Banking System

If we traced back the history of banking system, it will goes back to 2000 BC in Assyria and Babylon where farmers were given ‘grain loan’ and a safe place to deposit or keep their extra grain. With the discovery of precious metal such as silver and gold, ancient people actually used these precious metal as the de facto ex change value when they traded among themselves. Some of the ancient civilisation include but not limited to the Roman, Greek, Egyptian, Chinese , Indian and Muslim. Usually house of worships or palaces were used as the repository for the ancient people to keep their extra wealth. These repository also provide ‘loan’ such as grain seed for farmers to plant and usually need to repay back with interest after the subsequent harvest season. Mediaeval Europe also saw the proliferation of banking system or banks. Country like Italy, in her rich cities such as Genoa, Venice and Florence, seen wealthy merchants set up ‘banks’ to facilitate its vibrant trading activities. Such bank included Medici Bank, established by Giovani Medici in 1397. The oldest bank in Italy, Monte Dei Paschi de Siena still operating with headquarter in Siena, Italy and it was formed way back in 1472.

The emergence of modern banking system can be traced back to the 17th century of England. This is including what we always been told ie ‘fractional banking system’. During the 17th century, wealthy merchants will keep their precious metal such as gold and silver with their locksmith which having vaults for these metal. The locksmiths will issue receipts certifying the quantity and purity of the metals. The receipts cannot be assigned, meaning the actual owner can only redeem the metals. As time goes by, the locksmiths allowed the receipts to be redeemed by third part as when the merchants trade and the receipts formed part of the payment.