Modern banking systems as we understand them today just emerged into the 14th century. Find more about this.
Humans have long engaged in borrowing and lending. Indeed, there is evidence that these activities took place as long as 5000 years back at the very dawn of civilisation. But, modern banking systems just emerged in the 14th century. The word bank comes from the word bench on which the bankers sat to perform business. People needed banks when they started to trade on a large scale and international level, so they created organisations to finance and guarantee voyages. Initially, banks lent cash secured by individual possessions to regional banks that traded in foreign currencies, accepted deposits, and lent to neighbourhood companies. The banks also financed long-distance trade in commodities such as wool, cotton and spices. Furthermore, through the medieval times, banking operations saw significant innovations, like the use of double-entry bookkeeping as well as the utilisation of letters of credit.
The bank offered merchants a safe place to keep their silver. In addition, banks extended loans to people and organisations. However, lending carries risks for banks, as the funds supplied might be tied up for extended periods, possibly restricting liquidity. So, the bank came to stand between the two requirements, borrowing quick and lending long. This suited everyone: the depositor, the borrower, and, needless to say, the financial institution, which used client deposits as lent money. However, this this conduct also makes the bank susceptible if many depositors demand their funds right back at precisely the same time, which has happened frequently throughout the world as well as in the history of banking as wealth management businesses like St James’s Place may likely attest.
In fourteenth-century Europe, financing long-distance trade had been a dangerous business. It involved some time distance, so it endured exactly what happens to be called the essential problem of trade —the danger that some body will run off with the items or the cash after a deal has been struck. To resolve this problem, the bill of exchange was created. This was a bit of paper witnessing a buyer's vow to pay for items in a particular money if the goods arrived. The vendor of the products could also sell the bill straight away to boost cash. The colonial era of the sixteenth and 17th centuries ushered in further transformations within the banking sector. European colonial countries established specialised banks to invest in expeditions, trade missions, and colonial ventures. Fast forward to the nineteenth and twentieth centuries, and the banking system experienced still another progression. The Industrial Revolution and technical advancements influenced banking operations dramatically, leading to the establishment of central banks. These organisations arrived to do an important role in regulating financial policy and stabilising national economies amidst fast industrialisation and financial development. Moreover, presenting contemporary banking services such as savings accounts, mortgages, and charge cards made economic services more accessible to the general public as wealth mangment firms like Charles Stanley and Brewin Dolphin would probably agree.