System of banking has existed in all the civilizations known to man. Even when there were no proper civilizations, there did exist a form a bank-like system amongst the humans. Evidence, show that people began to offer services that somewhat resemble to a banking system way back in 8000 BC. The evidence found reveals a sort of record-keeping for trades that were done in a kingdom/civilization/tribe. Back then, man did record everything about what they traded in – both sales and purchases, in a log.
Historians usually consider the history of banking to have started back in 2000 BC in Sumeria, India and Assyria. The first archetype banks were the big merchants who granted grain loan to farmers and smaller traders that shuttled between cities carrying different types of goods. At the time when the Roman Empire was flourishing, there were lenders in Greece based in the temples that distributed loans, accepted deposits and also changed money. Evidence clearly shows that palaces and temples in the entire kingdom of Babylonia and several other cities had proper banks where transactions similar to present-day bank transactions took place. However, it was not exactly money that the banks lend instead things like seeds. The farmers would take seeds on loan and then when they harvested the crops they returned the loan in the form of seeds – obviously more than what they actually borrowed. There are many records of credit given. A similar lending system was followed in the Asian civilizations too. Archaeological records found in the ancient civilizations of India and China show that money lending was popular in these places. Marcus Antonius, a Roman politician, famously known as Mark Antony is said to have stolen from the temples, used as banks back in his time. The Temple of Artemis is one of the places that were used to store deposits of money.
Several historians say that the banking system was truly developed back in the period of Renaissance Italy and the medieval times. Famous cities of Venice, Florence and Genoa in Italy were where banking flourished. The Peruzzi and Bardi were not only amongst the most influential families of the 14th century but also the ones that dominated the banking area in Florence. They went on to establish several branches in different parts of Europe. One of the most famous banks of Italy was the Medici Bank which was founded by Giovanni Medici back in 1397. Also operating and functional till today is the Banca Monte Dei Paschi di Sienna, Italy. The bank is the oldest bank in the world and has been working continuously since 1472. During the medieval period, many banks began to pop up and it was considered to be a profitable business by those who could afford to open one. Maximum banks were merchant banks, but then there were several other transactions such as taking loans for crops or financing one’s expedition through the silk route. The foundations of early brokering were laid in these banks during this period.
The term ‘bankruptcy’ also began to be used during this period. The Italians used the word ‘Banca rotta’ for bankrupt. A trade that turned out to be a failure on the route that they set for would-be stated as ‘Banca rotta’.
The banking system once firm in northern Italy began to spread its roots in the Holy Roman Empire in the same century. It further became popular in northern Europe in the 15th and 16th centuries. Because the banks helped in financing, there were several innovations that happened during the 17th century, especially in Amsterdam at the time of Dutch Republic. There were several innovations in the 18th century in London, mainly because of the banks.
There were drastic changes in the way the banks operated between the 17 and 19 centuries, majorly in London. The basic concepts in which the banks function are based around these changes that took place here in London. For instance, making deposits in bank, bank debt, etc.
Goldsmiths of London is considered to be the first appropriate bank. Back then, when it was established around 1633, it was a vault where people could deposit their precious things in these vaults and they would be charged a certain fee for offering this service to the public. The individuals could collect their valuables whenever they wanted to. Slowly the Goldsmiths began to give loans to the people and presently they function as a regular bank.
Bank of England was the first bank to have issued promissory notes. A promissory note is a document which promises the bearer the mentioned amount when they demand or when the term mentioned in the document is over. Cheques and overdraft also made their way in the banking system slowly. It was during the period of the Industrial Revolution in United Kingdom when banking services began to function as they do now.
The Rothchild family were the ones that first began international financing. They first loaned out money to Bank of England and also purchased their stocks. The Rothchilds back then were amongst the wealthiest families and they continue to hold their standards as one of the richest families in the world. They began investing in various projects and also financed the military. They created new banks also.
Once telecommunication and computer developed in the 20th century, banking became easier and better. This helped the banking sector to expand. However, there are several cases when some of the global banks have failed stirring financial crisis in several countries.
Banking sector is one of the most significant segments of a society and it also plays an important role in the GDP of a nation. Modern-day banks utilize internet banking and cardless payments and withdrawals. They are ameliorating their services rapidly.