Banks are important. There is simply no arguing about that. Even if you hate bankers and their guts, you would have to agree that without them and their institutions that the economy would ground to a halt. Banks are the instruments through which the financial transactions of a countries, companies, businesses and individuals are done. Money passes through banks on a regular flow and they make sure that ventures and projects have enough funds.
A Short History of Banking
There’s no doubt that banks play a very crucial role today, but it would help to know how they got their start, and how it developed. That can come in handy when you want to figure how the banking system really works.
The earliest direct evidence that the idea for a bank was put into use by a civilization can be found in the ancient cities of what is now the Middle East. In the Babylonian empire there were merchants who gave loans to farmers and other merchants. Sometimes these loans can come in the form of grains. There is also some evidence that some kind of lending was practiced in ancient China and India. This is highly likely since the civilizations in those places reached a high degree of refinement.
Lending in Ancient Greece and Rome
The next stop in the development of Banking was in ancient Greece and in the Roman Empire. Lenders in those civilizations started the practice of doing their business in the temple. Aside from giving out loans they were able to change money and they also introduced the idea of taking in deposits.
The City States of Italy
At the time of the Renaissance the city states in what is now Italy held great power. Their merchants were some of the most daring and the most venturesome in the world. Some of these merchants even reached China, which in those times meant years of travelling. In a rapidly expanding commerce of the world, the merchants of Italy saw the needed for a banking system. They accepted deposits and they also gave out loans. The power of these banks was one of the reasons why the Italian cities of that period were some of the most influential in the world back then.
The Period of Colonization
The next stop in the development in the development of banking is Netherlands and in some ways England as well, at that time, the European countries were scrambling to find colonies. Some form of system was needed that would help the governments to finance these /np operations and so banks were formed. These banks established some of the modern standards that we now have in the banking system.
The Modern Period
Perhaps the start of the 20th Century was one of the periods when most of the changes in the banking system took place. Modern means of communication and travel have opened up new doors of possibility in baking that were not even explored in the past. Now we have conveniences in banking that would have only existed in the dreams of ancient bankers.