A short history of banking

Although organized banking is a relatively new phenomenon that has only developed over the last few centuries, banking is as old as civilization itself. The earliest banks go back to biblical days, about 4,000 years ago. We also know from early records that the ancient civilizations of Rome, Greece, Babylon, China and Egypt all made use of banks.

It was during the heyday of the Babylonian Empire from 1728 - 1686 BC that the Code of Hammurabi, named after the sixth and the most successful king of Babylon, was devised and written. Details of the country’s laws and financial regulations were carved on stone tablets, including details of how loans, interest and guarantees had to operate according to a set of standardized procedures.

Both Ancient Greeks and later the Romans developed their own domestic banking systems based on the use of a universal currency. But as countries’ borders were crossed and travelling throughout the globe became more common, a need for international banking arose. In those days moneylenders made loans to people. In Greece and Rome banks made loans and accepted deposits. They also changed money.

By having a resolute banking system Romans could trade with foreigners with confidence. The Greeks had successfully operated credit-based banking system with the Egyptians several centuries earlier. Later Romans crucially introduced legislation to regulate financial institutions.

Their successful and respected international banking model existed in the Mediterranean until the fall of the Roman Empire in the sixth century after which Europe entered a dark period of political instability and mistrust. As a result, banking could not operate in the same formalized way. However banking began to revive again in the 12th and 13th centuries in the Italian towns of Florence and Genoa. During the 16th century the westernized banking emerged and with it the false impression that banking itself was an entirely new concept. However, it developed from the same essential needs that drove first the Babylonians, Greeks and finally the Romans to establish their banking rules, regulations and standards and led to the formation of the London Royal Exchange in 1565; generally regarded as the formation of UK banking. It was from those renewed beginnings that standardized systems for deposits, loans and guarantees evolved and eventually were copied throughout the world.Over the past four centuries westernized banking principles have become firmly established across the globe and if King Hammurabi of ancient Babylon saw it, he wouldn’t recognize it now. Modern banks started with the Bank Charter Act of 1844. The Act split the Bank of England into two departments - a banking department and an issuing department. The Bank Charter Act also forbade new banks to issue bank notes. When banks merged they lost the right to issue bank notes. So gradually the Bank of England became the only bank in England that could issue notes. At the end of the 19th century and in the 20th century many banks merged and in the late 20th century banking was dominated by the 'big four', Barclays, Lloyds, Midland and National Westminster.

Notes: hayday – розквіт

Babylonian Empire – Вавилонська імперія

Code of Hammurabi – Кодекс Хаммурапі

to carve – вирізати; різьбити

money lenders – лихварі

to revive - відроджуватися

the fall of the Roman Empire – падіння Римської імперії

Mediterranean - Середземне море Bank Charter Law - закон, який дозволяє компанії, що займається банківською справою, вести бізнес, так як це робить банк

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