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BANKS AND BANKING

there still remains a representative of those older banks which were once of the highest importance in commercial affairs. Similar institutions greatly aided the prosperity of Venice, Genoa, Amsterdam and Nuremberg. The Bank of Hamburg is now the last survivor of these banks, whose business lay in the assistance of commerce, not by loans, but by the local manufacture, so to speak, of an international coinage. In a city of the highest rank of commercial activity, but greatly circumscribed in territory, continually receiving payments for merchandise in the coin of other countries, a common standard of value was a matter of primary necessity. The invention of bank money, that is, of a money of account which could be transferred at pleasure from one holder to another, enabled the trade of the place to be carried on without any of those hindrances to business which must have followed on the delay and expense attendant on the verification of various coins differing from each other in weight, intrinsic value, standard of purity of metal, in every point in fact in which coins can differ from each other. By supplying a currency of universal acceptation the Bank of Hamburg greatly contributed to the prosperity of that city." The regulations being strictly carried out, the currency was purely metallic; the "Mark Banco" being merely the representative of an equal value of silver.

For the earliest example of a bank for the receipt of deposits carrying on a business on modern lines, we must turn, as in the case of the exchange banks, to a great commercial city of the middle ages. Private banking in Venice began as an adjunct of the business of the campsores or dealers in foreign moneys. "As early as 1270 it was deemed necessary to require them to give security to the government as the condition of carrying on their business, but it is not shown that they were then receiving deposits. In an act of the 24th of September 1318, however, entitled Bancherii scriptae dent plegiarias consulibus, the receipt of deposits by the campsores is recognized as an existing practice, and provision is made for better security for the depositors." From this act it becomes clear that between 1270 and 1318 the money-changers of Venice were becoming bankers, just as the same class of men became in Amsterdam a couple of centuries later, and as later still the goldsmiths in London.

Of the early banks in Europe, the bank in Venice, the Banco The first public bank in Europe. di Rialto, was established by the acts of the Venetian senate of 1584 and 1587. This appears to have been the first public bank in that city and in Europe. The senate by the act of the 3rd of May 1619[1] established by the side of the Banco di Rialto a second public bank known as the Banco Giro, or Banco del Giro, which ultimately became the only public bank of the city and was for generations famous throughout Europe as the Bank of Venice. Earlier than this the campsores or dealers in foreign moneys had carried on the business. The Bank of Venice (Banco del Giro) appears to have been called into existence by the natural developments of trade, but some banks have been established by governments and have been of great service to the development of the countries in which they have carried on their business. Of these, the Bank of Sweden (the Riksbank), established in 1656, is the earliest. This bank still exists and has always been the state bank of Sweden. It was founded by a Swede named Palmstruck, who also invented the use of the bank note—perhaps adapted for use in Europe is the better expression to employ, as notes were current in China about A.D. 800. The first bank note was issued by the Riksbank in 1658. An enquête made by the French government in 1729 recognizes the priority of Sweden in this matter, and declares the bank note to be an admirable Swedish invention, designed to facilitate commerce.

European Countries

United Kingdom.—English banking may be traced back to the dealings in money carried on by the goldsmiths of London and thus certainly to the 16th century; but it has been so greatly influenced by the working of the Bank of England and by the Foundation of the Bank of England. acts of parliament connected with that institution, that a reference to this bank's foundation and development must precede any attempt at a detailed history of banking in the United Kingdom. The Bank of England was founded in 1694.[2] As in the case of some of the earlier continental banks, a loan to the government was the origin of its establishment. The loan, which was £1,200,000, was subscribed in little more than ten days, between Thursday, 21st June, and noon of Monday, 2nd July 1694. On Tuesday, 10th July, the subscribers appointed Sir John Houblon the governor, and Michael Godfrey (who was killed during the siege of Namur on the 17th of July 1695) deputy-governor. Michael Godfrey wrote a pamphlet explaining the purposes for which the bank was established and the use it would be to the country. The pamphlet supplies some curious illustrations of the dangers which some persons had imagined might arise from the establishment of the bank and its connexion with William III., deprecating the fear "lest it should hereafter joyn with the prince to make him absolute and so render parliaments useless."

The governor and the deputy-governor, having thus been appointed, the first twenty-four directors were elected on Wednesday, 11th July 1694. Two of them were brothers of the governor, Sir John Houblon. They were descended from James Houblon, a Flemish refugee who had escaped from the persecution of Alva. All the directors were men of high mercantile standing. The business of the bank was first carried on in the Mercers' chapel. It continued there till the 28th of September, when they moved to Grocers' Hall. They were tenants of the Grocers' Hall till 1732. The first stone of the building now occupied by the bank was laid on the 1st of August 1732. The bank has remained on the same site ever since. The structure occupied the space previously covered by the house and gardens of Sir John Houblon, the first governor, which had been bought for the purpose. Between 1764 and 1788 the wings were erected. In 1780 the directors, alarmed at the dangerous facilities which the adjacent church of St Christopher le Stocks might give to a mob, obtained parliamentary powers and acquired the fabric, on the site of which much of the present building stands. The structure was developed to its present form about the commencement of the 19th century.

The bank commenced business with fifty-four assistants, the salaries of whom amounted to £4350. The total number employed in 1847 was upwards of nine hundred and their salaries exceeded £210,000. Mr Thomson Hankey stated that in 1867 upwards of one thousand persons were employed, and the salaries and wages amounted to nearly £260,000, besides pensions to superannuated clerks of about £20,000 more. The number of persons of all classes employed in 1906 (head office and eleven branches) was about 1400.

Originally established to advance the government a loan of £1,200,000, the management of the British national debt has been confided to the Bank of England from the date of its foundation, and it has remained the banker of the government ever since. The interest on the stock in which the debt is inscribed has always been paid by the bank, originally half-yearly, now quarterly, and the registration of all transfers of the stock itself is carried on by the bank, which assumes the responsibility of the correctness of these transfers. The dignity which the position of banker to the government gives; the monopoly granted to it of being the only joint-stock bank allowed to exist in England and Wales till 1826, while the liability of its shareholders was limited to the amount of their holdings, an advantage which alone of English banks it possessed till 1862; the privilege of issuing notes which since 1833 have been legal tender in England and Wales everywhere except at the bank itself; the fact that it is the banker of the other banks of the country and for many years had the control of far larger deposits than any one of them individually—all these privileges gave it early a pre-eminence which it still maintains, though more than one competitor now holds larger

  1. A translation of the act of the 3rd of May 1619 may be found in the appendix to the Quarterly Journal of Economics (Boston, U.S.A.) for April 1892. These documents present a distinct picture of banking in its true sense.
  2. The clearest account of its early (1825 is found in Thorold Rogers' History of the First Nine Years of the Bank of England.