When we talk about the banking system, we refer to a group of institutions and entities that provide financial services and facilitate the economic activities of the population, helping users manage their financial assets (fiat money and cryptoassets), which allows for more fluid, flexible, and efficient transactions. However, many people wonder how this system began. Below, we’ll learn about the world’s first banking system.
First financial transactions
It is known that financial transactions were already taking place in the temples and palaces of ancient Mesopotamia and Egypt as early as 2000 BC. The first banks or financial institutions in history emerged in these places, as they stored precious metals or grains and were able to provide loans for goods to the farmers and merchants of the time.
Expansion of empires and societies
The cities and societies expanded, markets began to expand, and economic transactions became more complex. It was then that the ancient Romans and Greeks began to implement a “sophisticated financial network”, which not only kept accounting records but also provided currency exchange services (in the currencies of the time), deposits, formal loan contracts, and more.
First steps of the banking system
Due to the evolution and expansion of societies (Roman and Greek), and trade between cities, the need arose for a new way to store wealth safely and efficiently, as well as to offer more complex financial services. These needs gave rise to the first banking system, which allowed these societies to manage their wealth more efficiently, conduct more secure transactions, and boost economic growth in the region.
First modern banking system
In 1964, the Bank of England was established, a financial institution charged with implementing the first modern banking system. It created the national banking system, whose primary purpose was to finance the British government. In this way, the Bank of England revolutionized modern banking, not only through the creation of the banking system but also by issuing standardized banknotes and managing public debt, giving rise to central banks (which exist in almost every country today).
The banking system (implemented by the Bank of England) provided a more efficient means of conducting transactions by issuing banknotes and not relying solely on coins, as well as taking charge of managing public debt to help the government (through financing wars and public spending), which made the bank a central authority in charge of managing monetary circulation and economic stability in England, as well as allowing the stimulation of economic activity thanks to the implementation of loans that used the remaining funds (from deposits that only kept a fraction in reserve).
Who currently makes up the banking system?
The banking system is currently composed of companies and financial institutions that form a network of services and operate under various regulations, allowing users to manage their own financial resources (saving, conducting financial transactions, making investments, and obtaining loans). It is important to note that the banking system currently comprises central banks, commercial banks, investment banks, credit companies, and other financial institutions, which together help drive regional and global economic growth.
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