Trade, Banking & Insurance Flashcards
(18 cards)
How did Sir Thomas Gresham contribute to the success of banking in England?
Gresham developed The Royal Exchange, the first commercial building in Britain, as a hub for brokers to gain investment capital. He needed an alternative source of funding after being unable to secure loans from Antwerp
How did brokers contribute to banking success in the 17th century?
Brokers established extensive networks of contacts that provided financial support, particularly in London, facilitating investment and commerce
What were the market rates for loans in the 17th century?
1640: The market rate for a “good” loan was 8%, which was the legal limit at the time.
1688: The rate had fallen to between 4% and 6%, below the legal limit, making credit more accessible
How did government interest rate policies contribute to banking success?
The government systematically reduced interest rates, making lending more attractive:
1571-1624: The legal limit was 10%.
1624-1651: Reduced to 8%.
1651-1714: Further reduced to 6%, increasing borrowing and economic activity
Who was Robert Abbott, and how did he contribute to the success of money scrivening?
Abbott moved to London in 1636 and helped Royalist landowners secure loans to protect their assets from being confiscated. He founded a money scrivening firm to act as a broker, and between 1652-1655, his accounts handled £1,137,646 in transactions
How did Robert Clayton expand the money scrivening industry?
Clayton took over the business from his uncle and earned £3,515 per year in interest from loans alone, indicating the profitability of money scrivening
What was a major financial innovation introduced by Robert Clayton and John Morris in 1659?
They developed the first cheque, which allowed a payer to promise a specified amount of payment to another party, improving the efficiency of financial transactions
What role did goldsmiths play in money scrivening?
Goldsmiths provided financial services, including safekeeping money, lending at interest, and acting as intermediaries in transactions
Who was Edward Lloyd, and what was his contribution to financial services?
Edward Lloyd established a coffee house in London that became Lloyd’s of London, a world-leading insurance market.
How did goldsmiths contribute to banking success?
They lent money they held in storage and charged interest, acting as early bankers.
They were trusted due to their reputations, allowing them to borrow at 4%-6% and lend short-term loans at rates exceeding 6%
How did the number of goldsmith-bankers change in London?
1670: There were 32 goldsmith-bankers.
1677: The number increased to 44, showing the growing reliance on their services
How did Charles II’s financial struggles influence goldsmith-banking?
Charles II borrowed from goldsmith-bankers at 6% interest but re-lent the money to the Crown at 10%, making goldsmiths more profitable.
In 1672, he reformed banking so the government could levy loans from the general public at lower interest rates, reducing dependency on goldsmith-bankers
How did Dutch merchants influence marine insurance in London?
Dutch merchants recognized the value of marine insurance and met with financiers in London, spreading knowledge and increasing its use
What historical evidence shows early marine insurance in England?
Records from as far back as 1483 show marine insurance for shipments of broadcloth from Essex to Bruges
How did the 17th-century marine insurance market change?
Insurance premiums dropped by 75% as more policies were issued, making coverage more widespread
How did coffee houses contribute to marine insurance?
They served as meeting places for underwriters—financiers who provided marine insurance—helping clients assess risk and secure policies
How did The City Mercury newspaper contribute to marine insurance?
It published shipping announcements, and by 1680, advertisements for marine insurance services appeared regularly
What legal framework was introduced to regulate marine insurance?
The Marine Insurance Law of 1601, which created a separate “Assurance Court” to resolve disputes
