The Early History of Banking in England (RLE Banking & Finance)

Richard Richards

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136297427
• Edition: 1
• Topic: Economics
• Subtopic: Banks & Banking
• Index: Economics

This is widely acknowledged as a scholarly and well-documented study of early banking in England. It bridges gaps in the early history of English banking and deals with the operations of the pre-Bank of England bankers, the evolution of English paper money and the remarkable transactions of the early directors of the Bank of England. Although the main body of the book concentrates on the 16th and 17th centuries, the volume includes a brief survey of English banking in the 18th and early 19th centuries.

THE EARLY HISTORY OF BANKING IN ENGLAND

CHAPTER I

THE PIONEERS

“In his [Henry VII's] tyme the bankers had their begininge who did invente the merchandisynge exchange, makynge of money a merchandise.” —G. MALYNES, A Treatise of Tripartite Exchange (1610), B.M., Cott. MS., Otho, E.X., fol. 94.

“The Gentlemen of England . . . have too often their houses filled with Scriveners and Sollicitors, who entertain them with the croaking Musick of Procuration and Continuation till they have devoured their Estates.”—J. CARY, Essay on the Coyn and Credit of England (1696), pp. 25–6.

OUT of the business of dealing in foreign moneys, a business indispensable to the traders who frequented the great mediæval continental fairs, there had emerged before the thirteenth century not only a system of offsetting mercantile debts, but also the method of assigning these debts by means of the bill of exchange. Before the third decade of the fourteenth century the Venetian money-changers had developed into recognised keepers of deposits, while a little later they were settling the debts of their customers by book transfers of credit.¹ “It is tolerably clear,” writes a well-known authority,² “that private banking began in Venice as an adjunct of the business of the campsores, or dealers in foreign moneys.” The money-changers, changeurs, or campsores, were the exchange specialists and financial intermediaries of mediæval Europe; the fairs were their clearing houses.

The assigning of mercantile debts by means of the bill of exchange¹ was practised in England in the fourteenth century by merchants of continental extraction,² the wealthiest of whom were important Royal money-lenders.³ But though the Englishman was using this instrument with increasing frequency before the end of the following century,⁴ he does not appear to have carried out any major operations in the “business of exchange” prior to the age of the Tudors. With, however, the expansion of England's trade during the latter part of the Tudor period the transactions of Englishmen in this particular sphere increased so rapidly that by the end of the Tudor régime they were of an outstanding nature. It is, therefore, not surprising to find during the reigns of Elizabeth and James I certain English business men gradually developing into recognised money-lenders, money-changers, bullion merchants, exchange specialists, and financial middlemen.

Of these business men four types—the merchant, the broker, the scrivener, and the goldsmith—became prominent as financial intermediaries. They are the pioneers of the banker's trade in England; the origins of English banking must be sought for in their transactions.

Even in the early years of Elizabeth's reign the term banker, connoting an exchange specialist, was in use in England, and the Elizabethan traders and writers were well acquainted with the operations of these specialists. In 1572 that remarkable critic of the financiers of the day, Dr. Thomas Wilson, carefully examined, in his earnest and thorough Discourse uppon Usurye,¹ the methods of “bankers and exchangers,”² while eight years before the publication of this learned treatise, an observant English economic writer described in detail how “the bankers do cunningly fall the exchange at Antwerp.”³

But the transactions of the Antwerpian bankers were of an extensive nature much earlier in the sixteenth century than the reign of Elizabeth. The Flemish loan negotiations of Sir Stephen Vaughan during his tenure of the office of Royal Agent are striking evidence of the extent of these transactions in the first half of the sixteenth century.⁴ “Two days ago,” wrote the Queen of Hungary on 25th May 1544 to the Imperial Ambassador in London with reference to Vaughan's arrival in the Low Countries, “came one who calls himself the King's Commissioner and seeks in Antwerp to raise for the King [Henry VIII] 100,000 ducats monthly.”⁵ An interesting letter written by Vaughan, which describes how this loan was obtained,⁶ is a typical illustration of the dealings of the Tudor royal agents with the continental bankers.⁷

In Vaughan's time the securities usually accepted by the bankers of Antwerp for English loans were those of Italian mercantile firms established in London, such as the houses of Vivalde and Bonvyce.⁸ This is evidence of an exotic predominance in the embryonic London money market of the first half of the sixteenth century, a predominance which declined in the second half of the same century when Englishmen began to play an important part in international finance. Sometimes, however, even in the first half of this century, English merchants and members of the Privy Council guaranteed the integrity of the Italian house in London whose securities for loans were accepted in Antwerp.¹

Antwerp reached the height of its prosperity between 1500 and 1560,² and during this important period of European commercial expansion its great financial magnates, the Fuggers, Hochstetters, Welsers, Tuchers, Van Dalls, Prowens, Hoffemans, Lyndenas and Rantzaviuses appear to have been always ready to negotiate with the English royal agent.

