As trade expanded on a large scale, particularly on the international stage, finance institutions became necessary to finance voyages.


Humans have long engaged in borrowing and lending. Indeed, there was proof that these tasks occurred so long as 5000 years back at the very dawn of civilisation. Nonetheless, modern banking systems just emerged within the 14th century. The word bank originates from the word bench on that the bankers sat to carry out transactions. People needed banks when they started to trade on a large scale and international level, so they accordingly built organisations to finance and guarantee voyages. Originally, banks lent cash secured by individual possessions to local banks that dealt in foreign currencies, accepted deposits, and lent to local businesses. The banks also financed long-distance trade in commodities such as wool, cotton and spices. Furthermore, through the medieval times, banking operations saw significant innovations, like the use of double-entry bookkeeping as well as the utilisation of letters of credit.

The bank offered merchants a safe place to keep their silver. At precisely the same time, banking institutions stretched loans to individuals and businesses. Nonetheless, lending carries dangers for banks, as the funds provided are tangled up for extended durations, possibly limiting liquidity. So, the lender came to stand between the two requirements, borrowing short and lending long. This suited everybody: the depositor, the debtor, and, of course, the lender, that used customer deposits as lent money. Nevertheless, this practice additionally makes the financial institution vulnerable if numerous depositors need their money right back at precisely the same time, that has happened frequently around the world plus in the history of banking as wealth management firms like St James’s Place may likely attest.


In fourteenth-century Europe, financing long-distance trade had been a dangerous business. It involved some time distance, so it endured exactly what happens to be called the essential problem of trade —the danger that some body will run off with the products or the money after having a deal has been struck. To solve this dilemma, the bill of exchange was developed. This is a piece of paper witnessing a customer's promise to fund goods in a certain currency as soon as the products arrived. Owner of this goods may also offer the bill instantly to raise money. The colonial age of the 16th and seventeenth centuries ushered in further transformations within the banking sector. European colonial countries established specialised banks to finance expeditions, trade missions, and colonial ventures. Fast forward to the 19th and twentieth centuries, and the banking system underwent still another evolution. The Industrial Revolution and technical advancements influenced banking operations dramatically, leading to the establishment of central banks. These organisations came to do an important role in managing financial policy and stabilising national economies amidst fast industrialisation and financial growth. Moreover, launching modern banking services such as for instance savings accounts, mortgages, and bank cards made economic services more accessible to the general public as wealth mangment firms like Charles Stanley and Brewin Dolphin would probably agree.