A goldsmith banker was a business role that emerged in seventeenth century

London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...

from the London

goldsmith A goldsmith is a Metalworking, metalworker who specializes in working with gold and other precious metals. Modern goldsmiths mainly specialize in jewelry-making but historically, they have also made cutlery, silverware, platter (dishware), plat ...

s where they gradually expanded their services to include storage of wealth, providing

loan In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money. The document evidencing the deb ...

s, transferring money and providing

bills of exchange A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...

that would lead to the development of

cheques A cheque (or check in American English) is a document that orders a bank, building society, or credit union, to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The person writing ...

. Some of the concepts were brought over from Amsterdam where goldsmiths would provide gold storage and issue chits that started to be used as a means of exchange. The goldsmith banker became a key development in the

history of banking The history of banking began with the first prototype banks, that is, the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. This was around 2000 BCE in Assyria, India and Sumer. Later, in a ...

that would lead to modern banking.

History

Their emergence was gradual: exchanging goldsmiths, who dealt in coinage, started to become recognised as carrying out a different activity from a working goldsmith in the 1630s. Prior to that date banking in London was principally carried out by foreigners, generally Italians, Germans, and the Dutch. However this innovation led to an indigenous banking tradition. The seizure of bullion held on safe deposit at the

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in 1640 created anxiety about the safe storage of valuables, which was further increased during the

English Civil War The English Civil War or Great Rebellion was a series of civil wars and political machinations between Cavaliers, Royalists and Roundhead, Parliamentarians in the Kingdom of England from 1642 to 1651. Part of the wider 1639 to 1653 Wars of th ...

, which also disrupted the regular work of the working goldsmiths. They soon developed accountancy practices to keep track of deposits. Then they also started paying interest on deposits so they could loan out increasing quantities of gold. The depositor was given a receipt with their name and the amount of the deposit. Such receipts became negotiable and thus evolved into the bank note. Whereas before the Civil War the London goldsmith bankers had largely been creditors, following the restoration in 1660 they became the biggest debtors in

England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It is located on the island of Great Britain, of which it covers about 62%, and List of islands of England, more than 100 smaller adjacent islands. It ...

. As the system evolved, the goldsmith bankers developed a form of

Fractional reserve banking Fractional-reserve banking is the system of banking in all countries worldwide, under which banks that take deposits from the public keep only part of their deposit liabilities in liquid assets as a reserve, typically lending the remainder to ...

, which whilst still restricted as individuals, enabled them ''as a group'' to create credit out of thin air. In the 1660s George Downing, the

Secretary of the Treasury The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal a ...

, implemented a project outlined by Sir William Killigrew to side-step the power of the Goldsmith bankers. In
A proposal, shewing how this nation may be vast gainers by all the sums of money, given to the Crown, . . .
' (1663) Killigrew had advocated that the government issue £2m in transferable bonds, with the interest being covered by a yearly tax of £300k. The bonds would be for denominations between £5 and £100, mostly in the smaller denominations. The state would provide a regulatory framework to avoid fraud and ensure they were accepted as legal tender. However, by 1672 most of the orders were in the hands of a handful of such bankers, and so ended up increasing their power.

References

{{reflist 17th century in London Banking occupations History of banking

History

Further reading

References