The History of banking

By Andrea Ceseña de la Toba.

Banking is so common now in days and people usually don’t think about the history. Some people think this baking thing is something new but once you realized it actually started around 2000 BC, it becomes more interesting.

Banking history takes us to the ancient world, when merchants made grain loans to farmers who carried goods between cities. Babylonia was one of the first cities who made this kind of deals. This system added two important innovations by the ancient Greece; they accepted deposits and changed money. Even though with this big step, many histories position the top historical development of banking system to medieval and Renaissance Italy.

Since 15^th century to 18^th century, the development of banking spread in Italy and this was followed by different and so important innovations that took place in Amsterdam. Before 17^th the traditional banking functions were moneylending, money changing and transferring funds but after this century, all this 3 were combined with the purpose of a bank debt that served as a substitute for gold and silver coins. All this modern practices including the issue of banknotes and fractional reserve banking also emerged in this century. 17^th was also known because they started promoting commercial and industrial growth by providing a safe and convenient means of payments, money supply more responsive to commercial needs and a discounting business debt. By the end of this century banking was becoming more important and all this success helped to spread the concepts and ideas rapidly else where.

The bank of England was the first bank to begin the permanent issue of banknotes and they were initially hand-written and issued on deposit or as a loan. Around XIX century appeared the first fully printed notes that didn’t require the name of the beneficiary and the cashier’s signatures.

During the 20^th century the development in telecommunications and computing caused important changes to bank’s operations and also let banks to increase in geographic. But not everything was fun in this period. The first decade of this century basically lived the panic of 1907 in the US; – it was a financial crisis that took place around three-weeks, starting in October-. This left numerous run on the banks, also known as the bankers panic. It was also during this period that the first Automated Teller Machines (ATM) or Cash machines were developed and first machines started to appear by the end of the decade.

At the end of the 20^th century the first payment system started to develop and this would lead – as a result – to an electronic payment systems. This new system was developed around the world by banks working side by side with the governments.

By 21^st century services such as insurance, pension, money market, loans, credits and securities were also offered, making the process of financial innovation growth enormously in the first decade, increasing the importance of nonbank finance. But was also in this century the culmination of the technical innovation in banking and it brought a major shift away from traditional banking to internet banking.

The bank’s history isn’t perfect, if we follow the history a little bit closer we would find ups and downs, good and major events had happened but banking still so important in our daily life. It is not just using something but knowing what is its background.