The Birth of Banking

Before a bank had a branch network, it needed something more basic: a place people trusted with their wealth.

In ancient Mesopotamia, temples and palaces were important centres for storing and administering grain and silver. Their resources, authority and durable buildings made them natural locations for economic activity.

Stored wealth raised another possibility. It could be lent.

That movement from keeping valuables to financing other activity is central to banking's history. It also introduces a tension that has never disappeared: the person who leaves wealth for safekeeping and the person who borrows it may want very different things.

🌾 Storage became a financial relationship

Calling a temple an early bank is useful shorthand, provided we remember that ancient institutions were not modern deposit-taking businesses. Religious, political and economic functions overlapped.

Grain could be stored, allocated and lent. Silver could support transactions and obligations. Once repayment was expected in the future, somebody had to record the terms and decide what happened when they were not met.

By around 1750 BCE, the Code of Hammurabi included rules governing lending. The familiar rates associated with these provisions are roughly 20 percent for silver and one-third for grain.

Those figures belong to a particular historical and legal setting. Their significance here is not as a model for today's lending. It is that credit was established enough to require rules about the relationship between creditor and debtor.

🪙 Banking came to the marketplace

Greek bankers known as trapezitai took their name from the trapeza, or table, at which they worked. Their activities included changing coins, receiving deposits and making loans.

A money changer's table sat at a useful intersection. Travellers brought unfamiliar coins. Merchants needed acceptable payment. People with funds and people needing funds could find one another through an intermediary.

Roman argentarii performed related functions and participated in auction finance. The financial service was becoming recognisable even if its institutions differed from those of the present.

🔎 Did You Know? Both the Greek word associated with these bankers and the Italian word behind bank connect finance to an ordinary piece of furniture. Some of banking's grandest institutions trace their vocabulary to a working surface.

🛡️ Wealth could travel as a claim

For medieval travellers, carrying valuables created an obvious danger. A journey could end with money stolen long before it reached its destination.

The Knights Templar became associated with arrangements through which funds deposited in one location could be accessed elsewhere using documentary authority. The familiar example is a pilgrim leaving funds in London or Paris and obtaining access in the eastern Mediterranean.