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Tracing The Relationship Between Business And Banking

Jan 9, 2008
Banks and bank services have existed throughout history; it is believed they predate currency and traces of bank records are estimated to have been present in the third millennium B.C. In the ancient world they held grain, cattle and precious metals such as gold and are believed to have carried out their business in temples and palaces as these were the safest places to contain wealth.

The business bank relationship is believed to have begun in ancient Babylon where temple priests granted loans to merchants. It is believed that the first laws in society contained rules for banking and a bank code of conduct. Showing the extent at which banks and society are intertwined.

Ancient Greece took banking further by creating a centralised grain bank network and created credit slips for customers. These slips were used in business and consisted of instructions to bank tellers to perform deposits and withdrawals. This can be seen as a strengthening of the business bank relationship.

The Roman Empire perfected banking; being obsessed with administration, banks took a more recognisable form as increasing amounts of paperwork were involved in transactions. Detailed bank regulations and laws were also created to define the industry. The Romans also created the first bank charges in the form of interest. The business however experienced a downturn with the rise of Christianity as interest charges were seen as immoral; subsequently bank services dwindled in Western Europe until the time of the crusades.

The medieval period saw a revival for the business bank relationship. Trade fairs present in most major European cities began to create bills of exchange where notes were given in exchange for hard currency. These bills were redeemable at other cities and hence eliminated the necessity to carry huge fortunes across country; forming a far safer option for merchants. This need for the transfer of large sums of money was a direct result of the crusades and as the banks redeemed the bills in line with exchange rates and inflation, bank services started to become profitable.

Throughout the later medieval period the Italian bankers of Lombardy and Genoa became the financial powerhouses of the Mediterranean. Their loans allowed business to flourish as overseas trade became a mainstay of any nation's economy. Italian bankers spread throughout Europe and appeared in many European cities. Although problems did arise when defaulted payments by monarchs caused the bank services to become political issues.

During the beginning of the modern period the business bank relationship was further enhanced. Expeditions to the new world were funded by banks in Spain and Portugal; such journeys became profitable for the bank tellers as the returns became vast after the initial outlay. In Britain, new trade businesses used banks to fund their activities in the new world with tobacco and coffee imports from the Indies being extremely profitable.

Bank services and loans were the backbone of the industrial revolution in Britain. Without the funding that supported the entrepreneurs the improvements to the transport network and creation of evermore complex steam engines would not have been possible. It is thanks to the banking that Britain became the richest nation in the world, the empire was dependent upon loans and the reason it expanded to such a huge extent was the desire to repay these sums of money.

In the modern world global bank services have shrunk the world. Transfers are now instantaneous and banks fund vast projects on a worldwide basis. The profits they gain break records on a regular basis, figures of twenty and thirty billion are not uncommon for the world's largest banks. These sums make some banks wealthier than nations and subsequently the favour they hold in politics and business is seemingly unassailable.

Bank services have provided financial support for the business world since the beginnings of civilisation; today they hold a position of power as entrenched as many political systems. In many cases bank services have been fundamental in the formation of nations and political systems and have funded the exploration and empire building that has created the world we see today. The close business bank relationship is profitable for both sides, as long as banks are willing to fund entrepreneurial schemes the relationship is set to continue indefinitely.
About the Author
Financial history expert Shaun Parker has studied the business bank relationship in detail. To find out more please visit http://www.lloydstsbbusiness.com/
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