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Usury, while explaining "how the discornmodities of it may be best avoided and the commodities retained," refers to a " bank or common stock as an expression with which his readers would be See also:

FAMILIAR (through the Fr. familier, from Lat. familiaris, of or belonging to the familia, family)

familiar. , Originally connected with the See also:

IDEA (Gr. Ibia, connected with i&eiv, to see; cf. Lat. species from specere, to look at)

idea of a See also:

MOUND

mound or bank of earth—hence with that of a See also:

monk, an See also:

ITALIAN

Italian word describing a heap—the See also:

TERM

term has been gradually applied to several classes of institutions established' for the See also:

general purpose of dealing with money. The manner in which a bank prospers is explained by See also:

David See also:

RICARDO, DAVID (1772-1823)

Ricardo, in his Proposals for an Economical and Secure Currency, in apassage where he tells us that a bank would never Banking be established if it obtained no other profits but those as a business. derived from the employment of its own See also:

capital. The rea? See also:

ADVANTAGE

advantage of a bank to the community it serves commences only when it employs the capital of others. The money which a bank controls in the See also:

FORM (Lat. forma)

form of the deposits which it receives and sometimes of the notes which it issues, is loaned out by it again to those who See also:

DESIRE

desire to See also:

BORROW, GEORGE HENRY (18o3-1881)

borrow and can show that they may be trusted. A bank, in See also:

order to carry on business successfully, must possess a sufficient capital of its own to give it the See also:

STANDING

standing which will enable it to collect capital belonging to others. But this it does not hoard. It only holds the funds with which it is entrusted till it can use them, and the use is found in the advances that it makes. Some of the deposits merely See also:

lie with the bank till the customer draws what he requires for his See also:

ORDINARY (med. Lat. ordinarius, Fr. ordinaire)

ordinary everyday wants. Some, the greater See also:

PART

part by far, of the deposits enable the bank to make advances to men who employ the funds with which they are entrusted in reproductive See also:

INDUSTRY (Lat. industria, from indu-, a form of the pre, position in, and either stare, to stand, or struere, to pile up)

industry, that is to say, in a manner which not only brings back a greater value than the amount originally See also:

LENT (0. Eng. lenclen, " spring," M. Eng. lenten, lente, lent; cf. Dut. lente, Ger. Lenz, " spring," 0. H. Ger. lenzin, lengizin, lenzo, probably from the same root as " long " and referring to " the lengthening days ")

lent to them, but assists the business development of the See also:

COUNTRY (from the Mid. Eng. contre or contrie, and O. Fr. cuntree; Late Lat. contrata, showing the derivation from contra, opposite, over against, thus the tract of land which fronts the sight, cf. Ger. Gegend, neighbourhood)

country by setting on See also:

FOOT

foot and maintaining enterprises of a profitable description.

It is possible that some part may be employed in loans required through extravagance on the part of the borrower, but these can only be a small proportion of the whole, as it is only through reproductive industry that the capital advanced by a -banker can really be replaced. A See also:

LOAN (adapted from the Scandinavian form of a word common to Teutonic languages, cf. Swed. Mn, Icel. lan, Dut. leen; the O.E. laen appears in " lend," the ultimate source is seen in the root of Gr. Xeiaecv and Lat. linquere, to leave)

loan sometimes, it is true, is repaid from the proceeds of the See also:

sale of a See also:

SECURITY (Lat. securus, free from care, safe)

security, but this only means a See also:

TRANSFER (from Lat. transferre, to bear across, carry over)

transfer of capital from one See also:

hand to another; money that is not transferred in this way must be made by its owner. Granted that the security is See also:

COMPLETE

complete, there is only one See also:

ABSOLUTE (Lat. absolvere, to loose, set free)

absolute See also:

RULE

rule as to loans if a bank desires to conduct its business on safe lines, that the advance should not be of fixed but of floating capital. Nothing seems simpler than such a business, but no business requires closer See also:

ATTENTION (from Lat. ad-tendo, await, expect; the condition of being " stretched " or " tense ")

attention or more strong sense and prudence in its conduct. In other ways also, besides making loans, a well-conducted bank is of much service to the business prosperity of a country, as for example by providing facilities for the ready transmission of money from those who owe money to those to whom it is due. This is particularly obvious when the debtor lives in one See also:

TOWN

town or See also:

DISTRICT

district and the creditor in another at a considerable distance, but the convenience is very See also:

GREAT

great under any circumstances. Where an easy method of transmission of See also:

CASH

cash does not exist, we become aware that a " See also:

RATE

rate of See also:

EXCHANGE

exchange" exists as truly between one See also:

