Works on banking frequently include a somewhat detailed description of European central banking institutions, such as the banks of England, France, Germany, etc., and the discussion is sometimes at least presented in such a way as to suggest the thought that these "central banking countries" are fully provided for each by its own central bank which entirely meets the needs of the population. In fact, central banking has been usually the outcome of a slow evolution.

In most European countries the development of banking has been a long process extending over some hundreds of years. There has been a fairly well-marked tendency toward the development of a single type of banking organization, but there are still very broad differences of method and even of theory between European banking systems. A review of the history of the European countries shows that in practically all of them banking began as a more or less unregulated private occupation, and that as the business grew to greater importance it gradually fell under the supervision of the government, to some extent at least, or was subjected to control by a central institution in which the government took a strong part and which became sufficiently active in the market to exert a powerful influence over banking transactions in general.

Most of the non-European countries which were organized on the modern industrial basis by immigration from Europe have naturally followed European models in banking organization. Nevertheless, a very considerable difference of practice and method had developed in many of them, owing to differences in local needs, prior to the European War. It should be emphasized, moreover, that the student of foreign banking will do well to differentiate sharply between the conditions relating to banking and currency which existed prior to the European War and those which have developed subsequent to the close of the struggle. At the present time monetary conditions practically the world over are abnormal, and scientific analysis of banking systems, especially those of Europe, must confine itself very largely to prewar conditions, although taking account, as a matter of information, of the transitory problems which have arisen of recent years.

Looking back for the moment entirely to prewar conditions and confining attention exclusively to western Europe, it may be said that the standard form of banking organization which had grown up during the commercial development of the nineteenth century was essentially a co-ordinated or centralized system in which a fairly sharp line of division had been drawn between banking functions that could to best advantage be carried on as a private or individual matter and other functions which were better performed as a matter of community action or joint and common responsibility. As representative of the former may be taken the task of making direct loans or extending credit to individuals, while as representative of the latter may be cited the issuing of notes. In practically every European country the duty of issuing notes had been taken over almost entirely by a central banking institution, while in one way or another this institution had also acquired the responsibility for holding the bulk of the reserve funds of the community. In like manner the central bank had usually been assigned the duty of holding, receiving, and disbursing the public funds of the nation.

On the other hand, in practically every country it had been found undesirable to have the central bank, acting as it did on behalf of the financial community as a whole and vested as it was with a public quality, discharge the duty of testing private credit or of carrying the responsibility for loans to individuals, or that of regulating or controlling relations with foreign countries by furnishing exchange. It may be stated generally, therefore, that European countries had fairly closely concentrated the functions of note issue, of the handling of public funds, and of the conservation of reserves, and had tended to decentralize the other functions of banking.

Particularly was such decentralization deemed to be desirable in the case of loans to specific classes of enterprise which were vested with a peculiar character of their own. In nearly all of the European countries there had accordingly been developed classes of institutions known as export banks, whose function it was to facilitate foreign trade, land-credit institutions of various kinds intended to assist agriculture, and specialty banking establishments which devoted themselves to meeting the requirements of certain elements in the financial and business community.

A brief sketch of some of the principal foreign banks, intended to present certain of their salient features, will now be necessary. Effort is made only to furnish the basic facts concerning each of the systems, both as originally developed and as modified by war conditions. It should be remembered, of course, that the existing situation in practically all foreign countries is purely one of transition, the war having brought about changes which cannot be considered permanent.