The wealthiest of these continental financiers were the Fuggers of Augsburg.³ “The Fugger is never from me,” wrote Vaughan to the English Privy Council in September 1546, “the house of Bonvyce . . . pulls me hourly by the sleeve”;⁴ and it was with the firm of Fugger, which by 1508 had established an agency in Antwerp, that more than one of the English royal agents, particularly Sir Thomas Gresham, the greatest of them all, conducted large transactions.

Gresham¹ commenced his loan operations in Antwerp in 1552, operations which have been described in great detail by Burgon.² During the ensuing fifteen years, with the assistance of Sir Richard Clough, his able and zealous Welsh “factor,” he raised in this great financial centre many large loans for the Tudors. Before 1570 this famous “Court banker of Elizabeth”³ had also succeeded in obtaining very substantial State loans in London, loans which are of considerable importance in the genesis of the London money market,⁴ and which prove that by the ‘sixties of the sixteenth century Englishmen undoubtedly possessed the power to engage in high finance.

The surviving records of Gresham's financial activities in the City of London show that he obtained large sums for the use of the State from Englishmen. The following interesting item⁵ illustrates his method of recording these London loans:

Item of S^r Rog^r Martenn,¹ Knyght, the xxvj daie of Novemb^r 1569 to paie the xxvj daie of Maye an° 1570 the somme of xvc^li: more for the brokerage after one p cento some xv^li, more for thinterest after vj upon the hundrethe for vj monethes some iiij^xx xi^li ........................ lmvjcvj^li.

There is a great deal of further documentary evidence relating to the flotation of State loans in the London of Elizabeth. In a list of London residents who in 1589 contributed to a Royal loan of £15,000 at 10 per cent.² there are over a hundred subscribers, Englishmen with hardly an exception. Still later Elizabethan loans lists, compiled by the actual Royal “collectors,” show that in the last decade of the sixteenth century large sums were raised in London by means of the Privy Seal demand note, “loanes,” as they were termed, “upon Privie Seales.”³ These well-preserved later lists⁴ are cogent proofs of the capacity of Englishmen as contributors to State loans in Elizabethan times, and of the striking development of London as a monetary centre after the eclipse of Antwerp and its famous Bourse.

The Privy Seal demand note was usually issued in printed form to specially appointed “collectors” who entered on the note the lender's name, the amount advanced, and the receipt for the same. A Jacobean specimen,⁵ dated 31st July 1604, is headed with the words “By the King”; commences with the phrase, “Trustie and well-beloved”; and demands the sum of £30 to be delivered to John Wyn, Esq., “our collector in our Countie of Carnarvon . . . the loan whereof we do desire to be untill the twenty fourth day of March 1605[6].” Moreover, the note was “an immediate warrant to our Exchequer” to pay the contents to the lender or “his assignes” upon its delivery at the Exchequer of Receipt¹ when the loan was due for repayment. It could thus be assigned, and among the extant specimens there are actual examples of assignments. An Elizabethan specimen for £50,² duly receipted by the “collector,” is indorsed with the signature of an assignee, who received the sum specified on the note at the Exchequer of Receipt. The assignability of the Privy Seal demand note in Elizabethan times is an important monetary phenomenon, for it must be remembered that the bill of exchange payable to order was not recognised as an assignable instrument by the English Courts of Common Law until the post-Restoration era.³

The surviving Royal “collectors’” lists of the subscribers to the State loans⁴ and the Wardens’ Accounts and Court Minute Books of the Goldsmiths’ Company of London⁵ contain numerous illustrations of the financial activities of Elizabethan merchants and goldsmiths.⁶ There are, also, a number of contemporary documents among the Records of the Exchequer of Receipt which show that certain of the later Tudor goldsmiths were important bullion merchants.¹ It was this type of goldsmith—craftsman, bullion merchant and money-lender—who was the immediate forerunner of the goldsmith banker of Stuart London, a banker who became generally recognised in the metropolis and in the provinces as a keeper of deposits, an issuer of promissory notes, and a dealer in bills of exchange and various types of Treasury-Exchequer money orders.

But it does not appear from the available contemporary evidence that the goldsmiths were outstanding figures i...

Table of contents

• Front Cover
• Half Title
• Title Page
• Copyright
• Title Page
• Original Copyright
• Dedication
• CONTENTS
• PREFACE
• LIST OF ABBREVIATIONS
• CHAPTER I THE PIONEERS
• CHAPTER II THE GOLDSMITH BANKERS AND THE EVOLUTION OF ENGLISH PAPER MONEY
• CHAPTER III THE GOLDSMITH BANKERS AND THEIR TRANSACTIONS WITH THE EXCHEQUER
• CHAPTER IV TUDOR AND STUART BANKING SCHEMES
• CHAPTER V THE FOUNDATION OF THE BANK OF ENGLAND
• CHAPTER VI THE EARLY TRANSACTIONS OF THE BANK OF ENGLAND
• CHAPTER VII THE EARLY TRANSACTIONS OF THE BANK OF ENGLAND
• CHAPTER VIII THE SALIENT FEATURES OF ENGLISH BANKING HISTORY IN THE EIGHTEENTH AND EARLY NINETEENTH CENTURIES
• CHAPTER IX CONCLUSION
• APPENDICES
• BIBLIOGRAPHY
• INDEX