Banks And Banking
( Originally Published 1918 )
Brief History of Banks.-The name "bank" is derived from the Italian word banco, a bench ; the early Italian banks being in the habit of transacting their business on benches or tables in the market-places of the principal towns.
The First Banking Institution of Importance was the Bank of Venice, which was established in 1171. The Bank of Genoa was projected in 1345, but did not go into full operation until 1407. The Bank of Barcelona was established in 1401, and was the first to institute the system of negotiation of bills of exchange. The Bank of Ham-burg was established in 1619, the Bank of Rotterdam in 1635, the Bank of Stockholm in 1688, the Bank of England in 1694, the Banks of Berlin and Breslau in 1765, and the Bank of North America (by Robert Morris, at Philadelphia) in 1782.
The National Banking System of the United States was organized in 1863, prior to which all banks of issue and deposit were chartered by the several states, and in 1857, 1,400 of these state institutions were in existence.
Different Classes of Banks.óBanks are divided generally into five classes: of deposit, of discount, of circulation, of exchange, and savings banks. Taking them separately, they may be characterized as follows :
Banks of Deposit receive money to keep for the depositor until he draws it out, by checks payable to himself or to others. A person who desires to make a single deposit, to be withdrawn in the same amount, receives from the bank a certificate of deposit. This is payable at any stated time or on demand, and may bear interest. But for other purposes a deposit becomes subject to check as soon as it is made.
Banks of Discount are occupied in discounting promissory notes and bills of exchange, or in lending money on security. Almost all banks have a department embracing these features.
Banks of Circulation issue bills or notes of their own, intended to be the circulating currency or medium of exchange, instead of gold or silver. The notes or bills of the National Banks are guaranteed by the Government, which holds as security bonds belonging to the bank to a still larger amount than their issue of bills, or, as commonly termed, their "circulation." The Government also retains a five per cent fund for immediate redemption.
Only the National Banks issue circulation, be-cause a tax of ten per cent would be levied upon any kind of circulating notes other than those issued by the government, and this tax is sufficient to have an effect prohibitive of other issues.
Banks of Exchange receive money on deposit, and, instead of paying it back to the depositors, make payments by drafts on other banks. They keep money on deposit at the principal trade centers, thus money can be sent to different points at small expense and without risk. They charge one who desires to remit a small amount for their services, and sell him their draft on the place to which the remittance is to be sent.
Savings Banks receive in trust or on deposit small sums of money at a moderate rate of interest. These sums generally are the savings of wage earners, and are thus deposited for profit and safe keeping.
At the end of a certain fixed time the interest due is added to each depositor's account. These interest terms vary with different banks, being one, three, or six months. (See matter under the head of "Compound Bank Interest.")
Each depositor is furnished with a hook showing his deposits from time to time and what he has drawn out. When settling, the depositor is allowed no interest on the last deposit if it has not been in the bank for a full interest term.