Origin of International Banking
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Origin of International Banking: –
The name bank derives from the Italian word banco “desk/bench”, used by the bankers during the Renaissance period. Banks have been around since the first currencies were minted. There are records from Greece, Rome, Egypt and Ancient Babylon that suggest temples loaned money out in addition to keeping it safe this was sometime during the third millennium B.C. But the pioneers of banking as a system were The Romans. They took banking out of the temples and formalized it into financial institutions and financial practices with greater regulation.
A king traveling to another country was in danger of having his monies stolen en route, so all he needed to do was to deposit his needed funds at one Templar establishment, and withdraw his funds from the local Templar chapter in the country of destination. All he required was the proper documentation, and a small fee, of course. This in effect became the worlds first international banking system, the documentation carried being like the first travelers checks.
In the late 17th century, the largest centers for commerce were the ports of Amsterdam, London, and Hamburg. At that time moneychangers were already called bankers. They carried out the functions of a merchant banker. Individuals participated in the East India trades by purchasing bills of credit from these bankers. The deals they received for commodities by purchasing these bills were very profitable. Banking and Trading became very popular by that time giving a major boost to international trade and banking. However International banking was at an early stage.
Around this time Banking was already well established in the British Empire when Adam Smith came along in 1776 with his “invisible hand” theory. Empowered by his views of a self-regulated economy, moneylenders and bankers managed to limit the states involvement in the banking sector and the economy as a whole. This free market capitalism and competitive banking found fertile ground in the New World where the United States of America was getting ready to emerge. This was the actual beginning of the new era of International Banking.