According to Wikipedia's history of banking article:

Modern banking practice, including fractional reserve banking and the issue of banknotes emerged in the 17th century.

The article on fractional reserve banking seems to suggest that the Bank of Amsterdam is the earliest example:

In the past, savers looking to keep their coins and valuables in safekeeping depositories deposited gold and silver at goldsmiths, receiving in exchange a note for their deposit (see Bank of Amsterdam). These notes gained acceptance as a medium of exchange for commercial transactions and thus became an early form of circulating paper money. As the notes were used directly in trade, the goldsmiths observed that people would not usually redeem all their notes at the same time, and they saw the opportunity to invest their coin reserves in interest-bearing loans and bills. This generated income for the goldsmiths but left them with more notes on issue than reserves with which to pay them. A process was started that altered the role of the goldsmiths from passive guardians of bullion, charging fees for safe storage, to interest-paying and interest-earning banks. Thus fractional-reserve banking was born.

But it does not state that, nor does the article on the Bank of Amsterdam.

I imagine the exact details might be murky, but I'm looking for a summary of the recognized possibilities. What organizations are candidates for the earliest fractional reserve banking system, and when did they begin their fractional reserve banking?

I also realize that there may have been organizations which did so a long time before it became an established practice. If that's the case, please mention those organizations, but please also summarize who the early pioneers of our present system of fractional reserve banking are.

  • 1
    $\begingroup$ I haven't actually read it, but I would guess that the book "Debt: The First 5,000 Years" by David Graeber would have a good answer, $\endgroup$
    – Mick
    Commented Feb 14, 2017 at 20:14

2 Answers 2


Fractional reserves banking is at least as old as the 1400's:

A balance sheet from the London branch of the Medici Bank, dated November 12, 1477, shows that a significant number of the bank’s debts corresponded to demand deposits. Raymond de Roover himself estimates that at one point, the bank’s primary reserves were down to 50 percent of total demand liabilities. 60 If we apply the standard criterion used by A.P. Usher, this implies a credit expansion ratio of twice the demand deposits received by the bank. There is evidence, however, that this ratio gradually worsened over the bank’s life-span, especially after 1464, a year that marked the beginning of growing difficulties for the bank. The roots of the general economic and bank crisis that ruined the Medici Bank resemble those Carlo M. Cipolla identifies in his study of fourteenth-century Florence. As a matter of fact, credit expansion resulting from bankers’ misappropriation of demand deposits gave rise to an artificial boom fed by the increase in the money supply and its seemingly “beneficial” short-term effects. Nevertheless, since this process sprang from an increase in the money supply, namely credit unbacked by growth in real savings...

Page 73-74 of Money, Bank Credit, and Economic Cycles Jesus Huerta de Soto

The Wikipedia page on Scali Bank claims that the Austrian school or at least Soto believes that fractional reserve banking did in Scali bank in the 1300's but I couldn't find evidence for the claim in the citation.

Middle eastern banks were offering transaction accounts and loans in the 7th–12th centuries and this makes it likely that fractional reserve banking was occurring there as well.


The argument of W.V. Harris is that it goes back at least to Roman times. For example, the bankers of Ephesus were given 10 years to pay back loans in 85 bc, an action that makes little sense outside of a fractional reserve system. (I am using “fractional reserve lending” loosely; they were no formal reserve requirements. However, the banks were not holding money in safekeeping, similar to a safety deposit box, as that would imply that they could return funds immediately.)

W.V. Harris, "The nature of Roman money", from "The monetary systems of the Greeks and Romans", edited by W.V. Harris.

The situation for the Greek "trapeza" was murkier (working from memory).

  • $\begingroup$ Why do the terms of the Ephesus loan make no sense outside of a fractional reserve system? $\endgroup$
    – BKay
    Commented Aug 6, 2018 at 16:34
  • $\begingroup$ If they were just holding coins for safekeeping (like in a modern safety deposit box), they could return money immediately. However, if they are acting like a fractional reserve bank, they need to wait for loans to be repaid. $\endgroup$ Commented Aug 7, 2018 at 0:16
  • $\begingroup$ You don't have to have to have fractional reserve banking to make long term loans. You just have to have long term bank financing or equity fund the long term bank loans. $\endgroup$
    – BKay
    Commented Aug 7, 2018 at 11:55
  • 2
    $\begingroup$ That does not matter. It definitely means that they are not holding deposits in safekeeping (which would imply that money deposited is untouched, like in a safety deposit box); they are accessing the deposits to make loans. $\endgroup$ Commented Aug 8, 2018 at 1:03

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