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A bank is a place where money can be saved or loaned out from. Someone's money can be placed in the bank for safe keeping. Or the bank can give out loans to people for an agreement to pay the bank back at a later time, usually with interest. The people who run a bank are called bankers.

Banks also can use the money they have from deposit accounts to invest in businesses in order to make more money.

In most modern countries a bank controlled by the government but independent of the state administrators controls how much money appears at a time. Such a bank is called a national bank. A national bank ordinarily issues bills and/or coins. In some countries issuing money is the task of the government.

History[change | change source]

The word bank comes from an Italian word banco, meaning a bench, since Italian merchants in the Renaissance made deals to borrow and lend money beside a bench. They placed the money on that bench.

Elementary financial records are known from the beginning of history,[1] Baked clay records were done before the invention of writing.[2]

In the 17th century, merchants started storing their gold with goldsmiths in London. The goldsmiths had their own vaults, and charged a fee for storing the merchant's gold. The goldsmiths eventually started loaning money using the gold left to them, and also paid interest on the gold.

The Bank of England began issuing banknotes in 1695. The oldest bank still in existence is Monte dei Paschi di Siena in Siena, Italy, which started in 1472.

Banking activities[change | change source]

A bank usually provides the following services:

Types of banks[change | change source]

  • Community development bank: regulated banks that provide financial services and credit to under-served markets or populations.
  • Land development bank: The special banks providing long term loans are called land development banks, in the short, LDB. The history of LDB is quite old. The first LDB was started at Jhang in Punjab in 1920. The main objective of the LDBs are to promote the development of land, agriculture and increase the agricultural production. The LDBs provide long-term finance to members directly through their branches.
  • Credit union or Co-operative bank: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Typically, membership is restricted to employees of a particular company, residents of a defined area, members of a certain union or religious organizations, and their immediate families.
  • Postal savings: savings banks associated with national postal systems.
  • Offshore bank: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
  • Savings bank: focuses on accepting savings deposits and paying interest on deposists.
  • Building society and Landesbanks: institutions that conduct retail banking.
  • A Direct or internet-only bank is a banking operation without any physical bank branches, conceived and implemented wholly with networked computers.

References[change | change source]

  1. Mesopotamia of 8000 BC.
  2. Davies G. & Bank J.H. 2002. A history of money: from ancient times to the present day. University of Wales Press.