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A common definition of a bank is a financial intermediary that accepts transfers and most important creates deposits This includes such depository institutions as central banks commercial banks savings and loan associations and mutual savings banks Banks are most frequently organized in corporate form and are owned either by private individuals governments or a combination of private and government interests Although noncorporate banks-that is single proprietorships and partnerships-are found in other countries since 1863 all federally chartered banks in the United States must be corporations Only a few states permit formation of noncorporate banks All countries subject their banks however owned to government regulation and supervision normally implemented by central banking authorities Early Banking Many banking functions such as safeguarding funds lending guaranteeing loans and exchanging money can be traced to the early days of recorded history In medieval times the Knights Templars a military and religious order not only stored valuables and granted loans but also arranged for the transfer of funds from one country to another The great banking families of the Renaissance such as the Medicis in Florence Italy were involved in lending money and financing international trade The first modern banks were established in the 17th century notably the Riksbank in Sweden 1656 and the Bank of England 1694 Seventeenth-century English goldsmiths provided the model for contemporary banking Gold stored with these artisans for safekeeping was expected to be returned to the owners on demand The goldsmiths soon discovered that the amount of gold actually removed by owners was only a fraction of the total stored Thus they could temporarily lend out some of this gold to others obtaining a promissory note for principal and interest In time paper certificates redeemable in gold coin were circulated instead of gold Consequently the total value of these banknotes in circulation exceeded the value of the gold that was exchangeable for the notes Two characteristics of this fractional-reserve banking remain the basis for
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