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Final Project

Final Project

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Published by Mohd Anwar Khan

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Published by: Mohd Anwar Khan on May 01, 2012
Copyright:Attribution Non-commercial


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Earliest forms of banking
history of banking
is closely related to the history of money but banking transactions probably predate the invention of money. Deposits initially consistedof grain and later other goods including cattle, agricultural implements, andeventually precious metals such as gold,in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they wereconstantly attended and well built. As sacred places, temples presented an extradeterrent to would-be thieves.
There are records of  loans from the 2nd century BC in Babylon that were made by temple priests/monks to merchants. By the time of  Hammurabi's Code,dating to ca. 1760 BCE, banking was well enough developed to justify laws governingbanking operations.
In Egypt, from early times, grain had been used as a form of money in addition toprecious metals, and state granaries functioned as banks. When Egypt fell underthe rule of a Greek dynasty, the Ptolemies (332-30 BC), the numerous scatteredgovernment granaries were transformed into a network of grain banks, centralizedin Alexandria where the main accounts from all the state granary banks wererecorded. This banking network functioned as a trade credit system in whichpayments were effected by transfer from one account to another without moneypassing. In the late 3rd century BC, the barren Aegean island of Delos, known forits magnificent harbor and famous temple of Apollo, became a prominent bankingcenter. As in Egypt, cash transactions were replaced by real credit receipts andpayments were made based on simple instructions with accounts kept for eachclient.
In ancient India during the Maurya dynasty (321 to 185 BC), an instrument called adesha was in use, which was an order on a banker desiring him to pay the moneyof the note to a third person, which corresponds to the definition of a bill of exchange as we understand it today. During the Buddhist period, there wasconsiderable use of these instruments. Merchants in large towns gave letters of credit to one another.
In ancient China starting in the Qin Dynasty (221 to 206 BC) the Chinese currency  developed with the introduction of standardized coins which allowed the mucheasier trade across China and led to the development of letters of credit. Theseletters were issued by merchants that acted in ways that today we wouldunderstand as banks.
Ancient Greece holds further evidence of banking. Greek temples, as well asprivate and civic entities, conducted financial transactions such as loans, deposits,currency exchange, and validation of coinage.
 There is evidence too of credit,whereby in return for a payment from a client, a moneylender in one Greek portwould write a credit note for the client who could "cash" the note in another city,saving the client the danger of carting coinage with him on his journey. Pythius,  who operated as a merchant banker throughout Asia Minor at the beginning of the5th century BC, is the first individual banker of whom we have records. Many of the early bankers in Greek city-states were metics or foreign residents. Around 371 BC, Pasion,a slave, became the wealthiest and most famous Greek banker, gaining his freedom and Athenian citizenship in the process.
Gold coin produced by the Roman Imperial MintIn Ancient Rome moneylenders would set up their stalls in the middle of enclosed courtyards called
on a long bench called a
, from which the words
are derived. As a moneychanger, the merchant at the
did notso much invest money as merely convert the foreign currency into the only legaltender in Rome that of the Imperial Mint.
The Roman empire formalized the administrative aspect of banking and institutedgreater regulation of financial institutions and financial practices. Charging interest  on loans and paying interest on deposits became more highly developed andcompetitive. The development of Roman banks was limited, however, by theRoman preference for cash transactions. During the reign of the Roman emperorGallienus (260-268 AD), there was a temporary breakdown of the Roman bankingsystem after the banks rejected the flakes of copper produced by his mints. Withthe ascent of  Christianity,banking became subject to additional restrictions, as the charging of interest was seen as immoral. After the fall of Rome bankingtemporarily ended in Europe and was not revived until the time of thecrusades.
[edit] Religious restrictions on interest
Most early religious systems in the ancient Near East,and the secular codes arising from them, did not forbid usury.These societies regarded inanimate matter as alive, like plants, animals and people, and capable of reproducing itself. Hence if you lent 'food money', or monetary tokens of any kind, it was legitimate to chargeinterest.
 Food money in the shape of olives, dates, seeds or animals was lent outas early as c. 5000 BCE, if not earlier. Among the Mesopotamians, Hittites,  Phoenicians and Egyptians,interest was legal and often fixed by the state.
The Torah and later sections of the Hebrew Bible criticize interest-taking, but interpretations of the Biblical prohibition vary. One common understanding is thatJews are forbidden to charge interest upon loans made to other Jews, but obliged tocharge interest on transactions with non-Jews, or Gentiles. However, the HebrewBible itself gives numerous examples where this provision was evaded.Deuteronomy 23:19 Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of any thing that is lent upon interest.Deuteronomy 23:20 Unto a foreigner thou mayest lend upon interest; but unto thybrother thou shalt not lend upon interest; that the LORD thy God may bless thee inall that thou puttest thy hand unto, in the land whither thou goest in to possess it.

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