Banking Explained – Money and Credit

The international banking system is an enigma.

There are more than 30.000 different banks world wide, and they hold unbelievable amounts of assets.

The top 10 banks alone account for roughly 25 trillion US-Dollars.

Today, banking can seem very complex, but originally, the idea was to make life simpler.

11th century Italy was the centre of European trading.

Merchants from all over the continent met to trade their goods, but there was one problem:

too many currencies in circulation.

In Pisa, merchants had to deal with seven different types of coins

and had to exchange their money constantly.

This exchange business, which commonly took place outdoors benches,

is where we get the word "bank" from;

from the word "banco", Italian for "bench".

The dangers of travelling, counterfeit money and the difficulty of getting a loan got people thinking.

It was time for a new business model:

home brokers started to give credit to businessmen,

while genevese merchants developed cashless payments.

Networks of banks spread all over Europe,

handing out credit even to the church, or European kings.

What about today ?