IV. Text a

A Brief History of Banks

Banks are among the most important financial institutions in the economy and are essential businesses in thousands of local towns and cities. They are the principal source of credit (loanable funds) for households (individuals and families) and for most local units of government (school districts, cities, etc.).

Linguistics (the science of language) and etymology (the study of the origins of words) suggest an interesting story about banking's origins. Both the Old French word banque and the Italian word banca were used centuries ago to mean a “moneychanger's table”.

When did the first banks appear?

The idea of banks began more than 2,000 years ago in Babylon. In those days moneylenders made loans to people. In Greece and Rome banks made loans and accepted deposits. They also changed money. (In the Bible Jesus famously drove the money changers out of the temple in Jerusalem).

However with the collapse of the Roman Empire trade slumped and banks temporarily vanished. However banking began to revive again in the 12th and 13th centuries in the Italian towns of Florence and Genoa.

The first bankers were goldsmiths. Several centuries ago, money consisted primarily of gold coins. Wealthy people found the amounts of gold they accumulated quite heavy. An even bigger drawback is that thieves love gold; stolen gold pieces (or modern coins for that matter) are rarely identifiable. Looking around for safe places to store their wealth, people in medieval Europe thought of goldsmiths. Goldsmiths made jewelry, gold statues, and other precious goods. Most also had some excess space in their heavily guarded vaults.

In England banks developed in the 17th century. Sometimes people deposited their money with goldsmiths for safety. The goldsmiths issued a note promising to pay the bearer a certain sum on demand. In time people began to exchange these notes instead of coins because it was easier and safer. Goldsmiths began to lend the money deposited with them in return for a high rate of interest. They also paid interest to people who deposited money in order to attract their savings.

However not only individuals borrowed money. Governments also needed to borrow, especially in wartime. The government borrowed money from wealthy individuals and later repaid them with interest from taxation.

However at the end of the 17th century the cost of fighting a war with France was colossal. So in 1694 the Bank of England was founded to provide a loan to the government.

The Bank of England is sometimes called the 'Old Lady of Threadneedle Street'. In fact it moved to Threadneedle Street in 1734.

Modern banks began with the Bank Charter Act of 1844. The Act split the Bank of England (which was still legally a private bank) into two departments - a banking department and an issuing department. From then on the Bank of England could only issue notes if they were backed up by gold or government securities.

The Bank Charter Act also forbade new banks to issue bank notes. When banks merged they lost the right to issue bank notes. So gradually the Bank of England became the only bank in England that could issue notes.

V. Find in the text the equivalents of the following.

loanable funds, to vanish, to excess, to slump, drawback, to accept, to revive, to accumulate, to deposit, money, bearer, to split, to merge, loan, guarded vault, temple, to lend, to borrow, moneylender.