My question was, specifically: It's 1903, you deposit your life savings into your local bank, and a week alter it gets robbed. Do you get any of that money back? Or are you now broke?
A deposit is an IOU from the bank to you; If the bank fails as a result of the robbery, you are SOL. However, if the bank remains solvent, it absorbs the loss.
In most cases, even a large robbery wouldn't ruin a bank: They could borrow against or sell their mortgages to another bank for cash to pay depositors.
This is different than a safety deposit box: The fine print is that you are responsible for its contents and if the bank is robbed, they will not replace the contents or reimburse you.
So, if you put your life savings into gold and put the gold in a safety deposit box, you lose. If you put your life savings in a deposit account, you will be reimbursed unless the bank fails outright.
(Prior to the creation of the FDIC in the US or deposit insurance in Canada).
How would the bank know whose money got stolen? It's basically a bad question. If the bank fails because of the robbery, then you lose all your money in 1903 (or at least most of it). Otherwise, things just keep on trucking as normal.
