Banking in Ancient Greece

Banking is considered as one of the oldest activities known to humankind, even preceding the invention of coinage by several thousand years.

Coinage – an Invention That Created the Need for Professionals

By inventing coins in the 7th century BC Lydia the ancient Greeks gave a new impetus to the development of banking. It was not long after that almost every Greek city-state (“poleis”) began to forge its own coins as a mark of political independence. The result was that the markets of the ancient world soon became overwhelmed with a multitude of coins of different systems of weights and denominations, many of which were impure and counterfeit.

The First Professional Bankers in History

In order to introduce order in this turmoil and facilitate trade, in the 6th century BC Greece were born the first professional bankers in history. They were called “trapezites” (pl. “trapezitai”) after the table (“trapeza”) on which they handled money. The duty of these bankers, in the beginning, was to test the validity of the coins and to exchange currencies of different Greek poleis. As time went on and their reputation grew the trapezitai began to cover other activities. With the practice of receiving money on deposits and safekeeping, they stopped being ordinary moneychangers and paved the way to become bankers in the full sense of the word.

Ancient Greek agora or marketplace was a place of social gatherings and various business transactions

Perhaps the crucial precondition for the ascent of the banking profession was a mutual dependence between business and ethics. In these times the banker had to be known as a man of high standards and strict integrity if he wanted to gain the confidence of the people to entrust him with their assets.

Trapeza

The ancient Greek bank or “trapeza” was placed in close proximity to the agora, the economic and cultural center of Greek poleis, to be within reach of the clients. The most impressive banks were strong and reliable structures with facilities for conducting banking operations and for the storage of valuable goods.

Touchstone

Both individuals and governments knew to reduce the purity of precious metals by alloying them with cheaper metals. Thus the bankers relied on touchstones – a small black siliceous stone convenient for holding in one hand ─ to test the purity of gold and silver coins. The degree of purity was checked by comparing the color of streaks left on the touchstone by a metal of unknown purity with that made by a metal of known purity.

Banking Personnel

In running a business the trapeza was operated by an owner, who had to be a free citizen, and by auxiliary personnel made of well-trained slaves and freed-men whose number and charge greatly depended on the business scope and its needs.

Functions of the First Bankers

Along with the testing of coins, exchanging money, and taking deposits, the banking business of the ancient Greeks soon extended to more complex transactions. Lending money at interest emerged as the core occupation of the ancient bankers. The interest rate of 12 percent per year was the prevailing rate of interest on ordinary loans. Maritime loans involved greater risks and belonged to a completely different category of lending for which interest rates ranged between 12 and 100 percent, depending upon the destination and season of travel. Loans were usually collateralized by mortgages on valuable property depending on the social status of the clientele − such as real properties, merchant vessels, mining plants slaves, etc. Although the financial activities of the ancient Greek bankers were considerable and covered various functions, the invention of more demanding clearing systems was postponed for future times.

Contrary to common belief, slaves who worked for the banks could enjoy great authority and importance in business circles. Moreover, due to their opportunities for manumission and inheritance, they represented the most socially mobile businessmen in ancient Greece.