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Gradually the goldsmiths began to lend the money out on behalf of the depositor, which led to the development of modern banking practices; promissory notes (which evolved into banknotes) were issued for money deposited as a loan to the goldsmith.[5] The goldsmith paid interest on these deposits. Since the promissory notes were payable on demand, and the advances (loans) to the goldsmith’s customers were repayable over a longer time period, this was an early form of fractional reserve banking. The promissory notes developed into an assignable instrument which could circulate as a safe and convenient form of money backed by the goldsmith’s promise to pay,[6] allowing goldsmiths to advance loans with little risk of default.he definition of a bank varies from country to country. See the relevant country pages under for more information.Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Thus, the goldsmiths of London became the forerunners of banking by creating new money based on credit.



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bank loan insurance

Gradually the goldsmiths began to lend the money out on behalf of the depositor, which …