A Letter to My Parents

BANKING: Development and Growth

      There was meager historical evidence as to nature of banking operations before the 13th century. It was quite difficult to distinguish between commercial banks and other types of banks during the earlier period. It was believed that commercial banking evolved only in the later part of medieval times from the ancient practices of moneylending and moneychanging. In the case of central banking, it began to develop in Europe during the middle of 1600.

ANCIENT TIMES

      There were records of loans in the temples of Babylon as early as 2000 B.C. Temples then were considered sacred places under the special protection of the gods.
Companies of traders conducted banking activities which were related to buying and selling of goods. Banking was performed in Greece during the 4th century B.C. through temples, public bodies and private firms. Banking began to regain prominence in Europe several centuries later.

MEDIEVAL TIMES

      Records show that there were banking activities in Genoa and other Italian cities during the 12th century. Italian cities became the centers of warehouse trade, and they developed local banking systems. The most famous of these were those in Champagne, France. They had their own system of finance through ambulatory bankers. International financers were mostly concerned with the funding of the international wool trade, collection and transmission of papal revenues and extending loans to kings and princes.
Deposit banking again appeared in Medieval Europe. The legal doctrine of negotiability gradually developed from the 16th century to the 18th century.
The Fugger family was the greatest moneylender during the 16th century.

BEGINNING OF COMMERCIAL BANKING

      The bankers of the Mediterranean cities were the direct ancestors of modern commercial banking. It was only in 1587 that the Banco della Piazza di Rialto was founded in Venice.This is the first real public bank. The Bank of...