PLACE (through Fr. from Lat. platea, street; Gr. IrAar6s, wide)

place and another in the same country as between two places in different countries. The assistance that banking gives to the See also:

INDUSTRIES

industries of a community, apart from these facilities, is See also:

CONSTANT, BENJAMIN (1845-1902)

constant and most valuable. With these preliminary remarks on some See also:

main features of the business, we may pass on to a See also:

SKETCH (directly adapted from Dutch schets, which was taken from Ital. schizzo, a rough draft, Lat. schedium, something hastily made, Gr. oxE&os, sudden, off-hand, axeb6v, near by; Ger. Skizze and Fr. esquisse are from the same source)

sketch of the See also:

HISTORY

history of See also:

MODERN

modern banking. Banks in See also:

EUROPE

Europe from the 16th See also:

CENTURY (from Lat. centuria, a division of a hundred men)

century on- wards may be divided into two classes, the one described as "exchange banks," the other as "banks of deposits." These last are banks which, besides receiving deposits, make loans, and thus See also:

ASSOCIATE (Lat. associates, from ad, to, and sociare to join)

associate themselves with the See also:

trade and general industries of a country. The exchange banks included in former years institutions like the Bank of See also:

HAMBURG

Hamburg and the Batik of See also:

Amsterdam. These were established to See also:

DEAL

deal with See also:

FOREIGN

foreign exchange and to facilitate trade with other countries.

The others-founded at very different dates—were established as, or See also:

early became, banks of See also:

DEPOSIT (Lat. depositurn, from deponere, to lay down, to put in the care of)

deposit, like the Bank of See also:

England, the Bank of See also:

Venice, the Bank of See also:

Sweden, the Bank of See also:

France, the Bank of See also:

Germany and others. Some reference to these will be made later. The exchange banks claim the first attention. Important as they were in their See also:

day, the See also:

period of their activity is now generally past, and the See also:

INTEREST

interest in their operations has become mainly See also:

HISTORICAL

historical. In one respect, and that a very important one, the business carried on by the exchange banks differed from banking as generally understood at the See also:

PRESENT

present See also:

time. No exchange bank had a capital of its own nor did it require any for the performance of the business. The object for which exchange banks were established was to turn the values with which they were entrusted into " current money," " bank money " as it was called, that is to say, into a currency which was accepted immediately by merchants without the See also:

NECESSITY (Lat. necessitas)

necessity of testing the value of the See also:

coin or the See also:

BULLION

bullion brought to them. The " value " they provided was equal to the " value " they received, the only difference being the amount of the small See also:

charge they made to their customers, who gained by dealing with them more than See also:

EQUIVALENT

equivalent advantages. See also:

SHORT, FRANCIS JOB (1857– )

Short notices of the Bank of Amsterdam, which was one of the most important, and of the Bank of Hamburg, which survived the longest, its existence not terminating till 1873, will suffice to explain the working of these institutions. The Amsterdamsche Wisselbank, or exchange bank, known later as the Bank of Amsterdam, was established by the See also:

ordinance of the See also:

CITY (through Fr. cite, from Lat. civitas)

city of Amsterdam of 31st See also:

JANUARY

January 1609. The increased See also:

commerce of See also:

Holland, which made Amsterdam a leading city in See also:

INTERNATIONAL, THE

international dealings, led to the See also:

ESTABLISHMENT (0. Fr. establissement, Fr. etablissement, late Norm. Fr. establishement, from O. Fr. establir, Fr. etablir, Lat. stabilire, to make stable)

establishment of this bank, to which any See also:

PERSON, OFFENCES AGAINST THE

person might bring money or bullion for deposit, and might withdraw at See also:

PLEASURE (through Fr. plaisir from Lat. placere, to please; Gr. rlbovii)

pleasure the money or the See also:

worth of the bullion. The ordinance which established the bank further required that all bills of 60o gulden (£5o), or upwards—this limit was, in 1643, lowered to 300 gulden (£25)—should be paid through the bank, or in other words, by the transfer of deposits or credits at the bank.

These transfers came afterwards to be known as " bank money." The charge for making the transfers was the See also:

SOLE (Solea)

sole source of income to the bank. The bank was established without any capital of its own, being understood to have actually in its vaults the whole amount of specie for which " bank money " was outstanding. This regulation was not, however, strictly observed. Loans were made at various See also:

DATES

dates to the Dutch See also:

East See also:

India See also:

COMPANY

Company. In 1795 a See also:

REPORT (O.Fr. report or raport, modern rapport, from O.Fr. reporter, mod. rap porter, Lat. reportare, to bring back, in poetical use only, of bringing back an account, news, &c.)

report was issued showing that the city of Amsterdam was largely indebted to the bank, which held as security the obligations of the states of Holland and See also:

