EARLY HISTORY OF

BANKING
 THE WORD “BANK”

 Derives from two words

– Banque (French) = chest (safekeeping)
– Banca (Italian) = Bench (Transactions)
 First (non-modern) Bank recorded in town
of Ur in Chaldea – a temple where wealth
was stored (safekeeping function only)
 Before we move further let us see the
historical perspective
 The Birth of Money Lending

 FirstlyJews, who traveled around Europe

in the Middle Ages, began to specialize in
money-lending and other practices which
were forbidden in the Christians societies.
 They exploited Christian’s community
who finally realized that they being loose
their blood due to money lenders on
interest.
 Finally King Edward expelled Jews
from England in 1290.
 Oliver Cromwell allowed Jews back
when the moral authority of the
Church was damaged and the King
was beheaded in 1649.
 The Birth of Safe Keeping of
Coins and valuable started
and
 Secondly, gold coins, jewels and other
valuables were deposited with people
who held strongboxes
These facilities were usually available with
goldsmiths and money-lenders who were in
actual goldsmith and custodians who also
act as lenders.
These goldsmiths secretly and without
knowing they charge people for looking
after their deposits and then use those
deposits to make lending to needy people
on interest.
With the passage of time they became rich
and powerful in the society.
 Metal Money

 Gold coins that were in circulation were

heavy and uncomfortable to carry all
around.
 Money-lenders started issue credit notes
to depositors who began to trade these
notes between themselves in commercial
transactions.
 This give birth to Paper money and with
the passage of time paper took over on
A new form of interest developed when
money-lenders realized benefits from
such lending practice.
 It became apparent going one step
further by using depositors money for
financial gains at no cost to themselves.
 They invented money from absolutely
nothing.
 Started issuing credit notes with nothing
to back them up and put them into
circulation as interest-bearing debts.
 They calculated if they safely issue notes up to
ten times more than the gold deposits they held,
because depositors would never ask for their
deposits back all at the same time.
 Principle of modern banking was thus
established with the invention of money from
nothing and put it into circulation as "running
cash notes".
 These notes become payment as real wealth
that is produced from effort.
 The money lenders sit back and become
unbelievably wealthy and powerful class of the
society and regarded as the hidden rulers of
nations
 In England this system was officially
sanctioned in 1694.
 The William of Orange overthrew
legitimate King James II with financial
backing and powerful Jewish financiers in
Amsterdam.
 He gave sovereignty of England to a group
of financiers with a Charter allowing them
to call themselves the Bank of England, a
Charter for issuing nation’s money.
 Within minutes of signing the new Bank
officials were discussing the form of their
"running cash notes." The same system was
adopted in every country by a process of
Masonic revolution and management.
 Due to corrupt monetary practices by the group
Bank of England nationalize in 1946 and
control passed from a group of private
individuals to the British Government .
 This was the introduction of the Central Bank
as the Monitory Control Authority of state.
 HOW CENTRAL BANKS WORKED

 Stock in bank was bought with either coin or

“bills of exchequer” (I.e. government bonds)
 All proceeds given to State in return for new
interest-bearing bonds
 Central Bank is given right to issue banknotes
up to full extent of its capital – the banknotes
could be exchanged for customer promissory
notes (banknotes served as a currency)
 Note: double-interest on bonds and promissory
notes
 EARLY HISTORY
 National Banks less popular by 1820s,
number of State Banks increased from 88
to 246 from 1811 to 1816
 1837-38 “Free-Banking Acts” passed in
Conn, Michigan, New York
 “Wildcat Banks” appeared in the West
 By 1861, 1600 State Banks
 1860 need to finance Civil War led to a
revival of National Banks
 EARLY BANKING - EUROPE

 Banking evolved from the needs of

commerce
 Trade: market of luxury goods “make
known” to Europe
 Italy – great location and accepted the
trade merchants
 Venice – oldest and most important Italian
seaport
 First institution resembling a modern bank
appeared in Venice in 1135 A.D. “a
Bankhouse”
 Banks appeared in inland cities:
– Milan: Military armor
– Lucca: Silk
– Florence: Cloth
 By 1250 there were 80 Bankhouse in
Florence alone
 Banking was safe: (1) land/property used
as collateral on loans (2) Pope
excommunicated defaulters
 Italians pioneering for 4Paper used in
trade. :
–Importer
–Exporter
–Import Bank
–Export Bank
–(like a Banker’s Acceptance today)
–Note: Import Bank provides a service
(fee income), export bank provides loan
(interest income)
 All in all, Italy became banking center
because:
–Location
–Accepted merchants
–Expertise
–innovative
 Italians expanded Banking to Northern
Europe particularly in manufacturing
centers (e.g. monasteries in Yorkshire –
wool)
 By 16th Century trade centered at (1)
Bourse in Antwerp and (2) Royal
Exchange on Lombard Street in London
 Goldsmiths emerged as new bankers in
Europe (expertise in coin and “bills of
exchange” (personal promissory notes)
 EARLY HISTORY

 FIRSTS (cont.)

 First payment of interest on deposits in

1804, Farmers Bank of Maryland

 First term loan made in 1934 by First

National Bank of Boston to American
Metals Climax Corporation (AMAX)
 THE NEXT STAGE
 The next stage of development for
international finance is to get rid of
cash altogether.
 Then the token accountability of the
bankers will disappear along with the
cash.
 Their intention is that everyone will
have to use credit/debit cards for
every type of commercial
transaction.
 Electronic technology, when used
this way, and when it is not merely
widespread but compulsory gave
them complete control of every man,
woman and child in the world.
 If you cannot buy or sell food, petrol,
clothes without a card you are
completely at their mercy.
 If you lose the card or it doesn’t work
for some reason you will suffer until
issued with a replacement
 Who benefits from such a
scheme?
 The politicians or the bankers?
 The Bank of England is in real, a hidden
government of UK.
 The Government and the politicians are
merely puppets controlled by the Bank or
more accurately, the international
banking families.
 No politicians dare to stand against these
hidden and unelected rulers of the world.
 They are so powerful that they could
paralyze the entire financial market of
 The Bank

 A bank is a place or institution for transacting

business in which money is taken from its
customers on current accounts repayable to its
customers' thorough Cheque and at the same
time collects Cheque for its customers'
accounts.
 Banks may also issue bank notes, and lend
money to customers on current account (called
overdraft), accept term deposits and make term
loans and provide other financial services.
Banks that issue notes are called Banks of Issue
usually the Central Bank of the country is the
 Commercial bank

 Commercial bank is a type of financial

intermediary and a type of bank.
 It raises funds by collecting deposits from
businesses and consumers via checkable
deposits, savings deposits, and time (or
term) deposits.
 It makes loans to businesses and
consumers. It also buys corporate bonds
and government bonds. Its primary
liabilities are deposits and primary assets
 This is what people normally call a "bank".
The term "commercial" was used to
distinguish it from an investment bank.
Since the two types of banks no longer
have to be separate companies, some
have used the term "commercial bank" to
refer to banks which focus mainly on
companies. In some English-speaking
countries outside North America, the term
"trading bank" was and is used to denote a
commercial bank.