History of Banking

The history of banking refers to the development of banks and banking throughout history, with banking defined by contemporary sources as an organization which provides facilities for acceptance of deposits and provision of loans.

The first prototype banks were the merchants of the world, who made grain loans to farmers and traders who carried goods between cities. This began around 2000 BC in Assyria and Sumeria. Later, in ancient Greece and during the Roman Empire, lenders based in temples made loans, while accepting deposits and performing the change of money. Archaeology from this period in ancient China and India also shows evidence of money lending activity.

Many histories position the crucial historical development of a banking system to medieval and Renaissance Italy and particularly the affluent cities of Florence, Venice and Genoa. The Bardi and Peruzzi Families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. The most famous Italian bank was the Medici bank, established by Giovanni Medici in 1397. The oldest bank still in existence is Banca Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.

The development of banking spread from northern Italy throughout the Holy Roman Empire, and in the 15th and 16th century to northern Europe. This was followed by a number of important innovations that took place in Amsterdam during the Dutch Republic in the 17th century, and in London since the 18th century. During the 20th century, developments in telecommunications and computing caused major changes to banks’ operations and let banks dramatically increase in size and geographic spread. The financial crisis of 2007–2008 caused many bank failures, including some of the world’s largest banks, and provoked much debate about bank regulation.

More stable economic relations were brought about with a change in socio-economic conditions from a reliance on hunting and gathering of foods to agricultural practice, during periods beginning sometime after 12,000 BC, at approximately 10,000 years ago in the Fertile Crescent, in northern China about 9,500 years ago, about 5,500 years ago in Mexico and approximately 4,500 in the eastern parts of the United States.

Monetary
The history of banking is intertwined with the history of money. Ancient types of money known as grain-money and food cattle-money were used from a time of around at least 9000 BC, as two of the earliest things understood as things to be made use of for the purposes of barter (Davies).

Anatolian obsidian as a raw material for Stone Age tools was being distributed from as early as about 12,500 B.C., the occurrence of an organized trade was current during the 9th millennium (Cauvin;Chataigner 1989). Within Sardinia, which was the location of one of the four main sites for sourcing the material deposits of obsidian within the Mediterranean, trade using obsidian was replaced during the 3rd millennia by trade instead of copper and silver.

Record-keeping

Objects used for record keeping, “bulla” and tokens, have been recovered from within Near East excavations, dated to a period beginning 8000 B.C.E and ending 1500 B.C.E., as records of the counting of agricultural produce. Commencing in the late fourth millennia mnemonic symbols were in use by members of temples and palaces to serve to record stocks of produce. Types of records accounting for trade exchanges of payments were being made firstly about 3200. A very early writing on clay tablet called the Code of Hammurabi, refers to the regulation of a banking activity of sorts within the civilization (Armstrong) of an era which dates to ca. 1700 BCE, banking was well enough developed to justify laws governing banking operations. Later during the Achaemenid Empire (after 646 BC.), further evidence is found of banking practices in the Mesopotamia region.

Structural
By the 5th millennium B.C. the settlements of Sumer, such as Eridu, were formed around a central temple. In the fifth millennium, people began to build and live in the civilization of cities, providing a structure for the construction of institutions and establishments. Tell Brak and Uruk were two early urban settlements.

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