Banking and bankers are thought to have originated in ancient Mesopotamia around 3100BC, with modern banks beginning in Italy in the 14th and 15th centuries.
The Medici Bank, founded in Florence in 1397, collapsed in 1494. The institution known today as Banca Monte dei Paschi di Siena, founded in the Tuscan city state of Siena in 1472, is considered the world's oldest surviving bank.
The earliest banks grew organically from trading and commerce. The arrival of literacy, numeracy and accounting undoubtedly helped.
History of money
As James Kelman notes in The History of Banking: A comprehensive reference source and guide, the history of banking is intertwined with the history of money.
Ancient types of money known as grain money and food cattle money were used from around 9000BC, he writes. Wealth was usually deposited in temples and treasuries.
The earliest banks were used exclusively by rulers to fund the more important and larger festivals, and for building expenses.
The three major religions – Judaism, Christianity and Islam – placed various restrictions on the charging of interest, otherwise known as usury.
Medieval Italy: home of modern banking
It is from Italy that what we now regard as modern banking emerged. The very word credit, for example, comes directly from the Latin word 'credere', which means 'believe'. The word 'debit' comes from the Latin 'debitum', meaning 'debt'.
The word ‘bankrupt’ comes from the practice of disgracing a failed banker in Italy in medieval times. These bankers carried out their business at a bench, or banca. If they failed, the banca would be broken (rotta). This gives us the word bancarotta, which translates into modern English as the familiar 'bankrupt'.
Little or nothing is new under the banking sun. Only the scale changes. Readers will be familiar with the global financial crisis that has led so far to nearly a decade of economic recession.
It began to unwind in July 2007 and crashed into the broad public consciousness in September 2008. That was when the US investment bank Lehman Brothers collapsed into oblivion.
The reason was, in essence, that it could not refinance the short-term debt that it used to finance the bulk of its business.
In other words, it lost the confidence of the markets. The markets didn't believe in it any more. It had no credit left.
Bank too big to fail
It would have been followed by many more, if the US and UK governments had not stepped in to rescue banks that were deemed to be too big to fail. Goldman Sachs, Lloyds TSB and Royal Bank of Scotland spring immediately to mind.
Banking was devastated by what quickly became known as the credit crunch. This sounds like a modern phenomenon but it is nothing new.
When in Rome
Rome suffered a credit crunch during the reign of the Emperor Tiberius. Felix Martin, in his excellent and absorbing book Money: The unauthorised biography tells the story.
It was Tiberius himself who caused the shortage of liquidity. He made the mistake of deciding to enforce a law on the ownership of property. Enacted by Julius Caesar, it placed strict limits on the percentage of wealth that aristocrats could lend.
This very modern-sounding capital adequacy requirement had become much more honoured in its breach than its observance. In another development that sounds ultra modern, lenders, including most members of the senate, had found ways to get round the law.
When Tiberius decided that the letter of the law would be enforced, he, in short, unleashed monetary chaos. “All the familiar features of a modern banking crisis followed,” writes Martin: