Bank is a financial firm that accepts people’s deposits and uses them to make loans and investments. People keep their savings in banks for several reasons. Funds are generally safer in a bank than elsewhere. A bank checking account provides a convenient way to pay bills. Also, funds deposited in most bank accounts earn interest income for the depositor. People who deposit money in a bank are actually lending it to the bank, which typically pays interest for the use of the funds.
Banks help promote economic growth. Nonfinancial firms borrow from banks to buy new equipment and build new factories. People who do not have enough savings to pay immediately the full price of a home, an automobile, or other products also borrow from banks. In these ways, banks help promote the production and sale of goods and services, and so help create jobs.
Like all businesses, banks try to earn profits. They have traditionally done so by accepting deposits at one rate of interest and then lending and investing those funds at a higher rate. But large banks also earn fees from other activities, such as brokerage (buying and selling securities for other investors) or selling insurance.
Banking is nearly as old as civilization. The ancient Romans developed a relatively advanced banking system to serve their vast trade network, which extended throughout Europe, Asia, and much of Africa.
Modern banking began to develop during the 1200′s in Italy. The word bank comes from the Italian word banco, meaning bench. Early Italian bankers conducted their business on benches in the street. Large banking firms were established in Florence, Rome, Venice, and other Italian cities, and banking activities slowly spread throughout Europe. By the 1600′s, London bankers had developed many of the features of modern banking. They paid interest to attract deposits and loaned out a portion of their deposits to earn interest themselves. By the same date, individuals and businesses in England began to make payments with written drafts on their bank balances, similar to modern checks.
This article discusses banks throughout the world. Because U.S. banks have unique features, however, this article also includes sections on the regulation and the history of banks in the United States. Banks in the United States have been more strictly regulated than banks in many countries as a result of the numerous bank failures that occurred in the United States during the Great Depression of the 1930′s. The United States also has more banks and banking assets than any other country in the world.