VENICE, Bank of. The history of this remarkable institution forms one of the most instructive chapters in the annals of money, finance and banlcing. In 1171 the government of Venice, needing money to pay the expenses of a war upon which hung the destinies of the republic, plundered the treasury of its coins and bullion oelonging to the goldsmiths or bank ers who had deposited those species in the mint and exchequer, to the amount of about 10,000,000 ducats. Unlike benoa (see GENOA, BANK oF), Venice paid its creditors, not by pledging the revenues of the state, nor by sur rendering its autonomy to them, but by em pioying its power and authority to create an artificial bank money more valuable than the gold and silver coins or bullion of which it had despoiled the bankers. This bank money did not consist of metal or of paper currency nor indeed of anything ponderable or portable, but merely of the registration in a book of so many artificial or imaginary ducats, repre senting neither coins nor currency notes, as were made by law the only medium capable of liquidating bills of exchange.
The state opened a chamber of loans (Camera degr Imprestiti), giving credit on its books to each of the parties it had despoiled for the amount of their loss, with interest at 4 per cent per annum. This interest being always punctually paid, it gave the creditors or assigns a permanent and reliable fund con sisting of the right to demand and receive 4 per cent per annum forever. By making the assignment payable only in credits on the books of the chamber or bank, familiarly known as the Giro, it established a permanent income for the Giro, of which it could not be deprived so long as the state survived. This interest and the profits and inheritances presently to be described constituted the capital of the bank. The latter sources of income became in time so great that the allowance of the 4 per cent in terest was discontinued as superfluous.
Between the plunder of Asia Minor by the Crusaders, of the Byzantine Empire by the Veneti and Latins, and the plunder of Moorish Spain by Genoa, Castile, Arragon and others, thc stock of metallic money in Europe had fallen so low that the degradation, debasement and clipping of coins had become common.
No assurance was to be had for the honest payment of a bill of exchange. By instituting ao imaginary money which could neither be dipped or debased; by reforming its own coin age and keeptng it constant; by coining gold ducats (in 1252) containing 54 English grains of fine gold; by estErblishing a fixed legal re lation between its coined money and its imag inary money, and by other measures mentioned below, the Giro gradually became a reliable centre of exchange, not only for the commercial transactions of Venice, but also for those of other states. This movement received great impetus both from the extent of Venetian com merce, the supremacy of its navy and the rigidity and impartiality of its jurisprudence.
In 1423 Venice took that important step which rendered the Giro the clearing-house for practically all Europe. It required that all bills of exchange drawn upon Venice should be paid only at the bank. Such payment was made by debiting the bill-acceptor's account so and so many ducats and adding an equal sum of imaginary ducats to the credit of the bill holder, who thus became the proprietor of so and so many ducats at the bank.
In presenting his bill of exchange for pay ment the state required that the holder should effect the transaction in person, or by proxy. The transfer was made in the presence of two booldceepers. No coins or any right to coins was involved in the transaction. The Giro kept no coins or circulating money. No en dorsement was recognized or accepted. There fore, the possession of the bill could not bene fit a robber, whether marauding prince or foot pad; it could not be passed around and used as money. Payable only at the Giro and in Giro credits, it was valueless elsewhere. valueless in other hands than those of the drawee. It was only money in and out of the Giro and only money in Giro debits and credits. This system made of the Giro a clearing-house for the entire civilized world. In this sense it was used all over Europe and its colonies.