Antiquity

Usurers, who lent money at interest, appeared in ancient times. Banking existed as early as Babylonia in the eighth century B.C. Babylonian merchants were even aware of a bank note called a hudu, which circulated on a par with gold^.

In ancient Greece, trapezites (τραπεζίται, from τράπεζα – table) accepted deposits for safekeeping in order to make payments at the expense of depositors. They were also given valuable documents, contracts, and disputed sums for safekeeping. Greek bankers lent out capital entrusted to them on the security of chattels, slaves, houses, and land. At the same time, the ancient Greek temples were serious competitors to the private bankers, who lent large sums of money from their temple treasures, both to private individuals and to public enterprises. The sanctity of the temple treasuries allowed them to attract significant contributions from individuals, rulers, and cities. It is not known whether the temples put into circulation the deposits entrusted to them and whether any interest was paid on them.

In the time of the Ptolemies, in the second century B.C., in Thebes (Greater Diespolis), Germontis, Memphis, and Siena, there were "royal banks" run by trapezites, into which various state dues, revenues from state factories flowed, and which, at the expense of the state, made various payments, for example, the payment of salaries to soldiers. 

The Temple of Jerusalem was also used for banking operations^.

In ancient Rome, bankers were called mensarii and argentarii. Mensarii, or mensalarii, is a calque from the Greek word τραπεζίται. The Argentarii accepted deposits, gave loans, and could be used to transfer money to another city^.

Middle Ages

However, the popes of Rome repeatedly threatened severe penalties for those who made loans at interest and released debtors from their obligations to creditors. In 1179, at the Third Lateran Council, Pope Alexander III declared that those guilty of collecting interest should be deprived of communion and Christian burial^. The kings, impelled by the fear of papal threats, and anxious to appropriate the wealth of the bankers, drove them out of their dominions. Thus, Italian bankers were expelled from France by Saint Louis and Philip the Fair (1291), and Italian bankers were expelled from England by Henry III (1240), but were then readmitted to the country in 1250 at the insistence of the pope, who was in need of money and wanted to win over the bankers. Sometimes exiled bankers bought themselves the right to return, and their persecution became a lucrative source of income for the rulers.

Competing with the activities of individual bankers were the so-called montes pietatis. Monte di Pietà, fr. mont de piété) Special banks set up in various Italian cities to provide cheap small loans to the needy. They charged interest on loans only to cover their expenses, and their capital was formed from private or public donations. The first such institution was established in Orvieto (1463) and the second in Perugia (1467).

The Senate of the Republic of Venice issued a decree in 1584 establishing a public bank called the Banco della Piaza de Rialto. Banking was declared a monopoly of the republic and private individuals were forbidden to engage in it, but this ban was soon lifted^.

In Genoa, the creditors who had lent to the government of the Republic of Genoa in connection with the war with Algeria and Tunisia (dating back to 1148) formed a partnership to which the republic transferred the collection of certain taxes to secure interest and repay the loan. This method was then repeated in subsequent loans; In this way a number of partnerships were formed, called compère or scritte, the capital of which was made up of shares (luogo). In 1250, all these partnerships were united into one compère de capitolo. Soon, however, new partnerships were opened to make new loans. In 1407, all the partnerships were again merged into one, called the Compère di San Giorgio in honor of St. George, the patron saint of the city. It was allowed to accept private deposits and lasted until 1805^.

Modern times

Initially, the bankers in all of Western Europe were exclusively Italians. It was only later that local bankers appeared in other European countries and more important banking houses were established, such as the Fuggers in Germany.

England alone has not followed this path in the history of banking. There, the exchange of money has long been the subject of a state monopoly, and there was a bargaining chamber - "Cambium Regis", which gave at the mercy of the exchange and exchange of foreign and local coins. But under Henry VII., the currency of England was so distorted by the deterioration of the coins, that it became virtually impossible to satisfy the need for change by privileged money-changers alone. This induced goldsmiths, who had the appropriate knowledge and facilities for the storage of jewels, to undertake the exchange of money without any legal permission, and to engage in petty banking operations, such as deposits, loans, and partly goldsmith's notes. Books dating back to 1620 have come down to us from them. One of the oldest English bankers was Francis Childe.

In the 16th and 17th centuries, the merchant guilds of Venice, Genoa, Hamburg, Nuremberg, Milan, and Amsterdam created special banks called giro banks. This name came from the word "giro", which means "turnover" in Italian. Giro banks specialized in cashless payments between their customers because cash—coins—depreciated over time. Clients' funds that were in giro accounts could not be converted into cash. This method of calculation was quite fast and convenient. Gir banks used special monetary units for settlements, which were expressed in weight quantities of precious metals. Giro banks lent free money resources to cities, the state, and trading companies^.

In 1609, the Bank of Amsterdam was founded by the city of Amsterdam. He established an immutable unit of account, representing the value of a certain quantity of silver, equal to 211.91 aces of pure silver, and called the "bank florin"—the bank accepted deposits of various coins, but the account was kept only in bank florins. This bank lasted until 1795^.

