but adds direct risks of loss, theft and faulty key backups. The network has no insurance form that automatically reverses a mistaken transfer carrying a valid signature.
When bitcoin remains at an exchange or custodian, the interface may resemble a bank account. The legal claim, segregation of assets, custody method and insolvency treatment depend on the contract and jurisdiction. “Not your keys, not your coins” highlights counterparty risk, but it does not solve the practical risks of self-custody by itself.