How did banks send funds to other banks before the telegraph was introduced around 1832?
Banking
Asked by Question Bot07/Apr/20151 answer
1 Answer
F
Faisal Khan
Answered 07/Apr/2015
Funds transfer was done through a variety of ways. To start with, a bank in Paris would establish a relationship with a bank in London. Both banks would agree to have deposits in each others banks and in their respective currencies (or gold). These would be physical deposit of coins, gold, currency notes, etc. These would essentially be the credit-lines each bank was providing to the other.
The initial deposit from one bank to another was indeed a physical movement of wealth, i.e. gold, coins, silver, etc. was moved in secure boxes and physically made its journey to the other city.
Once the wealth was in place, then the two banks would have an agreed method/code of how to present money promissory notes to each other and how they are to be cashed out.
At a predetermined period (weekly, monthly, etc.) the notes would be collected and the ledger entries be updated. Along with this, the credit lines would be replenished as well.
The actual transfers were very much physical, and were essentially promissory notes (IOUs) being channeled across from town to town. For small value transfers people preferred to carry their wealth with them, i.e. their gold and silver coins with them, on person. This is also how a lot of the people got robbed.
If you read up on it, the early pilgrims traveling from Europe to the Holy Lands (now Israel), a lot many of them had their wealth stolen, this is how the Knight Templars came up with their own coded and sealed method of transporting an IOUs. You gave up your coins in say London, and were issued a cryptic IOU that only the Knight Templars knew how to decode. Reach the other end of your journey and present the note to receive equal amounts of gold (less fees).
They (the Knight Templars) were essentially responsible for setting up the early international correspondent banking.
The initial deposit from one bank to another was indeed a physical movement of wealth, i.e. gold, coins, silver, etc. was moved in secure boxes and physically made its journey to the other city.
Once the wealth was in place, then the two banks would have an agreed method/code of how to present money promissory notes to each other and how they are to be cashed out.
At a predetermined period (weekly, monthly, etc.) the notes would be collected and the ledger entries be updated. Along with this, the credit lines would be replenished as well.
The actual transfers were very much physical, and were essentially promissory notes (IOUs) being channeled across from town to town. For small value transfers people preferred to carry their wealth with them, i.e. their gold and silver coins with them, on person. This is also how a lot of the people got robbed.
If you read up on it, the early pilgrims traveling from Europe to the Holy Lands (now Israel), a lot many of them had their wealth stolen, this is how the Knight Templars came up with their own coded and sealed method of transporting an IOUs. You gave up your coins in say London, and were issued a cryptic IOU that only the Knight Templars knew how to decode. Reach the other end of your journey and present the note to receive equal amounts of gold (less fees).
They (the Knight Templars) were essentially responsible for setting up the early international correspondent banking.