Wednesday, January 7, 2009

History of Banking

It is very difficult to state the complete historical background of banks or banking. It is not possible to learn when and how the banking system came into existence. Mankind has always been seeking security and protection. This need has led him to scientific and technological development on one hand, and banking development on the other.

The name bank derives from the Italian word banco which means "desk/bench". Man has always found himself in the pursuit of safety and convenience. If we go back to the history we will come to know that his persistent effort to achieve these two targets. In the days gone by when man started saving money he felt himself unsecured. First he buried his savings underground. But this practice did not last long for its shortcomings. Then, he resorted to deposit his savings with the strong and robust persons for safekeeping who hired armed guards on wages. These persons charged fee from depositors.

This practice turned into widely accepted business, which gave rise to the idea to lend the deposited money. The new scheme proved a blessing in disguise because it, then, attracted even more business and brought the trustee new dimensions of profit, and thus modern banking started.

The bank of Venice, established in 1157, is supposed to be the most ancient bank. The bank of England was established on 15th April, 1694. It was a turning point in the history of English Banking which led to the growth of modern banking.

Today the banks are the most important financial institutions which play a vital role throughout the world's economic system.

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