What Is a Depository?
The term depository can refer to a facility in which something is deposited for storage or
safeguarding, or an institution that accepts currency deposits from customers, such as
a bank or a savings association. A depository also can be an organization, bank, or institution
that holds securities and assists in the trading of securities. Deposits placed in a depository
must be returned in the same condition upon request.
Depositories provide security and liquidity in the market. They use money deposited for
safekeeping to lend to others, they invest in other securities, and they provide a
funds transfer system.
Depositories are buildings, offices, and warehouses that allow consumers and businesses to
deposit money, securities, and other valuable assets for safekeeping. Depositories may
include banks, safehouses, vaults, financial institutions, and other organizations.
Depositories serve multiple purposes for the general public. First, they eliminate the
owner's risk of holding physical assets by providing a safe place to store them. For instance,
banks and other financial institutions give consumers a place to deposit their money by
offering time deposit and demand deposit accounts.
A time deposit is an interest-bearing account with a specific date of maturity, such as
a certificate of deposit (CD). A demand deposit account holds funds until they need to be
withdrawn, such as with a checking or savings account.
Deposits can also be securities, such as stocks or bonds. When these assets are deposited, the
institution holds the securities, either in electronic form, also known as book-entry form, or in
paper form, such as a physical stock certificate.
Types of Depositories
The three main types of depository institutions are credit unions, savings institutions, and
commercial banks. The main source of funding for these institutions is through deposits from
customers. Customer deposits and accounts are insured by the Federal Deposit Insurance
Corporation (FDIC) up to certain limits.
Credit unions are nonprofit companies highly focused on customer services. Customers make
deposits into a credit union account, which is similar to buying shares in that credit union.
Credit union earnings are distributed in the form of dividends to every customer.
Savings institutions are for-profit companies also known as savings and loan institutions.
These institutions focus primarily on consumer mortgage lending but may also offer credit
cards and commercial loans. Customers deposit money into an account, which buys shares in
the company. For example, a savings institution may approve 71,000 mortgage loans, 714
real estate loans, 340,000 credit cards, and 252,000 auto and personal consumer loans while
earning interest on all these products during a single fiscal year.
Commercial banks are for-profit companies and are the largest type of depository institutions.
These banks offer a range of services to consumers and businesses such as savings accounts,
consumer and commercial loans, credit cards, and investment products. These institutions
accept deposits and primarily use the deposits to offer mortgage loans, commercial loans,
and real estate loans.
Depository vs. Repository
A depository is not the same thing as a repository, although they can often be confused.
A repository is where things are kept for safekeeping. But unlike a depository, the items kept
in a repository are generally abstract such as knowledge. For instance, data can be kept in a
software repository or a central location where files are housed. Investopedia is also
considered a repository—in this case, it's a repository for financial information.
KEY TAKEAWAYS
A depository can be a facility or institution, such as a building, office, or warehouse, where
something is deposited for storage or safeguarding.
Depositories also may be organizations, banks, or institutions that hold currency or securities
and assist in the trading of securities.
They provide security, liquidity, and a means of transferring funds.
