Banking History

Banking
- Banking includes various financial institutions that manage the funds of individuals, corporations,
and other entities.
- Banks also offer financial services that help people save, manage, and invest their money.

o According to Turner (2022), the term "bank" can apply to a variety of financial institutions,
including banks and trust companies, savings and loan associations, credit unions, and any
other sort of institution that collects money.

Earliest Banking Systems

o The History of Banking began in the ancient world around 2000 B.C., when merchants
issued grain loans to farmers and traders began transporting products between towns in
Assyria and Babylonia. The Code of Hammurabi, dating back to around 1772 B.C., is one
of the first deciphered works of substantial length that deals with contract concerns and
transactional agreements. This regulation also stipulated normal operating processes for
loans, interest, and guarantees.

o Grain Banks - American Deposit Management explains that prior to the advent of
currencies, banking was conducted by trading grain and other necessities. Farmers could
deposit grain in a grain bank and withdraw it on a regular basis to ensure a steady supply
of food. Historians say Egypt's grain banking system was so advanced that it was
comparable to modern-day banking systems in terms of transaction volume and networked
banks.

O In addition to keeping money secure, historical records from Greece, Rome, Egypt,
and Babylon indicate that temples also made loans. Temples often handled massive
loans, including those to several sovereigns, while affluent merchant money lenders
managed the balance.

The Earliest ‘Proper’ Banks

o Basically, the earliest banks would have emerged in ancient Mesopotamia. There is evidence that
temples and palaces in Babylonia and other towns were involved in lending activities.
o Mainly concerned primarily in coins and bullion, which accounted for a considerable amount of
their activities, money-changing, and the supply of foreign and local coinage of appropriate
weight and quality.

Banks During the Medieval Period

o During the medieval period, banks really came to their own. However, the majority of these
banks were merchant banks. Likewise, this was mostly about agricultural loans and funding
 journeys along the silk lines. These institutions were the site of some of the early instances of
broker - dealers.
o The earliest banks were in Italy. Bankrupt comes from the word ‘banca rotta’ in Italian
o Dealing in money deposits and loans, as well as the creation of typically spendable IOUs.
o IOU - usually an informal document acknowledging debt.

10th century
o Paper money was initially introduced by the Chinese. Governments favored standardized
money because it made tax collection easier, and paper currency was less expensive to
maintain than metal currency.
Modern Banking in the 17th To 19th Centuries
o The Goldsmiths of London might be considered the first "real" bank. It is currently a bank, but it
was formerly a collection of vaults that charged a fee for their services. People would store their
precious resources in these vaults and then collect them. Goldsmiths eventually began to provide
loans.

20th Century
o It wasn't until the twentieth century that banks became what we know them to be. After WWII,
banks began to lend money to entire countries, and retail banking became a legitimate 'thing.' In
reality, much of the technology built throughout the twentieth century is still in use today, such as
ATM systems and SWIFT payments.
o World War II and the Rise of Modern Banking- World War II may have rescued the banking
industry from destruction. The financing operation generated enterprises with massive credit
demands, which prompted banks to consolidate in order to supply the demand.
Modern Banking Technology
o The most major advance in the world of banking in the late twentieth and early twenty-first
centuries has been the introduction of online banking, which goes back to the 1980s but truly took
off with the arrival of the internet in the mid-1990s. The increasing use of smartphones and
mobile banking has accelerated the trend.
o Since the invention of the first ATMs sixty years ago, banking technology has flourished. Credit
cards and smartphone applications have made it possible to instantly access deposits and make
electronic payments from everywhere.
Additional Information

Additional Information
Banking in the Philippines
- Served a vital role in maintaining our economy's growth rate and strengthening balance sheets,
governance, including risk management
Bangko Sentral ng Pilipinas (BSP) and the Securities of Exchange Commission (SEC)
- have the authority of conducting a supervisory control of bankings
Some Early Banking Examples in the Philippines
Obras Pias
– The charitable foundation established by the Spaniards on February 3, 1827.
- Banking institution run by friars
- First organized credit institution

Banco Español Filipino de Isabel II

- It was the first state bank to be established in 1851.
- The bank started operation in 1852 and was recognized as the first to create paper money.
- Renamed as the Bank of the Philippine Islands on January 1, 1912

Philippine National Bank

- was founded on July 22, 1916 as a government-owned bank with headquarters at the historic
Masonic Temple along Escolta Street in Manila. Its major mission was to offer financial services
to Philippine industry and agriculture and to promote the government's economic development
initiative.
- Special power: issue bank notes and act as depository of government funds
- It was granted permission to function as an investment bank with the authority to acquire shares
and issue debentures in 1955.
- In 1963, the government founded the National Investment and Development Corporation to
provide long-term and equity finance for economic enterprises.
Conclusion

Banks have come a long way since the days of the ancient temples, but their primary business
practices have stayed remarkably the same. But even though the precise details of the business
model have evolved through time, the goals of a bank have remained consistent: to make loans
and secure clients' money. Although the most important purpose of a bank is to connect creditors
and borrowers, banks are also critical to the domestic and international payment systems because
they generate money.
 References
American Deposit Management. (n.d.). The History and Evolution of Banking. Retrieved from:
https://americandeposits.com/history-evolution-banking/#

Beattie, A. (2021). The Evolution of Banking Over Time. Retrieved from:

https://www.investopedia.com/articles/07/banking.asp

PNB. (n.d.). History. Retrieved from: https://www.pnb.com.ph/index.php/history

Tamba, A. (2011). Oldest Banks in the Philippines That Are Still in Business Today. Retrieved from:
https://www.banksphilippines.com/2014/09/oldest-banks-philippines.html

Technofunc. (n.d.). History of Banking: Evolution of Banking as an Industry. Retrieved from:

https://www.technofunc.com/index.php/domain-knowledge-2/banking-domain/item/history-of-banking
Turner, T. (2022). Banking. Retrieved from: https://www.annuity.org/personal-finance/banking/
World bank Organization. (n.d.). The History Of Banks. Retrieved from:
https://www.worldbank.org.ro/about-banks-
history#:~:text=The%20first%20proper%20banks%20would,out%20seeds%20and%20the%20like.