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27-06-2017, 08:10 PM

icse maths project on banking

jaseela123d · 30-06-2017, 10:33 AM

A bank is a financial institution that accepts deposits from the public and creates credit. Loan activities can be carried out directly or indirectly through the capital markets. Because of their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks have liquid assets equal to only a portion of their current liabilities. In addition to other regulations designed to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Banking in its modern sense developed in the fourteenth century in the prosperous cities of Renaissance Italy, but in many ways it was a continuation of ideas and concepts of credit and loans that had their roots in the ancient world. In banking history, several banking dynasties - notably the Medicis, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds - have played a central role over many centuries. The oldest existing retail bank is Banca Monte dei Paschi di Siena, while the oldest existing merchant bank is Berenberg bank.

Banking began with the first prototype of dealer banks in the ancient world, which lent grains to farmers and merchants who transported goods between cities. This began around 2000 BC in Assyria and Babylon. Later, in ancient Greece and during the Roman Empire, temple-based lenders made loans and added two major innovations: they accepted deposits and exchanged money. Archeology of this period in ancient China and India also shows evidence of the activity of money lending.

The origins of modern banking go back to medieval Italy and early Renaissance, to the rich cities in the center and north as Florence, Lucca, Siena, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. One of the most famous Italian banks was the Medici Bank, created by Giovanni di Bicci de 'Medici in 1397. The Bank of St. George, the first known state deposit bank, was founded in 1407 in Genoa, Italy.

Modern banking practices, including fractional reserve banking and ticketing, emerged in the seventeenth and eighteenth centuries. Merchants began to store their gold with goldsmiths in London, who had private vaults, and charged a fee for that service. In exchange for each deposit of precious metals, the goldsmiths issued receipts certifying the quantity and purity of the metal they had as deposit; These receipts could not be assigned, only the original depositor could collect the goods stored.

Little by little the goldsmiths began lending money on behalf of the depositor, which led to the development of modern banking practices; The promissory notes (which became bank notes) were issued for the money deposited as a loan to the goldsmith. The goldsmith paid interest on these deposits. Since the promissory notes were paid in cash and the advances of the goldsmith's customers were repayable in the long term, this was an early form of fractional reserve banking. The promissory notes became an assignable instrument that could circulate as a safe and convenient form of money backed by the promise of the goldsmith to pay , allowing the goldsmiths to advance loans with little risk of default. Thus, goldsmiths in London became the forerunners of banking through the creation of new funds based on credit.

The Bank of England was the first to begin the permanent banknote issuance in 1695. The Royal Bank of Scotland established the first overdraft facility in 1728. At the beginning of the nineteenth century a London clearing house was established to allow multiple banks To settle the transactions. The Rothschilds pioneered large-scale international finance, financing the purchase of the Suez Canal for the British government.

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