A History of Banking
Lessons from Banking History
What four thousand years of banking teach about trust, lending to rulers, panics, regulation and innovation, and a recap of the module.
Banking history offers enduring lessons.
Lessons
- Trust is the foundation of banking.
- Lending to rulers is risky, from the Templars to the Medici.
- Panics spread fast without a lender of last resort.
- Deposit insurance and regulation stop runs.
- Innovation, from bills of exchange to bank money, expands finance.
- Too big to fail creates moral hazard.
Module recap
- Mesopotamian temples lent grain and silver.
- Roman argentarii ran banking tables.
- The Templars offered international transfers.
- The Medici built a branch banking empire.
- Amsterdam created stable bank money in 1609.
- The Rothschilds pioneered international finance.
- India’s presidency banks became SBI.
- The 1907 panic led to the Federal Reserve.
- Depression failures led to deposit insurance.
- India nationalised banks in 1969.
- Global megabanks raised systemic risks.
The repeating pattern
From Rome in 33 CE to New York in 1907 to Lehman in 2008, credit booms and panics repeat, each prompting new rules.
Thinking today's banking problems are new
Similar patterns repeat throughout history.
Key takeaways
- Trust underpins banking.
- Panics recur without backstops.
- Regulation evolves after crises.
- Innovation expands finance but brings risks.
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