Sep 2010 As one of the oldest civilisations on Earth the UK can trace the origins of its banking system back to almost Roman times.
These were, however, very different to the banks and banking systems that we are familiar with today. The advent of the modern bank came after Henry VIII dissolved the monasteries; previous to this the monasteries had always been the proprietors of wealth. After they were gone there was the need for a more formal system. After a lot of different systems being adapted the first proper bank was during the reign of Charles I, after needing somewhere to store the gold seized from the Tower of London.
Banks were not permitted to grow too large owing to a Parliament act restricting this. However, towards the end of the nineteenth century parliament introduced legislation that allowed for three banking divisions: High street banks, merchant banks and building societies.
After the Second World War the banking system gradually became more computerised, this led to a need for a simpler system of organising debits and credits between accounts and different banks. So the bank sort code was introduced, this enabled anyone to identify the bank they were making their debit or credit from easily and without the need to write out the whole bank address. This allowed the majority of these types of transaction to be automated. A bank sort code consists of six numbers, in three sets of two, separated by hyphens.
Before the middle of the 1960s there were countless banks on the high street. After the government gave the go ahead for bank mergers to be permissible, this led to the five large banks that are familiar to all high streets today.
Around the same time the government also made legislation allowing banks not just to be able to offer standard accounts but to be able to offer home loans, mortgages, credit cards etc.
One of the more drastic changes that have been seen in recent years is the deregulation of several acts of parliament regarding the way banks and building societies can raise funds. Building societies had always had to get their funds from deposit accounts. With banks and building societies able to offer the same services this gave way to a blurring of who did what, some suffered, and were therefore taken over by others in mergers.
At the beginning of the twenty first century banks were in a stronger position than they had ever been and financial markets were thriving. Consequently, banks became too free willed in whom they would lend too and made the mistake of offering mortgages to those who could not afford them, or they offered mortgages greater than the value of the property it was secured against, leading to negative equity. This has led to the collapse of some banks and a subsequent recession at the end of the decade.
