1 See Beckmanns History of Inventions, vol. ii. p. 5 (Bohn's Stand. Lib.).
After commerce and the arts had revived in Italy, the business of banking was resumed. The word bank is derived from the Italian word Banco, a bench - the Jews in Lombardy having benches in the market-place for the exchange of money and bills.1 When a banker failed, his bench was broken by the populace; and from this circumstance we have our word bankrupt. Though the States of Venice and Genoa made the most rapid advances in commerce, and established public banks, yet the department of banking appears to have fallen more particularly into the hands of the Florentines. "As the Florentines did not," like the Venetians and the Genoese, "possess any commodious seaport, their active exertions were directed chiefly towards the improvement of their manufactures and domestic industry. About the beginning of the fourteenth century, the Florentine manufacturers of various kinds, particularly those of silk and woollen cloth, appear, from the enumeration of a well-informed historian, to have been very considerable. The connections which they formed in different parts of Europe, by furnishing them with the productions of their own industry, led them to engage in another branch of trade, that of banking. In this they soon became so eminent, that the money transactions of almost every kingdom in Europe passed through their
1 This is the commonly received derivation. A more accurate explanation of the use of the word is that which makes it synonymous with the Italian Monte (Latin, Mons), a mound, heap, or bank. Thus the Italian Monte di Pieta and the French Mont de Piete signify "A Charity Bank." Bacon and Evelyn use the word in the same sense. Bacon says, "Let it be no Bank or common stock, but every man be master of his own money." Evelyn, adverting to the Monte di Pieta at Padua, writes, "There is a continual bank of money to assist the poor." Black-stone also: "At Florence, in 1344, government owed £60,000, and being unable to pay it, formed the principal into an aggregate sum called, metaphorically, a Mount -tr Bank." - (Vol. i.) hands, and in many of them they were entrusted with the collection and administration of the public revenues. In consequence of the activity and success with which they conducted their manufactures and money transactions - the former always attended with certain though moderate profit, the latter lucrative in a high degree, at a period when neither the interest of money nor the premium on bills of exchange were settled with accuracy - Florence became one of the first cities in Christendom, and some of its citizens extremely opulent."l Cosmo di Medici was reckoned the most wealthy merchant ever known in Europe, and in a treaty whereby Louis XI. engaged to pay Edward IV. fifty thousand crowns annually, it was expressly stipulated that the king of France should engage the partners of the Bank of Medici to become bound for the faithful and regular performance of this agreement on the part of himself and his heirs.2
Although the business of banking has probably always been carried on by private individuals before it has been carried on by a public company, yet most countries have found it useful to establish a public or national bank. Some of these banks have been founded for the purpose of facilitating commerce, others to serve the government.
The most ancient bank was that of Venice. It is supposed to have been established in 1157.3 The State being involved in debt, through a long and severe war, the public creditors were formed into a corporation, with peculiar privileges, and the debts were allowed to be transferred from one name to another, much in the same way as our public funds, or the stock of our public banks. It was made a particular regulation that all payments of wholesale merchandise, and bills of exchange, should be in bank money; and that all debtors and creditors should be obliged, the one to carry their money to the bank, the other to receive their payments in banco, so that payments were made by a simple transfer of stock from one account to the other. This bank may be deemed a wonder for the twelfth century, but requiring much alteration to adapt it to the modes and manners of the nineteenth.1
1 Robertson's Disquisition on India, page 113.
2 Macpherson's History of Commerce, vol. i. page 698.
3 Anderson's History of Commerce, vol. i. page 156.
So early as the year 1349 the business of banking was carried on by the drapers of Barcelona, who were probably the most wealthy class of merchants in that city. But by an ordinance of the king of Arragon, they were not allowed to commence this branch of trade until they had first given sufficient security. In the year 1401 a public bank was established by the magistrates, and the city funds were responsible for the money placed in the bank. They exchanged money, received deposits, and discounted bills of exchange, both for the citizens and for foreigners.2
The bank of Genoa was established in 1407. This bank, like that of Venice, owed its origin to the debts of the State. Considerable confusion had arisen from the multitude of loans which the republic had contracted with its citizens. These various loans were now formed into one total amount, and made the capital of the bank. This bant was called the Chamber of St. George, and its management was entrusted to eight directors, elected by the proprietors of the stock. As a security for the debt, the State made over to the bank several cities and territories, among which were the port of Caffa and the little kingdom of Corsica.
1 See Montefiore's Commercial Dictionary, Article Bank. It was not until 1587 that the Bank of Venice became a bank in the modern sense of the word. The extensive foreign trade of the city brought thither coins of all countries, and in every state of wear. To remedy the loss and inconvenience thus caused, the merchants were ordered to bring their coins to the bank, where they were weighed, the merchants receiving notes, promising to pay the bearer on demand bullion of the proper or standard fineness, equal to the value of the coins paid in.
2 Macpherson's History of Commerce, vol. i. pp. 540, 612.
The Bank of Amsterdam was founded in the year 1609. It was occasioned by the vast quantity of worn and clipped coins then in circulation, in consequence of which the value of the currency was reduced above nine per cent. below that of good money fresh from the mint. The bank received these deficient coins at nearly their intrinsic value, and made all its issues in coin of the standard weight and fineness. At the same time a law was made that all foreign bills of exchange should be paid in bank money. This law raised the value of bills on Holland in foreign countries, and compelled every merchant to keep an account at the bank, in order that he might at all times have legal money to pay his foreign bills. The premium (called the Agio) on bank money was regulated by the market price of gold, and was subject to considerable fluctuations. To prevent the gambling to which these fluctuations gave rise, the bank at length determined to sell bank money for currency at five per cent. agio, and to buy it again at four per cent. From this and other sources of profit the bank is supposed to have gained a considerable revenue. It was the entire property of the city of Amsterdam, and was placed under the direction of four burgomasters, who were changed every year.1
The Bank of Amsterdam was the model on which were formed most of the European banks now in existence; but they have varied very considerably from each other, according to the circumstances of the respective countries in which they have been established.
1 Adam Smith's Wealth of Nations, vol. ii. p. 220. Edition 1812.