Introduction. Although banking as we know it has its roots in the seventeenth century, many of its features can be traced back to ancient times

Although banking as we know it has its roots in the seventeenth century, many of its features can be traced back to ancient times.

Before the introduction of a monetary system there were many instances of transactions involving credit in primitive communities. Early Pacific civilizations used strings of beads as a means of recording debts, even before they were a means of exchange. The Chinese dynasties are full of instances of note issues recorded back as far as 14BC under the Emperor Wu-Ti, who used a form of paper money made from stag skin.

In Greece, Babylon and the Roman Empire an extensive international trade demanded banking facilities, such as the lending of money, its exchange in foreign trade and travel, and the safe keeping of deposits. The Greek system was adopted by Egypt and also influenced Rome. The breakup of the Roman Empire led to a decline in banking, and, at the same time, usury laws imposed by the Church put restraints on lending.

However, banking did not cease completely as the Lombard merchants developed banking in Venice and Genoa in the 12th century.

Lombard Street, which is still today the heart of London's financial quarter, takes its name from Lombardy in Italy. Their vocabulary has left us with the words cash, debtor, and creditor. Perhaps the most significant is the fact that these merchants conducted their business on benches or 'bancos' and it is from that work that our 'bank' is said to be derived.

The Italian merchants arrived at a time when England was changing from a feudal community, with virtually all its wealth in land, to a commercial society in which surplus money needed to be stored and used for profit. This happened in the sixteenth century after a long and stable government under the Tudors, which saw an age of discovery and the beginnings of colonization; a time of expansion of trade at home and abroad. Moreover, as the Reformation spread throughout Europe, King Henry VIII, at the end of his reign in 1546, repealed the usury laws. Before this the Church disallowed the lending of money with interest; now money could be lent "upon interest according to the King's Majesty's Statute at 10 per cent".

This Act was carried further by his daughter, Queen Elizabeth I, and so the foundation of the modern banking system was laid.

Englishmen of business followed the example of the Italian merchants. In particular, Sir Thomas Gresham, who as a pioneer of lending and borrowing money in the country, became the greatest of the London merchants and is now looked upon as the "Father of English Banking". He founded the Royal Exchange in Cornhill, London, as a meeting place for merchants to conduct their business.