Marchant, 1 Phillips 360) it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. Thus by the 19th century, we find in ordinary cases of deposits of money with banking corporations, or bankers, the transaction amounts to a mere loan or mutuum, and the bank is to restore, not the same money, but an equivalent sum, whenever it is demanded Īnd money, when paid into a bank, ceases altogether to be the money of the principal (see Parker v. Gradually the goldsmiths began to lend money out on behalf of the depositor, and promissory notes (which evolved into banknotes) were issued for money deposited as a loan to the goldsmith. In exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the quantity and purity of the metal they held as a bailee these receipts could not be assigned, only the original depositor could collect the stored goods. Merchants started to store their gold with the goldsmiths of London, who possessed private vaults, and who charged a fee for that service. Early modern Sealing of the Bank of England Charter (1694), by Lady Jane Lindsay, 1905.įractional reserve banking and the issue of banknotes emerged in the 17th and 18th centuries. The Republic of Genoa founded the earliest-known state deposit bank, and Banco di San Giorgio (Bank of St. Giovanni di Bicci de' Medici set up one of the most famous Italian banks, the Medici Bank, in 1397. The Bardi and Peruzzi families dominated banking in 14th-century Florence, establishing branches in many other parts of Europe. The present era of banking can be traced to medieval and early Renaissance Italy, to the rich cities in the centre and north like Florence, Lucca, Siena, Venice and Genoa. Main article: History of banking This 15th-century painting depicts money-dealers at a banca (bench) during the Cleansing of the Temple.īanking as an archaic activity (or quasi-banking ) is thought to have begun as early as the end of the 4th millennium BCE, to the 3rd millennia BCE. The oldest existing retail bank is Banca Monte dei Paschi di Siena (founded in 1472), while the oldest existing merchant bank is Berenberg Bank (founded in 1590). In the history of banking, a number of banking dynasties – notably, the Medicis, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds – have played a central role over many centuries. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, the Basel Accords.īanking in its modern sense evolved in the fourteenth century in the prosperous cities of Renaissance Italy but in many ways functioned as a continuation of ideas and concepts of credit and lending that had their roots in the ancient world. Most countries have institutionalized a system known as fractional-reserve banking, under which banks hold liquid assets equal to only a portion of their current liabilities. Whereas banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Lending activities can be directly performed by the bank or indirectly through capital markets. A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans.
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