West See also:

FRIESLAND, or VRIESLAND

Friesland. The See also:

DEBT (Lat. debitum, a thing owed)

debt was paid, but it was too See also:

LATE

late to revive the bank, and in 1820 " the establishment which for generations had held the leading place in See also:

EUROPEAN

European commerce ceased to exist." (See Chapters on the Theory and History of Banking, by See also:

Charles F. See also:

Dunbar, p. 105.) Similar banks had been established in See also:

MIDDELBURG

Middelburg,(See also:

March 28th, 1616), in Hamburg (1619) and in See also:

ROTTERDAM

Rotterdam (See also:

FEBRUARY

February 9th, 1635). Of these the Bank of Hamburg carried on much the largest business and survived the longest. It was not till the 15th of February 1873 that its existence was closed by the See also:

ACT (Lat. actus, actum)

act of the See also:

German See also:

PARLIAMENT (Anglo-Lat. parliamentum, Fr. parlement, from parler, to speak)

parliament which decreed that Germany should possess a See also:

gold See also:

standard, and thus removed those conditions of the See also:

LOCAL

local See also:

MEDIUM

medium of exchange—silver coins of very different See also:

INTRINSIC (through Fr. intrinsique, from Lat. intrinsecus, inwardly; inter, within, secus, following, from root of sequi, to follow)

intrinsic values—whose circulation had provided an ample See also:

field for the operations of the bank. The business of the Bank of Hamburg had been conducted in absolute accordance with the regulations under which it was founded. - The exchange banks were established to remedy the inconvenience to which merchants were subject through the uncertain value of the currency of other countries in reference to that of the city where the exchange bank carried on its business.

The following See also:

QUOTATION

quotation from Notes on Banking, written in 1873, explains the method of operation in Hamburg. " In this city, the most vigorous offshoot of the once powerful Hansa, the latest representative of the See also:

FREE

free commercial cities of See also:

MEDIEVAL

medieval Europe, Historical develop• See also:

MEAT

meat. 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, See also:

GENOA (anc. Genua, Ital. Genova, Fr. GPnes)

Genoa, Amsterdam and See also:

NUREMBERG (Ger. Nurnberg)

Nuremberg. The Bank of Hamburg is now the last survivor of these banks, whose business See also:

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 See also:

RANK (O.Fr. rant or rent, mod. rang, generally connected with the O.E. and O.H.G. bring, a ring)

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 See also:

MATTER

matter of See also:

PRIMARY

primary necessity. The invention of bank money, that is, of a money of See also:

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 See also:

WEIGHT

weight, intrinsic value, standard of purity of See also:

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 " See also:

Mark Banco " being merely the representative of an equal value of See also:

SILVER

silver. For the earliest example of a bank for the See also:

RECEIPT (M.E. receite, derived through Fr. from Lat. recepta, participle of recipere, to receive)

receipt of deposits carrying on a business on modern lines, we must turn, as in the See also:

case of the exchange banks; to a great commercial city of the See also:

MIDDLE

middle ages. Private banking in Venice began as an See also:

ADJUNCT (from Lat. ad, to, and jungere, to join)

adjunct of the business of the See also:

CAM (CAO), DIOGO (fl. 1480-1486)

cam psores or dealers in foreign moneys. " As early as 1270 it was deemed necessary to require them to give security to the See also:

government as the See also:

CONDITION (Lat. condicio, from condicere, to agree upon, arrange; not connected with conditio, from condere, conditum, to put together)

condition of carrying on their business, but it is not shown that they were then receiving deposits. In an act of the 24th of See also:

SEPTEMBER (Lat. septem, seven)

September 1318, however, entitled Bancherii scriptae dent plegiarias consulibus, the receipt of deposits by the campsores is recognized as an existing practice, and See also:

PROVISION (Lat. provisio)

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 See also:

LONDON

London.

Of the early banks in Europe, the bank in Venice, the Banco di Rialto, was established by the acts of the Venetian See also:

SENATE (Lat. senatus, from root sen-, as in senex, old; the root is the Sanskrit sana, cf. Gr. 'vos; the same element appears in senor, seigneur, seneschal)

senate of The first 1584 and 1587. This appears to have been the first public public bank in that city and in Europe. The senate bank In by the act of the 3rd of May 1619' established by the Europe. See also:

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 See also:

BEER

beer' 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 See also:

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 See also:

CHINA

China about A.D. Boo. The first bank See also:

note was issued by the Riksbank in 1658. An enqueete made by the See also:

French government in 1729 recognizes the priority of Sweden in this matter, and declares the bank note to be an admirable See also:

SWEDISH

Swedish invention, designed to facilitate commerce.

End of Article: BANKS AND BANKING

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