Nowadays the banking system is incredibly complex, worldwide financial institutions rely on each other, governments, and their customers to continue operating their services, but where did this system come from, and how did it become so complicated?

Scholars believe that the first banks were probably religious temples in the ancient world, and may have been established as far back as five thousand years ago. Banks probably predated the invention of coined money, and in their earliest incarnation may well have been religious controlled warehouses that stored the product of agriculture. With the discovery and use of

precious metal, coinage may have developed. At any rate, temples and palaces were the safest places to store precious metals and other goods of value as they were constantly attended, well constructed, and there were religious deterrents to would-be thieves.

The earliest extant records of loans comes from the 18th century BC in Babylon. Babylon’s banking system, in fact, was so advanced that the first recorded system of laws – known today as Hammurabi’s Code – involved a set of regulations governing how banks should operate.

There is also evidence of banking in Ancient Greece. Temples conducted financial transactions such as loans, deposits, validation of coinage and even currency exchange, based upon weighing of comparative coins for their precious metal content. There is even evidence of credit and cheques, with credit notes being written in one city and then cashed in another.

In the fourth century in Egypt grain has been used as a form of money in addition precious metals and state granaries functioned as banks. When Egypt was conquered by the Greeks the numerous scattered government granaries were transformed into a network of grain banks, centralised in Alexandria where records were kept for the entire state.

As with so many of the other foundations of western civilisation it was the Romans who perfected the administrative aspects of banking and imposed greater regulations on financial institutions and practices. Charging interest on loans became highly developed and similarly competitive. Romans preferred to operate cash transactions. This temporarily caused the breakdown of the system when Roman banks rejected some forms of coinage produced by the Imperial mint.

The banking system in Rome broke down with the rise of Christianity which deemed interest charging to be a sin. Before this the Jewish Torah criticised interest taking. There was however the common understanding that Jews were forbidden to charge interest on loans made to other Jews, but allowed to charge interest on transactions with Gentiles.

Nowadays interest taking is an accepted part of day-to-day life. Banks compete with each other by trying to offer high interest rates on bank accounts, and low interest rates on unsecured loans and mortgages. For some of the best deals on personal loans take a look at Alliance and Leicester and ASDA Finance.