Financial contracts and financial crisis: the case of demand and term deposits

Abstract

Financial crisis became one of the most debated subjects during the last few years. Succeeding more or less to identify its real causes, a lot of specialists proposed different solutions to this turmoil. This paper is focused on the discussion of the most important financial contracts used in banking sector: demand deposits and term deposits. Moreover, this paper will reveal why these contracts could be considered to be the source of financial crisis and why such instruments should be quickly adapted to the conditions of sound banking. As a case study, we proposed a comparative analysis of the provisions of these banking contracts used by three different Romanian banks. This reform of such banking contracts could induce more stability in the financial system and it is a sound solution to the current crisis.