Banks

In their earliest form, banks were temples and palaces where goods and commodities were stored. The first of these to be considered a real type of bank was in Mesopotamia and coincides with the development of writing, which presumably was used as a method for keeping accounts. Banks also became private institutions apart from religious sites about this time and the earliest rules and regulations governing them were included in the Code of Hammurabi.

The earliest institutions that resemble modern banks were established in Venice nearly 700 years ago. These were places to house coins and other precious materials held as collateral on loans. These institutions lent money with a 4 percent interest rate and were therefore able to make a profit.

Bank of England

The central bank of England is the Bank of England founded in 1694 by Scotsman William Patterson. In that day, the country's finances were in poor condition and the bank was granted a charter for itself and its backers by lending money to the government on which it received fees at an annual interest rate of 8 percent. The charter also granted the bank the right to issue its own notes, quite literally a license to print money.

Other private banks were established on the same model and began issuing their own notes until the Bank of England exercised its political muscle (after all, the government owed it money) and was granted the exclusive right to print currency. The United States Federal Reserve Bank was established on these same principles and fills much the same function.

Modern Banks

Today, banks offer an array of financial services and have various accounts for customers on which it pays interest for money deposited as an inducement to attract capital. They also charge interest on money borrowed. They also serve as storehouses for currency. Famed bank robber Willie Sutton was once asked why he robbed banks, to which he replied, "That's where they keep the money."

During the Great Depression of the 1930s many banks lost all their assets and were forced to close, taking the deposited savings of many with them. That led to Federal legislation that guarantees the deposited assets of lending institutions and has served to stabilize the national economy.