The Oldest Banks in the World
Everytime you turn on the news or open the paper, it seems like another bank has folded or been merged into the embrace of another, larger concern. Here are a few that have withstood the financial crises of centuries past. Although at least one may not be around for much longer.
Banca Monte dei Paschi di Siena Siena, Italy
Established in 1472 to grant loans to “poor or miserable or needy persons,” Monte di Pieta, or Monte Pio as it was then known, translates as mountain of piety. The idea for a lending institution that catered to the needy came from the Franciscan Friars who advocated interest-free loans to the needy. That idea had been tried as early as the 14th Century when the Michael Northburgh, the Bishop of London, left 1000 marks of silver to establish a bank that would lend money on pawned objects, without interest, providing that the expenses of the institution be defrayed from its foundation capital. The capital was eventually consumed, and the bank closed. The mercantile families of Siena who started the bank doubtless had this in mind when they established the interest rate at 7.5 percent.
The bank was awarded a new charter after Florence’s Medici family was given the Republic of Siena for its support of Emperor Charles V in a long civil war. In 1624, then, the new institution was founded, which was to be managed by eight citizens belonging to the nobility. The bank expanded into agricultural and business loans that were guaranteed by a lien on income from the public pasture lands in Maremma, called the “Dogana dei Paschi.”
Berenberg Bank Hamburg, Germany
Germany’s oldest private bank was founded in 1590 by Hans and Paul Berenberg, cloth traders from Antwerp who fled religious persecution in Holland to settle in Hamburg.
At the time there was no functioning banking system so traders financed the transactions themselves, granting loans to customers and making advance payments on the deliveries of their suppliers. The company grew along with the city of Hamburg, which remained neutral during the Thirty Years War and was able to expand into a major European trading center, establishing and maintaining alliances with merchants in the Netherlands, France, Spain and Portugal in the west, with Scandinavia in the north, with Russia in the east and with Italy in the south.
The large number of different currencies funneling through the city led Cornelius Berenberg, the third generation leader of the business, to expand into the exchange business. Cornelius also began taking on insurance transactions.
With a current balance sheet of 3,6 billion euros, assets of more than 19 billion euros under management, capital of 155 million euros and more than 800 employees, Berenberg remains one of Germany’s leading private banks.
Bank of Sweden Stockholm, Sweden
Sveriges Riksbank is the world’s oldest central bank, responsible for conducting monetary policy and issuing Sweden’s official banknotes.
The first real banknotes were issued by Stockholm Banco in 1661 by founder Johan Palmstruch who came up with the idea of facilitating the management of money by issuing “credit notes,” interest-free IOUs in specific amounts that were meant to correspond to money deposited in the bank The banknotes were a great success, though the bank eventually failed after Palmstruch issued too many notes in the form of unsecured loans.
In 1668 the Sveriges Rikes Standers Bank, the Bank of the Estates of the Realm, was founded. By the authority of parliament, the bank took over banking in Sweden. It was a state institution and adopted the organization of the old bank with some differences. The old bank had been controlled by the government and was governed by a director. The new bank was controlled by parliament and was governed by a politically appointed board.
The Riksbank became the sole issuer of Swedish banknotes in 1904. Prior to that, each bank issued its own notes.
C. Hoare and Co. London, England
Established in 1672 by Sir Richard Hoare, the bank began as a goldsmith under the sign of the golden bottle in Cheapside. Goldsmiths had secure premises and had always been the storehouses for cash and valuables. With the recent repeal of usury laws, which banned the lending of money for interest, Richard Hoare was able to begin lending money to customers for interest.
The bank remains a family-owned and -managed bank, the sole survivor of the private deposit banks which were established in the 17th and 18th centuries. Customer service has been the bank’s hallmark since its founding. Stories of extraordinary service abound, like the time a banker paying a private call to a customer delivered a fur coat to the customer’s daughter so she could wear it that evening to the opera. Or the time the bank sent bulletins to a customer’s mother when he was off on a six-month rafting tour of the Congo. The bank refused to sign on to a code established by the British Bankers Association believing that the code would entangle it in red tape. Complaints have always been immediately referred to a partner, a member of the Hoare family with full authority to act, and taken care of on the spot.
Halifax Bank of Scotland Edinburgh, Scotland
Although it has survived European revolutions, agricultural depressions, two world wars, stock market crashes and numerous recessions, Scotland’s oldest bank may not be around much longer. Plans are underfoot for a merger with Lloyds TSB as the bank struggles to survive the greatest upheaval in financial markets since 1929.
The Bank of Scotland was established in 1695 by an Act of the Scottish Parliament, the first bank to be established in Scotland, and one of the first in the UK.
The Bank was set up primarily to help develop Scotland’s trade; its 172 original shareholders came mainly from Scotland’s political and merchant elite who needed a banking system which would offer long-term credit and security.
In 1696, Bank of Scotland became the first bank in Europe to successfully issue paper currency. These first notes were issued in denominations of £5, £10, £50 and £100 - the first £1 note didn’t appear until 1704. The Bank’s right to issue notes has been maintained to the present day.
Under the terms of its founding Act, the Bank had been granted a banking monopoly in Scotland for 21 years. After the monopoly expired, a rival bank - the Royal Bank of Scotland - was founded in 1727 by Royal Charter. There followed a generation of intense competition as the two banks tried to drive each other out of business.
During the Jacobite Rebellion of 1745, the Bank was forced to close its doors when Bonnie Prince Charlie’s army occupied the city of Edinburgh. All the Bank’s papers and valuables were transferred to Edinburgh Castle for safe-keeping, until the rebel army left several weeks later.
In 2001, the bank merged with Halifax, a former building and loan society, to become HBOS plc.
The Bank of New York Mellon New York
The bank began with a small advertisement in The New York Packet announcing plans to start New York’s first bank. Eight years later, it was the first company to be traded publicly when the New York Stock Exchange opened in 1792.
The bank’s constitution was written by Alexander Hamilton, who envisioned an institution that would support the goals of the government, address the needs of the local merchants and residents and spur the growth and development of the community at large. For the first 15 years of its existence, the bank financed virtually all of New York City’s commercial activity, and most importers of cargo entering the Port of New York turned to the Bank for financing.
The bank helped fund the Morris and Erie Canals and financed the steamboat companies that sailed those waterways. As the industrial age took hold, the bank invested in nearly every railroad and utility, as well as in the construction of the New York City subway system.
In 2007, the bank merged with the Mellon company, which as T. Mellon and Sons of Pittsburgh had provided backing for such companies as US Steel, Alcoa and Westinghouse in the early days of their founding.
This entry was posted on Tuesday, December 2nd, 2008 at 5:52 am and is filed under Banks and Banking. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
