Page:The New International Encyclopædia 1st ed. v. 02.djvu/547

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000,000 marks ($62,500,000); while a number of subordinate banks are permitted to issue uncovered notes to the amount of 135,000,000 marks ($33,750,000). Notes are issued for 5, 50, 100, 500, and 1000 marks. The State itself (by an act passed in 1874) may issue 120,000,000 marks in small notes for the general convenience of the public. For a more detailed treatment of the banking systems of foreign countries, see articles on those countries.

Historical Sketch. The origin of banking is in remote antiquity, but in its nature and scope great changes have been made during the last four centuries. The modern banker is a dealer in credit, while in ancient times the so-called banker was a mere custodian of other people's money and a buyer and seller of foreign moneys. The bill of exchange appears to have been the first credit instrument handled by the early bankers. Explorers have discovered evidence of its use in Assyria several thousand years before Christ. In Athens and in Rome several hundred years before Christ, men who would now be called bankers made a business of receiving money on deposit and of buying foreign money and foreign bills of exchange. In Rome bankers were called argentarii, or dealers in money. Although at first their profits came altogether from commissions upon deposits and from the exchange of domestic for foreign money, they finally became dealers in bills of exchange, and even loaned the money which had been intrusted to them, a credit on their books being transferred by an order resembling the modern check. Livy first mentions the argentarii at the year B.C. 350, and they are frequently referred to in Latin literature of a later date. They were not patricians and had no social status, being despised by the nobles and hated by the common people. By the time of Justinian, the business of banking, involving a comparatively large use of credit, had become firmly established, and a complete body of jurisprudence relating to the subject had been developed.

During the Middle Ages, the insecurity of property and the risks attending commerce practically reduced the business of banking once more to that of mere money-changing. In Italy, at this time, the bankers were known as campsores, or dealers in foreign money. There was still traffic in bills of exchange; but for several centuries banking in the modern sense of the term, implying the lending of other people's money, the issue of notes as a medium of exchange, and the transfer of accounts by order or check, was practically unknown. The rise of modern banking really dates from the establishment at Venice of the Banco di Rialto, in 1587. For two centuries prior to this date private bankers in Venice had been receiving deposits, making loans, and transferring credits upon order. The Banco di Rialto received deposits subject to call, and permitted its customers to transfer their credits by order. In 1619 this bank was absorbed by the Banco del Giro. This bank loaned 500,000 ducats to the Government of Venice. Depositors were given receipts in proportion to the weight of the gold or silver coins which they deposited, and these receipts were used as money. As the current coinage in Venice was in bad condition, it often happened that credits upon the Bank of Venice were at a premium. On several occasions, however, the paper of the bank was at a discount, on account of excessive issues. The bank survived until 1805, when its affairs were liquidated under a decree of Napoleon.

The Bank of Amsterdam and the Bank of Hamburg, established in the same century as the Banco del Giro in Venice, performed banking functions of a similar character. They did not issue bank-notes, and were not authorized to make loans; but their credits, based upon coins deposited, became a very popular medium of exchange in the settlement of all large transactions. These credits were known as ‘bank money,’ and are generally regarded as the first step in the evolution of the check and deposit system now in common use in Europe and the United States. The Bank of Amsterdam was successfully managed from 1609, the date of its establishment, until the middle of the following century, when secret advances to the Dutch East India Company resulted in the destruction of its credit. It was liquidated by a royal decree in 1819. The Bank of Hamburg was always conservatively managed, and survived until 1873, when the adoption of an Imperial coinage and bank currency rendered its services no longer necessary.

It was during the Eighteenth Century that the two characteristic features of modern banking—the issue of notes not covered by coin, and the granting of deposit accounts upon the mere credit of borrowers—were finally evolved. China appears to have been familiar with bank-notes for at least twelve centuries, but their use in Europe dates only from 1661, when the Bank of Sweden issued notes to avoid the transportation of copper coin. In England the recognition of the bank-note as a representative of credit rather than as a mere warehouse receipt secured by an equivalent deposit of coin, was not realized until the end of the Seventeenth Century, when the Bank of England was created. The Bank of Scotland, chartered in 1695, received privileges similar to those possessed by the Bank of England.

Consult: Bagehot, Lombard Street (New York, 1874); Conant, A History of Modern Banks of Issue (New York, 1897); Dunbar, Theory and History of Banking (New York, 1891); Francis, History of the Bank of England (London, 1848); Gilbart, History, Principles, and Practice of Banking (London, 1882); White, Money and Banking (Boston, 1896); Breckinridge, The Canadian Banking System (New York, 1895); Report of the Monetary Commission (Chicago, 1898); Reports of the Comptroller of the Currency. See also Credit; Currency; Interest; Savings-Banks.

BANK BILLS, or NOTES. The promissory notes of a bank or banker, issued under special legal authority, payable to bearer on demand. They differ from an ordinary promissory note in two important particulars: they may be reissued after payment, and they do not become stale, or overdue, by the expiration of a reasonable time after their issue. Bank of England notes are a legal tender in England for all sums exceeding £5, except by the Bank. In the United States, bank-bills are not a legal tender. Whether a demand or payment must be made before an action can be brought on a bank-bill is a question upon which the decisions in the United States