The early history of bills is of great interest, because we learn that from a remote period a need was felt for something which should take the place of metallic money for the purposes of transmission. Gold and silver coins could only be sent from one place to another at great risk. The Romans recognised the use of bills, and made it legal to sell a debt due from one person to another. If a debt could be sold it was desirable to have some means of transferring it. A written document was therefore necessary in order to transfer debts due, and these documents known as bills of exchange were in reality debts owing from one person to another.

Cicero says: "Sed qucero quod opus illi erit Athenis permutarine possit an ipsi ferendum est". We have therefore evidence showing that the Romans understood the utility of bills and transferred debts by means of them. Bills were used by the Italian and Jewish merchants, and in the fourteenth century were largely in circulation. Thus in order to trace the early history of bills and of banking institutions, we must go to the shores of the Mediterranean.

The utility of banking and bills of exchange was recognised by the Italians long before the system of credit was recognised in this country. The merchants of Genoa, Florence, Venice and other Italian towns sent their ships to the East with goods and received in exchange gold and silver coins. The merchants then deposited their surplus wealth in the "mounts" or public treasuries, and received in exchange documents stating the amount deposited.

With the increased trade of the country it was necessary to have credit documents in order to facilitate the payment for goods between the various towns which traded with one another. When, therefore, bills of exchange became to be used for this purpose, they were the means of extending the operations of banking.

In these Italian towns banking was of two descriptions, viz., one for money changing, acceptance of deposits, and transfer of accounts; the other was of a private character, viz., the lending of money and the discounting of bills. In the former case the municipalities undertook the business of banking, and in the latter the Jews or Lombards were the money lenders.

The use of bills was, therefore, principally in the hands of the Jews, who also found these documents very advantageous when they wished to transfer their capital from one place to another. This was needful, because they were continually expelled from various countries. Another circumstance must not be forgotten which materially increased the circulation of bills, and that was in consequence of the great power of the Roman Church. Each country had to contribute tithes to the pope, and these remittances were made either in specie or bills of exchange.

The growth and development of credit documents was also due to a race called the Lombards, who gave the name to a street in London which we might say has become the centre of the financial world. These Lombards were Italian merchants, and were descended from the Longobards, who settled in Italy after the fall of the Roman empire. They were merchants representing the four republics of Genoa, Lucca, Florence and Venice.

Edward III., in travelling through France, made use of one of the Lombard banks when in want of money, and received from the Bank of the Bardi 5000 mks., for which he gave an acknowledgment for 7000 mks.

In course of time these Italian merchants established themselves in London, but at first they did not discount bills, that business being in the hands of the Jews. However, when the Jews were expelled from London, the Lombards became money lenders. It must also be remembered that public opinion had somewhat changed with reference to lending money at usury, because it was no longer considered immoral to receive interest for loans of capital.

The Record Office gives us an interesting example of an early bill. It was a bill drawn 26th September, 1442, by Francesco Venier & Bros., sons of the late Santo, at usance on Obertino de Bardi & Co. in London, and payable to themselves; value received in Venice from Cosmos de Medici & Co., and to be placed to the account of Marino Velliero at the exchange of 44 1/2 per cent. per ducat, and the protest is signed by the notary public, Nicolar Acon, by imperial authority, on the 31st December, 1442, Anglican style, secundum cur sum et computationem Ecclesice Anglicance.

The above bill illustrates that many of these credit documents were passing between England and Italy at that period.

Bills are said to have been first used in England in the year 1307, and were recognised as a legal method of sending money from England to foreign countries (Act 4, Richard II.).

The early history of bills therefore shows that they were principally used for the purpose of the transmission of money, but they were also utilised for the payment of wages and for the payment of debts due from one person to another. It must be remembered that there were few banks in existence during the seventeenth and eighteenth centuries, and therefore banking facilities were comparatively unknown. The private bankers issued notes, but the amount in circulation was small in proportion to the population. A want was experienced of some circulating medium, and we therefore find bills used as bank notes, as well as for the payment of wages.

A practice was established by which the wages of servants were paid by means of promissory notes. It seems, however, that the system led to abuses, because bills were issued for such small amounts as 6d. and Is., and when they were unpaid the loss fell upon poor people who could ill afford to lose. This system was happily confined to Yorkshire, but an Act passed in 1775 prohibited the circulation of promissory notes of less than 20s.