“A banker need not be popular. Indeed, a good banker in a healthy capitalist society should probably be much disliked.” – John Kenneth Galbraith
The origins of banking can be traced back to Mesopotamian temples which were used as a safe place to store goods, particularly grain. Palaces and private residences were also used but the temples were seen as having the extra protection of the gods.
As well as deposits and withdrawals by the owners, these goods soon became used as assets with which to pay debts. From this, the idea of the loan emerged and there are records of Babylonian temples making loans as early as 2000BC.
So, the earliest currency was weighed not counted, and this connection persisted.
“Expenditure”, “spend” and “pound” all derive from the Latin expendere meaning “to weigh”. And the basic unit of weight in Ancient Greece was the drachma which meant “a handful of grain”.
Lawyer & goldsmiths
The first banking services in the UK were provided by goldsmiths and lawyers. The lawyers found themselves ideally placed to match lenders with borrowers, while goldsmiths expanded their services and began storing valuables for their clients as well as dealing in coins.
In the early 17th century, the written instructions given to goldsmiths to pay money to another customer developed into the “check” (as in a check against forgery or tampering) – the fancy spelling “cheque” was probably influenced by the exchequer, the name for the checkered counting table used since medieval times for financial transactions. But as well as receipts for deposits, the goldsmiths began to issue notes that guaranteed a customer’s ability to pay, and by end of the 17th century these were being referred to as “bank notes”.
Each year there are 30,000 applications to UK’s damaged note service, with claims totalling a value of £18 million. In 2008, there were 4,916 claims (totalling £113,000) for bank notes which had been eaten by pets. Notes which are unfit for circulation are destroyed. They used to be burnt on-site by the Bank of England – the heat from the incinerator was used to supplement the site’s central heating – but today they are shredded, which is seen as more environmentally friendly. Between 1988 and 1992, employees at the Loughton site stole £600,000 worth of notes that were intended for destruction by concealing them in their underwear.
A bank robbery is only classified as such if it takes place within office hours, when people are present. If there is no threat against a person the perpetrators are classed as burglars. The average haul per raid per person is £12,706.60 but the screens installed to protect cashiers and the contents of the bank cost £4,500 each. In 2011, a man demanded a bank in North Carolina hand over $1 then waited for to be arrested so he could access free health care in prison.
It used to be possible to take a bank note to the Bank of England and exchange it for gold, but this hasn’t been the case since 1931 when the country left the gold standard.
Scottish money isn’t technically legal tender – which is a very niche legal definition about settling debts. However, notes issued north of the border do contain a promise to pay the bearer in “pounds sterling”, and every note issued in Scotland and Northern Ireland is backed by deposits or assets held by the BoE. This protects the notes in the event that an issuing bank runs into difficulty.
The largest bank notes issued in the UK are Titans (the size of an A4 piece of paper and worth £100 million) and Giants (A5 and worth £1 million) which are used internally to back the Scottish and Northern Irish notes.
The word “bankruptcy” comes from the Italian banca rotta which literally means “broken bench”, although there is little evidence that the wooden moneylenders’ benches were ever actually broken to graphically display their unfitness for business. Strictly speaking, under UK law only individuals can be declared bankrupt. Businesses become insolvent and go into administration. Today you are usually discharged from your bankruptcy after a year but it will cost a minimum of £525 to go bankrupt. Abraham Lincoln, Walt Disney and Oscar Wilde all went bankrupt.
In 2011, 2,436 bankers in the UK earned more than €1 million (approximately £875,500). The nearest European rival was Germany with 170.