In the beginning
A question often asked by collectors is which is the 'oldest bank' - is it Messrs Hoare & Co or Child's Bank? In fact the oldest known banking house in the world is that of Egibi and Son in Babylon, founded in the reign of Sennacherib about 700BC.
For those interested in tracing the first English cheque (or rather drawn note) however, we must set our sights more modestly. As recently as 1958 eminent authority would have it that the earliest known English cheque was in the possession of Messrs Child & Co and was dated 17 May 1670. But before long another candidate appeared - a note of 16 February 1659, drawn on Messrs Clayton and Morris, scriveners, bankers and estate agents in Cornhill. Thus accepted wisdom at present points us no further back than the Stuart Goldsmith bankers to be found from about the time of Charles II and the Restoration of the Monarchy. The gap between the pioneering of banking in England ad the age of Samuel Pepys devoid of any such species of a Bill of Exchange is simply too wide to be wholly credible.
The Medieval Scene
Venetian money-changers kept deposits, apart from the business of campsores or foreign money dealers, early in the fourteenth century. At the same time in England, mercantile debts were being assigned through the medium of Bills of Exchange by eg: the merchants of the Staple. Even earlier, Italian bankers in England made loans to Edward I and Edward II. But, according to one C Malynes in "A Treatise of Tripartite Exchange" of 1610, it was "in his [Henry VIII} tyme the bankers had their beginnings who did invente the mechandisynge enchange and makynge of money…" Hence we look to the Tudors as the pioneers of English banking in a shape recognisable to current thinking.
With the relatively stable period of government under the Tudors came a dramatic expansion of trade both at home and abroad. Money was desperately needed and, at a price, financiers were willing to oblige with loans. The repeat of the Usury Laws pointed the way. The Crown itself shared this need and kept its Royal Agent busy. Today, the names may seem bizarre, but, to the likes of Sir Stephen Vaughan, King's Commissioner - Messrs Fugger, Hofmans, Hockstetter, Rantzaviuses and Van Dalls would be well known as continental financiers working from Antwerp.
In considering Tudor money-men one name stands out. Sir Thomas Gresham has been called the father of English banking. Gresham, the greatest merchant in London, served Henry VIII; Edward VI; Mary; and Elizabeth I. Fortunately, his journal (1546-52) survives as do many contemporary documents and letters. We see clearly how, in conjunction with Sir Richard Clough, loans were obtained from Antwerp on a large scale. But in 1561, his efforts procured a loan of £30,000 at 10% from twelve Englishmen. As Antwerp declined, so London rose as the key financial centre. By 1563, Gresham was carrying on large scale transactions from the premises with the sign of the grasshopper in Lombard Street, the original of which was destroyed in the Great Fire of London in 1666. The first Royal Exchange, built by him, was opened by Queen Elizabeth I in 1571.
Privy Seal Notes
Increasingly money was raised by 'loanes upon Privy Seales". A demand note was issued in printed form to appointed collectors by whom the lenders name, amount advanced and receipt were entered. Upon delivery at the Exchequer of Receipt when the loan was due for repayment, such constituted an immediate warrant to the Exchequer to pay the contents, not only to the lender, but significantly to an assignee. It was over half a century later before Bills of Exchange were recognised by English Common Law Courts as assignable. In lieu of Privy Seal demand notes were promissory notes (or "Bills Obligatory") given as a sealed acknowledgement of the loan. One, dated 1581, yet extant, is seen to acknowledge a loan of £1000 received, on Royal behalf, by Leicester from Sir Richard Martin, goldsmith, bullion merchant and Warden of the Mint.
But some caution is needed. Most Tudor goldsmiths remained just that, ie jewellers and dealers in precious stones, silver and gold. For most financial transactions one looked to the merchant bankers and scriveners. Incidentally the less scrupulous pawnbrokers were hardly popular as the Elizabethan description "retaylinge brogger", "fripperer" and "thievinge broker" testify. In his "The Anatomie of Abuses" in 1583, Stubbs refers to "This dunghill trade of brokerie newly sprung up and coined in the devil's minting house." Interest rates on loans ran between 60% and 100%.
It is to the scriveners that we look as regular receivers of money or estates into their custody on deposit. Sums so deposited were loaned out at interest to "poor petitioners". Indeed the more formal title of "Money Scriveners" was then used to describe their activities which encompassed the essentials of banking as we understand it. Hence Sir Dudley North in his "Discourse upon Trade" of 1691 explains: "The Merchants and Gentlemen keep their money… with… Scriveners and they depend upon a course of trade whereby money comes in as fast as it is taken out. (On a more specialist level outside London operated the wool brogger and the corn brogger)> So it was the scrivener who developed from a writer of bonds, "Bills Obligatory" and contracts into the first English bankers of deposit well before the goldsmith evolved through a bailee into a deposit keeper/user. And this function was certainly carried out in the reign of James I. Pausing at this point then - would there not have been notes drawn on those bankers half a century or more before Messrs Clayton and Morris? Where are they?
Payment Orders etc
But, when looking for the earliest English cheques, there are other candidates which need to be examined. In Tudor times there was a section of the Exchequer of Receipt called Pell Office who first Order Books survive from 1597-99. A payment order under the authority of the Privy Seal and signed by the Lord Treasurer was issued to eg the Army Paymaster who transmitted it to the recipient who in turn presented it for payment. (We needs must in passing, distinguish such Treasury payment orders in favour of a creditor from (a) repayment orders of loans or tallies - variously so called - which were negotiable interest bearing securities, and (b) a fiduciary order or Order of the Exchequer, issued particularly from 1667, which have been described as the origin of official paper money in England.) Payment orders (or debentures as they were confusingly sometimes called) are particularly found in Restoration times issued to creditors for the workmanship on, or for ordnance provided for His Majesty's ships. Some were assigned to goldsmith bankers such as Vyner and Backwell. From 1612 the payment order would be signed by at least two Commissioners of the Treasury. Early (Tudor and Stuart) orders were commonly written by the auditor.
Bank of the Exchequer?
So let us remember the definition of a cheque as a bill of exchange, drawn on a banker payable on demand. (S73 Bills of Exchange Act 1882), and a banker may be incorporated or not but must carry on the business of banking, and a bank is an establishment which trades in money by investing, lending or exchanging it. We do not normally think of the Exchequer as a bank but it could possess most of the requisite qualities. Bankers commonly accept money from customers and place to their credit, honour cheques or orders and keep current accounts (besides other manifold activities). If we say that to be accepted as a banker one's primary functions need to be such, what of the many of the many jewellers (goldsmiths), already acknowledged as bankers? Reluctantly to use a Scottish phrase, the verdict must be 'not proven'. More research is needed. At the very least though, demand notes in themselves are historically significant if not as cheques then as their precursors.
Copyright 2010 BBHS