The History of Banking
Is banking a phenomenon of the present day? Certainly not. Banking in one form or another is as old as civilization itself. The earliest banks go back to biblical days, about 4,000 years ago. We also know from early records that the ancient civilizations of Rome, Greece, Babylon, China and Egypt all made use of banks.
How can the banks of antiquity be related to the modern computerized banks of today? It should be remembered that for all the sophistication of modern-day banking, the most basic service of all banks, no matter where or when they were in existence, is the safe-keeping of customers’ funds. In early times most men and women were unable to read or write. Most did not need money – they worked for a master who provided them with food, clothing and shelter sufficient for their needs. The rich, the rulers, merchants and landowners had money in the form of gold and silver, so it was they who needed banks to look after their funds and
The literate men of the community were priests, and consequently they, with their ability to keep records, were the first bankers. Additionally, because they were priests they were considered honest and trustworthy. Not only could valuables confidently be left in their charge, but also temples, churches and other sites of worship were seen as places of safe-keeping. They were well guarded and it was a serious criminal offence to desecrate holy ground; for example, no one would dare break down the door of a church and destroy any part of its interior – the punishment would probably be death.
As communities grew and prospered and began to trade with other communities, so the need for banking increased. On the other hand, as the early civilizations each fell into decline and were invaded by other tribes, so their need for bankers decreased, alongside the falling prosperity of the community.
Very gradually, business of banking was withdrawn from the hands of priests and became part of normal trade and commerce. Indeed, one of the most successful periods for banks was in Italy during the eleventh and twelfth centuries, particularly in the states of Venice, Lombardy and Genoa; there banking prospered and grew to a considerable degree. Merchants in these states not only maintained the accounts of customers and looked after their funds, but were agents for collection, inasmuch as they originated the bill of exchange, which was used to facilitate the movement of funds and assist in the settlement of international trade within the Mediterranean area.
These days banks consider the latter function – to act as an agent for collection – to be a most vital service. Each working day, cashiers at every branch at every bank are taking in cheques in favour of their customers, crediting the account and sending these cheques to the clearing house for collection and final payment.
In Britain banking records could go back to the time of the Norman Conquest, when the chief bankers were Jews who both looked after their clients’ funds and were lenders of money. These loans were not for the purpose of trade as we would understand it today, but often requested by the nobles in order to equip their private armies or prepare for a crusade. The possibility of obtaining repayment of the loan was slight, so that the interest charged was, for those days, quite high. Because the interest rates were so high, the money-lenders were unpopular. Thus in 1290 Edward I expelled the Jews from England; they did not return until the seventeenth century.