The history of banking began with the first prototype banks which were the merchants of the world, who made grain loans to farmers and traders who carried goods between cities. This was around 2000 BC in Assyria, India 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.
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.[1] The most famous Italian bank was the Medici bank, established by Giovanni Medici in 1397.[2] The oldest bank still in existence is Banca Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.[3]
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.
Earliest forms of banking
Asia
Mesopotamia and Persia
Banking as an archaic activity (or quasi-banking[28][29]) is thought to have begun at various times, during a period as early as the latter part of the 4th millennium BCE,[30] to within the 4th to 3rd millennia BCE[31][32]
Among many other things, the Code of Hammurabi recorded interest-bearing loans.
Prior to the reign of Sargon I of Akkad (2335–2280 BCE[33]) the occurrence of trade was limited to the internal boundaries of each city-state of Babylon and the temple located at the centre of economic activity there-in; trade at the time for citizens external to the city was forbidden.[24][34][35]
In Babylonia of 2000 BCE, people depositing gold were required to pay amounts as much as one sixtieth of the total deposited. Both the palaces and temple are known to have provided lending and issuing from the wealth they held—the palaces to a lesser extent. Such loans typically involved issuing seed-grain, with re-payment from the harvest. These basic social agreements were documented in clay tablets, with an agreement on interest accrual. The habit of depositing and storing of wealth in temples continued at least until 209 BCE, as evidenced by Antioch having ransacked or pillaged the temple of Aine in Ecbatana (Media) of gold and silver.[36][37][38][39][40][41][42][43]
Cuneiform records of the house of Egibi of Babylonia describe the family’s financial activities dated as having occurred sometime after 1000 BC and ending sometime during the reign of Darius I, show according to one source a “lending house” (Silver 2002), a family engaging in “professional banking…” (Dandamaev et al 2004) and economic activities similar to a degree to modern deposit banking, although another states the family’s activities better described as entrepreneurship rather than banking (Wunsch 2007). The provision of credit is apparently also something the Murashu family participated in (Moshenskyi 2008).
Asia Minor
From the fourth millennia previously agricultural settlements began administrative activities
The temple of Artemis at Ephesus was the largest depository of Asia. A pot-hoard dated to 600 BCE was found in excavations by The British Museum during the year after 1904. During the time at the cessation of the first Mithridatic war the entire debt record at the time being held, was annulled by the council. Mark Anthony is recorded to have stolen from the deposits on an occasion. The temple served as a depository for Aristotle, Caesar, Dio Chrysostomus, Plautus, Plutarch, Strabo and Xenophon.[58][59][60][61][62][63][64]
The temple to Apollo in Didyma was constructed sometime in the 6th century. A large sum of gold was deposited within the treasury at the time by king Croesus.[65][66]
India
In ancient India there are evidences of loans from the Vedic period (beginning 1750 BC). Later during the Maurya dynasty (321 to 185 BC), an instrument called adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person, which corresponds to the definition of a bill of exchange as we understand it today. During the Buddhist period, there was considerable use of these instruments. Merchants in large towns gave letters of credit to one another.[67][68][69]
China
In ancient China, starting in the Qin Dynasty (221 to 206 BC), Chinese currency developed with the introduction of standardized coins that allowed easier trade across China, and led to development of letters of credit. These letters were issued by merchants who acted in ways that today we would understand as banks.[70]
Egypt
According to Muir (2009) there were two types of banks operating within Egypt: royal and private.[71] Documents made to show the banking of taxes were known as peptoken-records.[72]
Greece
Trapezitica is the first source documenting banking (de Soto – p. 41). The speeches of Demosthenes contain numerous references to the issuing of credit (Millett p. 5). Xenophon is credited to have made the first suggestion of the creation of an organisation known in the modern definition as a joint-stock bank in On Revenues written circa 353 BCE[8][73][74][75]
The city-states of Greece after the Persian Wars produced a government and culture sufficiently organized for the birth of a private citizenship and therefore an embryonic capitalist society, allowing for the separation of wealth from exclusive state ownership to the possibility of ownership by the individual
According to one source (Dandamaev et al), trapezites were the first to trade using money, during the 5th century BCE, as opposed to earlier trade which occurred using forms of pre-money
Specific locus of funds[edit]
The earliest forms of storage utilized were the rudimentary money-boxes (θΗΣΑΥΡΌΣ[79]) which were made similar in form to the construction of a bee-hive, and were found for example in the Mycenae tombs of 1550–1500 BC.[80][81][82][83][84][85][86]
Private and civic entities within ancient Grecian society, especially Greek temples, performed financial transactions. (Gilbart p. 3) The temples were the places where treasure was deposited for safe-keeping. The three temples thought the most important were the temple to Artemis in Ephesus, and temple of Hera within Samos, and within Delphi, the temple to Apollo. These consisted of deposits, currency exchange, validation of coinage, and loans.[8][8][74][87][88]
The first treasury to the Apollonian temple was built before the end of the 7th century BC. A treasury of the temple was constructed by the city of Siphnos during the 6th century.[89][90][91]
Before the destruction by Persians during the 480 invasion, the Athenian Acropolis temple dedicated to Athena stored money; Pericles rebuilt a depository afterward contained within the Parthenon.[92]
During the reign of the Ptolemies, state depositories replaced temples as the location of security-deposits. Records exist to show this having occurred by the end of the reign of Ptolemy I (305–284).[93][94][95][96]
As the need for new buildings to house operations increased, construction of these places within the cities began around the courtyards of the agora (markets).[97]
Geographical locus of banking activities[edit]
Athens received the Delian leagues‘ treasury during 454.[98]
During the late 3rd and 2nd century BC, the Aegean island of Delos, became a prominent banking center.[99] During the 2nd century, there were for certain three banks and one temple depository within the city.[100]
Thirty five Hellenistic cities included private banks during the 2nd century (Roberts – p. 130).[100]
Of the settlements of the Greco-Roman world of the 1st century AD, three were of pronounced wealth and centres of banking, Athens, Corinth and Patras.[101][102][103][104][105]
Loans
Many loans are recorded in writings from the classical age, although a very small proportion were provided by banks. Provision of these were likely an occurrence of Athens, with loans known to have been provided at some time at an annual interest of 12%. Within the boundaries of Athens, bankers loans are recorded as having been issued on eleven occasions altogether (Bogaert 1968).
Banks sometimes made loans available confidentially, which is, they provided funds without being publicly and openly known to have done so, in addition also, to act as intermediaries for persons to loan their own monies without this being known to others. This intermediation per se was known as dia tes trapazēs
A loan was made by a Temple of Athens to the state during 433–427 BCE