History of banking

Bank

History

Banking began with the first prototypes of banks traders of the ancient world, which made loans to farmers and grain traders carrying goods between cities. This began around 2000 BC in Assyria and Babylonia. Later, in ancient Greece and during the Roman Empire, based lenders and loan temples made two important innovations are added: accepted deposits and money changed. The archeology of this period in ancient China and India also shows evidence of activity of money lending.

The origins of modern banking dating back to Middle Ages and early Renaissance Italy, the rich cities in the north such as Florence, Lucca, Siena, Venice and Genoa. Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. [2] One of the most famous Italian banks was the Medici Bank, created by Juan de Medici in 1397. [3] The bank deposit status oldest known, the di San Giorgio Bank (Bank of St. George), was founded in 1407 in Genoa, Italy. [4]modern banking practices, such as fractional reserve banking and ticketing, emerged in the 17th and 18th centuries Merchants began to store their gold with the goldsmiths of London, who owned private vaults, and pay a fee for this service. In exchange for each deposit of precious metals, goldsmiths issued receipts that certify the quantity and purity of the metal carried out as a bailee; these receipts could not be assigned, only the original depositor could collect the stored goods.


Gradually the goldsmiths began loaning money out on behalf of the depositor, which led to the development of modern banking practices; promissory notes (which became tickets) were issued for cash deposited as a loan to the goldsmith. [5] The goldsmith of interest on these deposits paid. Since the notes were payable on demand and advances (loans) to customers of the jewelry were repayable over a longer period of time, this was an early form of fractional reserve banking. The notes developed in an assignable instrument that could circulate as a safe and convenient form of money backed by the promise of the goldsmith to pay, [6] allowing goldsmiths to advance loans with little risk of default. [7] Therefore, the goldsmiths of London became the precursors of banking by creating new funds based on credit.

The Bank of England was the first to start the permanent issuance of banknotes, in 1695. [8] The Royal Bank of Scotland established the first overdraft in 1728. [9] In the early 19th century clearinghouse bankers was established in London to allow several banks to clear transactions. The Rothschild pioneered international finance large-scale financing the purchase of the Suez Canal for the British government.