Bank

[4] Banking in its modern sense evolved in the fourteenth century in the prosperous cities of Renaissance Italy but, in many ways, functioned as a continuation of ideas and concepts of credit and lending that had their roots in the ancient world.

[8][9] The present era of banking can be traced to medieval and early Renaissance Italy, to the rich cities in the centre and north like 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.

Merchants started to store their gold with the goldsmiths of London, who possessed private vaults, and who charged a fee for that service.

Since the promissory notes were payable on demand, and the advances (loans) to the goldsmith's customers were repayable over a longer time-period, this was an early form of fractional reserve banking.

The promissory notes developed into an assignable instrument which could circulate as a safe and convenient form of money[15] backed by the goldsmith's promise to pay,[16][need quotation to verify] allowing goldsmiths to advance loans with little risk of default.

[17][need quotation to verify] Thus the goldsmiths of London became the forerunners of banking by creating new money based on credit.

[25] In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation).

When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general.

Examples of statutory definitions: Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument.

This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques .

Non-banks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account.

Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle.

In the past 20 years, American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions.

After the financial crisis of 2007–2008, regulators force banks to issue Contingent convertible bonds (CoCos).

Owing to their capacity to absorb losses, CoCos have the potential to satisfy regulatory capital requirement.

Fee revenue generated by global investment in banking totalled US$66.3 billion in 2009, up 12% on the previous year.

[39] This is an indicator of the geography and regulatory structure of the US, resulting in a large number of small to medium-sized institutions in its banking system.

The statutes and regulations in force within a particular jurisdiction may also modify the above terms or create new rights, obligations, or limitations relevant to the bank-customer relationship.

Some types of financial institutions, such as building societies and credit unions, may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules.

Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing.

Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut.

In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs.

Banks also face ongoing pressure from shareholders, both public and private, to achieve earnings and growth projections.

Fixing bugs and creating interfaces costs huge sums, as knowledgeable programmers become scarce.

The phenomenon of disintermediation had to dollars moving from savings accounts and into direct market instruments such as U.S. Department of Treasury obligations, agency securities, and corporate debt.

Accepting a significant quantity of such deposits, or "hot money" as it is sometimes called, puts a bank in a difficult and sometimes risky position, as the funds must be lent or invested in a way that yields a return sufficient to pay the high interest being paid on the brokered deposits.

Such deposits, combined with risky real estate investments, factored into the savings and loan crisis of the 1980s.

Increases in telecommunications and other financial technologies, such as Bloomberg, have allowed banks to extend their reach all over the world since they no longer have to be near customers to manage both their finances and their risk.

The growth in cross-border activities has also increased the demand for banks that can provide various services across borders to different nationalities.