The history of banking, as far as it can be traced, began in ancient Egypt. On those days the principal form of exchange was in grain, held in massive warehouses. Egyptian peasants would harvest their grain and would engage in a form of barter for other products and services to keep them going throughout the year. Eventually the tedious process of withdrawing and transporting quantities of grain began to be replaced by a form of promissory note against a given quantity, which became a forerunner of today’s chequing system. In many other developing civilizations,   similar system was gradually being evolved, with the majority being based around coinage, with the Romans being a principal example. However the Egyptian grain banks are generally regarded as the first  albeit primitive examples of modern banking.

Banking history owes a lot to the Italians, and the first traces of modern day practices can be found there. During medieval times, members of wealthy merchant families residing in the cities of Venice, Florence and Genoa began to make loans to the upper echelons of society there, usually without any form of security. These loans were made to finance a variety of activities from waging wars to financing international trading with no little amount going towards maintaining the excessively opulent standards that these leading families in Italian society were expected to maintain.

The two most prominent merchant families of that time, the Bardies and the Peruzzis were so succesful in their banking enterprises that they relinquished all their other trading activities to concentrate their efforts in this increasingly lucrative field. During the 14^th century both families, who enjoyed a healthy rivalry, expended their activities throughout all of Western Europe. One of their principal customers of that time was the King of England, Edward the third, who borrowed huge sums of money to finance his favourite project: the hundred years war with France. After the war petered out, Edward found that he was either unwilling or unable to pay his debts, and both these banks descended into ignominious bankruptcy.

 As the banking industry developed, the British began to refine and develop more sophisticated systems,  that still form the backbone of modern banking. Learning from their Italian counterparts that handing out loans without security was a recipe for disaster, and began to request various forms of security against these loans, which could be either long or short term. This system of lending money, whilst not so popular with the borrower, provided banks with the security that they needed to consolidate and grow. In return, the government of each country began to form a central bank, that was responsible for  administrating banks who were growing and spreading continuously throughout the United Kingdom.  The Bank of England, founded in 1694 was one of the first to issue bank notes. The Bank’s mythical offices on  Threadneedle Street, where it remains more or less in its original form till today.

In 1844 the Bank Charter Act was issued designed to insure that Bank of England  would be the only body who issued bank notes  and would be required to hold a very reserves in gold or silver to back the notes in the event of a collapse. This act remained current till as recently as 1931, when all the gold and foreign exchange reserves became the property of the Treasury.  In 1946  the Bank of England was eventually nationalised.

The mid half of the twentieth century witnessed many changes in the banking system, both in the UK as well as throughout the World. The advent of the credit card, easy credit, overdrafts and many other developments saw banking take on a face that has proved, at least in the short term,  to have caused  tremendous difficulties both to the system as well as the public at large.

It would appear that the history of the banking system  is still being written, and hopefully will  find ways to overcome and learn from its  current problems.