 Banking used to be relatively simple. Archaeologists
believe that the first banks were probably religious temples in which gold was stored in the form of
easy-to-carry compressed plates. Temples
were chosen because they were usually well built and held sacred, thus
deterring would-be thieves. Merchants would therefore use the temples as safe
repositories for their wealth and there is even evidence of loans
from ancient Babylon that were made by temple priests to
merchants.
Similarly, ancient Greek temples also conducted financial
transactions such as loans, deposits, currency exchange, and validation of
coinage. It was Ancient Rome though
that perfected the administrative aspect of banking and introduced greater
regulation of financial institutions and financial practices. At this time
charging interest on loans and paying interest on
deposits also became more highly developed and competitive.
Modern Western
economic and financial history is usually traced back to the coffee houses of London. The London Royal Exchange, for example, was established in
1565 and at that time moneychangers were already called bankers though the term
‘bank' usually referred to their offices and did not carry the
meaning it does today. It was the coffee houses that first came up with the
idea of producing lists of share prices or shipping data which made it possible
for the first time to compare the relative success (and liquidity) of bankers
and to spot investment opportunities.
Around the time of Adam Smith (1776)
there was a massive growth in the banking industry. Within the new system of
ownership and investment, moneyholders were able to reduce the State's
intervention in economic affairs, remove barriers to competition, and, in
general, allow anyone who had access to capital to become a ‘capitalist'. It
wasn't until over 100 years later, however, that US companies began to apply
Smith's policies on a larger scale and shift the financial power from England to America.
After a period of relative stability throughout the
sixties and seventies ‘global banking' and capital market services proliferated
during the 1980s and 1990s as a result of not only a great increase in demand
from companies, governments, and financial institutions for banking services
but also because financial market conditions were buoyant and bullish. These
factors plus growing internationalisation and opportunity in financial services
has entirely changed the competitive landscape and today many banks have
demonstrated a preference for the ‘universal banking' model so prevalent in Europe. Universal banks are free to engage in all forms of financial services and therefore function as a ‘one-stop' supplier of both retail and wholesale financial services.
This growth and opportunity also led to an unexpected outcome - the entrance into
the market of other non-bank financial intermediaries. Large corporate players
began to find their way into the financial service community resulting in
massive competition to the established banks. The main services offered
included insurance, pensions, share dealing and money market advice, loans and
credit facilities. Indeed, by the end of 2001 the market capitalisation of the
world's 15 largest financial services providers included four non-banks. This
trend shows no sign of abating and today more and more organisations including
supermarkets (e.g Tesco's), Retail outlets (e.g Marks and Spencer) and
conglomerates (e.g Virgin) try to be ever more innovative in their consumer
offerings.
Today the Banking and Finance sector continues to change at an almost
alarming rate. Over the last few years we have seen a steady growth in the
success of electronic, no-frills, non-branch banking (just look at the success
of First Direct) There are regular debates on the pro's and con's of the
cashless society, credit card spending runs
into billions and cheque books may soon be a thing of the past. In addition the
concept of charging for current accounts looks to become main stream while the
ever increasing threat of identity fraud has now become a major crime and a major
concern for the banking fraternity.
One
thing is certain. The rate and pace of change shows no sign of slowing down and
it is therefore essential that candidates seeking good positions within the
Finance industry keep up to date with not just the technological and
legislative aspects of the job but also the wider global economic and
sociological elements impacting the industry. Recruiters aiming to place these
candidates must similarly keep abreast of all the changes that are today
changing the face of banking so that they too, just like those ancient Romans,
stay at the forefront of their profession.
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