Englishman William Paterson. In view of the fact that only about a quarter of all the deposits entrusted to him were in cash at the Bank of Amsterdam, he came to the conclusion that it was not at all necessary to cover all the obligations issued by the bank in specie. He proposed the project of the Bank of England, the fixed capital of which would be deposited in government interest-bearing securities, which would serve as collateral for its credit operations. In 1694, the English government, in financial difficulty, adopted the project. The Bank of England was established in the form of a joint-stock company^.

Among the banks founded in the 15th and 17th centuries, there are those that continue their activities. Among them: the oldest bank in the world in Siena Monte dei Paschi di Siena (founded in 1472), Hamburg's Berenberg Bank (1590), Sweden's Sveriges Riksbank (1668), England's C. Hoare & Co. (1672), Japan's Sumitomo Mitsui (1683), and English Barclays Bank (1690).

Current situation

The evolution of finance and the banking system has led to the widespread use of non-cash payments, which has significantly changed the nature of banking operations. Money became not only cash, but also the bank's debts to customers, both in the form of accounts on customer accounts and in the form of bank receipts – banknotes.

By issuing a loan, banks can create new money. In essence, in the case of non-cash payments as money, the bank transfers to the borrower its obligation to pay — the borrower becomes the debtor of the bank, and the bank is the debtor of the borrower. The total balance is not disturbed^, but bank debts play the role of money and we pay our obligations with them. In this regard, some economists, referring to the signature on the decision to grant a loan, refer to loans as "money created with the stroke of a pen"^.

The central bank can limit the total amount of credit in the economy by setting reserve requirements (see also bank multiplier). This instrument is not rigid and, in practice, the total volume of lending is much lower than the theoretical maximum. In addition, if there are not enough funds to meet the reserve ratio, banks can usually get the shortfall from the central bank at the refinancing rate. In the UK, for example, there is no mandatory reserve ratio for commercial banks at all. The Bank of England believes that central banks today tend to implement monetary policy through the regulation of interest rates rather than through the regulation of reserve ratios.

The financial crisis of 2007-2008 also showed that in the event of the threat of bankruptcy of large banks, governments are usually forced to "save" them at the expense of taxpayers' money, risking otherwise paralyzing the entire monetary system. This allowed analysts to talk about the actual "nationalization of risks" for large banks while maintaining the private nature of appropriation of profits in this sector of the economy. 

Globalization in banking

In the 20th and 21st centuries, there has been a significant reduction in the barriers to global competition in the banking sector. The rise of telecommunications and other financial technologies has allowed banks to expand their reach across the globe as their employees no longer need to be around customers to manage finances and risk. The growth of cross-border interaction has also increased the demand for banking services, which can now be provided to citizens of a wide variety of countries. However, despite the reduction of barriers and the increase in cross-border activity, the banking industry is still not as deeply globalized as some other sectors of the economy. In the U.S., for example, very few banks operate on the basis of the Rigle-Neale Act, which facilitates more efficient banking interaction between different states. In the vast majority of the world's countries, the market share for foreign banks is now less than one-tenth of the market share for domestic banks. One of the reasons the banking industry has not been fully globalized is that it is more convenient for small businesses and individuals to borrow from local banks. On the other hand, for large corporations, it is not so important in which country the bank's office is located, since the financial information of the corporation is available all over the world^.

Bank management

The supreme governing body of the bank is the meeting of shareholders (participants). The bank's Board of Directors and the Audit Commission are accountable to him. The Board of Directors of the Bank:

• determines the general directions of the bank's development,
• reviews the bank's business plans,
• opens and closes the bank's branches.

The collegial executive management body directly managing the bank's activities is the bank's Management Board, which usually includes representatives of the largest shareholders of the bank.

Types of banks

Distinguish:

• central banks, which carry out state regulation of the banking sector and money emission.
• Commercial banks providing cash and settlement services, deposit and credit operations:
  • universal banks that carry out all major types of banking operations;
  • Specialized banks specializing in one or more banking operations;
  • savings banks specializing in attracting funds from the public.
• Investment banks that specialize in investments, most often in securities.
• Land banks, previously issued loans to individuals for the purchase of land or on the pledge of land.

Sometimes there are:

• "Retail Bank"  is focused on working with individuals.
• "Captive Bank" is a subsidiary bank of a large industrial or banking structure, the main purpose of which is to service the operations of the parent company.

Functions of banks

• Historically, the first function of banks was to store customers' money safely.
• Since the bank has many customers who keep their money in it, the bank becomes able to transfer money from one of them to another by changing the entries in the bank accounts (non-cash payments). Cashless payments are also possible between customers of different banks thanks to the system of correspondent accounts.
• Banks issue loans. In this case, an additional money supply is actually created (see Bank multiplier).

Essential features of banking activity (distinguishing it from production, trade, etc.) are as follows:

• The predominance of borrowed and borrowed funds in the resources of banks, which entails increased responsibility to creditors and depositors.
• Extreme mobility and volatility of the parameters of financial markets, caused not only by economic, but also by political, social and other reasons.
• The need for constant and simultaneous work with clients representing various spheres and branches of business, having conflicting interests and goals.
• The intangible nature of banking products (services) and the need for the participation of almost all subdivisions of the bank in the production of each such product.