Chapter 01
Introductory
Presented by Sheza Aksar
Tehreem Tahir
and Abeer Arif
Evolution of Banking
• Some authors opine that Bank is derived from the word “bancus” or
“banque” which mean a bench.
• Some authors hold the opinion that the word “Bank” is derived from the
German word “Bauk” which means joint stock fund
• Later on when German occupied major part of Italy, the word “Bauk” was
Italianized into “Bank”.
Early Growth
• Sumerians were the first who carried on some such activities around 3400
BC which are considered as ‘Banking activities’.
• Babylonians made great advancements in the areas of credit, specially in
agriculture credit.
• King Hammurabi got his code inscribed on block of diorite about 8 feet
tall, containing about 150 paragraphs which deals with nearly all aspects
of deposits, and loans, interest, pledges, guarantees, natural accidents,
loss, theft etc.
Greek’s Era
• The business of exchanging money and making remittances between
various cities was carried out under the Greek system.
• After some time, Aristotle dictum that “Charging of interest was un-
natural and immoral” became very popular.
• In the following periods, growing necessity forced the acceptance of the
principle of interest in lending and borrowing.
Earliest currency coins in the world
• History records that Gyges (Croesus), King of Lydia, Casted electrum (a
natural alloy of gold and silver) ingots of identical shape and uniform
weight with a triple emblem engraved on it as an official guarantee of
value in 687B.C.
• They are regarded as the earliest currency coins in the world.
The Romans
• The romans brought some drastic changes in the banking procedures and
practices established by the Greeks earlier.
• They regulated the conduct of private banks.
• Because the banking business was mostly done by Individuals.
• The ultimate fall of roman empire and subsequent effects completely
destroyed the established tradition and practices of banking and finance by
5th centaury AD.
Bank of Venice
• The cities of Venice, Florence and Genoa became the Centre of trade and
commerce.
• The earliest known public bank is said to be the Bank of Venice which
was established in 1157A.D.
• Soon Venice and Genoa became the most important money market of the
time; and banking, through different from its present form, flourished.
Public Banks
• In 1401 a German public banks was formed comprising the operations of
discounting, deposits and transferring of money.
• In 1407 some more public banks were formed in Venice, Milan,
Amsterdam, Hamburg, and Nuremberg.
• In 1587 a state bank under the name of Banco di Rialto was formed in
Genoa which was not run by private indivuals.
Modern Banking
• Banks have been around since the first currency was formed.
• In the early days of ancient empires, temples were considered to be safest
place to keep valuable commodities.
The Goldsmith
• He had take special precautions against theft of gold and jewellery.
• The goldsmith started charging something for taking care of money and
valuables.
• The goldsmith receipt became like cheques as a medium of exchange and
a means of payment.
The Moneylenders
• Goldsmiths started the advancing the coins on loans by charging the
interest.
• He became q banker who started performing the two functions of modern
banking, that of accepting deposits and advancing loans.
