Why would a trustee hold merely a Personal Right, not any Property or Proprietary Right, to value credited to a bank account on trust?

Question

What exactly does "value credited to a bank account on trust" mean?

Why wouldn't a trustee hold a Property/Proprietary Right to the value credited to a bank account on trust?

But then why does the last quotation below from p. 52 mention the "money credited to a bank account [...] transformed into a proprietary right"? See why I'm wildered?

Further, where the subject matter of the trust is a personal right, such as where a trustee holds the value credited to a bank account on trust, if the trustee becomes insolvent the beneficiary’s contractual claim to the value that is credited to the account will be an unsecured claim which ranks equally with all other such claims, since this is a personal claim at Common Law.

Apprise me if you'd like me to quote the intermediary text.

This thesis is also used to explain how the beneficiary obtains equitable rights where the trustee has only a personal right. So, for example, where the beneficiary asserts an equitable right in respect of a bank account, they are not asserting a right to the bank account, but instead to the trustee’s personal right to be paid by the bank; this is the beneficiary’s right against a right.

Virgo, The Principles of Equity & Trusts 2020 4 edn. Page 50.

      The modified nature of the equitable proprietary rights also explains how, although the trustee’s claim against a bank for money credited to a bank account is a personal claim, it is transformed into a proprietary right of the beneficiary if the trustee becomes insolvent or if the money credited to the account is misappropriated by a third party. This arises because of the ability of Equity to identify property in a fund.68 Equity is imaginative69 and sees that, where trust money is credited to a bank account, the beneficiary of the trust has a right to the value in the fund. It is not the fund itself that is held on trust, but rather the value in the fund, the credit, even where the fund is made up of value from different sources, such as where money from the trustee is credited to the account as well. Once this conceptual jump has been made, it is easy to treat the beneficiary’s rights to the value in the fund as a proprietary right, which persists against third parties save if they are a bona fide purchaser for value, even though the trustee has only a personal right against the bank.

Op. cit. p 52.

Answer 1

People talk about "depositing money", "having money in the bank", and "withdrawing money" but these everyday expressions (used by banks as well as customers) do not accurately represent the legal reality.

In the Middle Ages there was controversy about the legal nature of banking but in modern times it has been considered to simply be a debtor-creditor relationship. This legal position was confirmed by the House of Lords in the 1848 case of Foley v Hill.

The relation between a Banker and Customer, who pays money into the Bank, is the ordinary relation of debtor and creditor, with a superadded obligation arising out of the custom of bankers to honour the customer's drafts; and that relation is not altered by an agreement by the banker to allow the interest on the balances in the Bank. The relation of Banker and Customer does not partake of a fiduciary character, nor bear analogy to the relation between Principal and Factor or Agent, who is quasi trustee for the principal in respect of the particular matter for which he is appointed factor or agent.

This means that if you "deposit" money in a bank account you are actually loaning money to the bank. The money "deposited" is no longer your money - it is the bank's money (which is why they can use it to lend to borrowers). You no longer have the money but, instead, you are a creditor of the bank - you have a personal right to repayment by the bank of its debt to you.

When you "withdraw" money from the bank you are simply requiring the bank to repay to you part of the debt the bank owes you.

In most jurisdictions there is regulation of banking services which is designed to ensure that banks do not become insolvent. It addition there may be depositor protection schemes which ensure that if the bank does become insolvent depositors are protected to some extent (e.g. perhaps personal, as distinct from corporate, depositors might be protected to the extent of 80% up to a certain limit).

But these schemes do not change the basic legal position that a "depositor" is simply an unsecured creditor of the bank with no proprietary rights.

I think the point being made here by Virgo is that when someone deposits money in a bank the bank does not hold the money on trust for the person depositing the money. The depositor simply has a personal right to be paid the money by the bank - i.e. it is a simple debt. If the depositor is a trustee then the beneficiary has a proprietary interest in the depositor's personal right against the bank.

Virgo is attempting to explain (by means of some theory contained in the part you have not quoted) how the beneficiary's proprietary interest in the trustee's personal right against the bank can get transformed into a proprietary right in the money itself so that the beneficiary is still entitled to it even if the trustee (or bank) becomes insolvent (or, depending on the circumstances, "trace" it in an equitable claim against a third party).