THE HISTORY OF MONEY

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With the development of money and the increase in trade, the establishment of banks was the next logical step. Today these institutions keep the wheels of the economy turning

MONEY doesn’t grow on trees, your parents often reminded you when you nagged them for a new toy. It means it’s a valuable resource and not easy to come by. That’s why money should be approached with care, not just be spent left, right and center. And if you’re able to save money, so much the better. People might have some means of saving at home but generally they use banks to save. The emergence of banks went hand in hand with the development of money, which we discussed last week.

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What is a bank?..

A simple definition of a bank is a place where money is handled and where it and other valuable items are stored. In essence a bank is a company that deals in money. Banks receive money in the form of deposits from businesses and individuals, and loans it to lenders applying for loans. Banks are actually the intermediaries between lenders and those who lend.

* The first banks

We can’t say for sure when banks first came into existence but their origin can definitely be linked to trade.
When Mediterranean countries such as Turkey and Greece began trading more in ancient times the transactions were similar to those handled by banks today. There are records of banks as far back as 2 000 BC. Loans were granted, deposits were accepted and money was exchanged.

* Later years

Many centuries later, in the Byzantine period (5th to 15th century AD) the exchange of money was strongly regulated in Constantinople (now the Turkish city Istanbul). It was then one of the most prosperous cities in the Roman Empire. People who forged money were severely punished and black market trade in coins was prohibited.
Despite these strict regulations, however, Constantinople began to decline by the 13th century and the hub of banking activity moved to the Italian city states until the sea route to India was discovered in the 15th century. Banking then moved to the Spanish city of Barcelona and later to Antwerp and Amsterdam

in the Netherlands. From the 19th century it moved to London, competing with other cities such as Paris in France and Frankfurt in Germany.
For 150 years until the end of World War 2, London was the global banking capital until it was overtaken by New York, mainly due to the size of the American economy and the effectiveness of its money markets.

South African Reserve Bank

South Africa got its first bank in 1793 when the Dutch East India Company opened the Lombard Bank. Within about 50 years almost every town in the country had its own bank.
By 1920 there were three groups: the National Bank of South Africa, Standard Bank and the Netherlands Bank. Each issued its own banknotes but thanks to a unified monetary system, the South Africa Reserve Bank was eventually formed. Since 1922 it’s been the only institution authorized to issue SA banknotes and coins The Reserve Bank must keep prices stable to maintain high standards.