In almost all modern countries the business of banking has assumed a special relationship to the government; for there has been a tendency to exercise an increasing degree of surveillance over essential businesses of all types, especially over those which occupied a predominant influence. Banking would not in any case have been exempt from this kind of supervision, but the supervision of banking is probably older than that which is exercised over most other kinds of business. Historically it may be traced to the fact that in early modern times the state had definitely assumed the function of issuing money; while, when banking first began its modern development, the assumption that bank notes were money and that they were therefore to be controlled or regulated as a matter of state function or duty was likewise generally accepted. Within more recent times, however, specific business relationships between the government and banking institutions have come to be definitely accepted. Such relationships may be regarded as assuming the following principal forms:

1. In some countries the government is either whole or part owner of a central banking institution, or where it owns no stock it appoints the officers or directors of such a banking establishment. To such institutions is committed a sort of general oversight over the financial community at large. This may be informal in its scope, but nevertheless very thorough.

2. Elsewhere governments provide for the regular examination and inspection of banks, giving publicity to their reports, and through their officers requiring that banks conform to certain well-marked legal requirements.

3. In practically all countries governments have large revenues which they must receive and disburse through banking channels, and they thus become customers of banks on a large scale. In this capacity, their receipts and disbursements through the banks have a direct influence upon the position of the whole banking community and affect its soundness.

4. In some countries, too, the government has undertaken, either through direct lending or through guaranteeing the operations of private institutions, to furnish funds under specific conditions to individuals or corporations engaged in particular kinds of business which are supposed to be in need of such support or aid.

It is necessary to examine briefly these various types of relationship between governments and banks and to see how they affect the general organization of the banking system. .