Lombard Street and the early history of London Banking

Lombard Street has its origins in one of the main Roman roads of Londinium It later formed a plot of land granted by Edward 1st(1272-1307) to goldsmiths from the part of northern Italy known as Lombardy (larger than the modern Lombardy region).

This area marks the birth of modern banking in the City of London. Until the 1980s, most UK-based banks had their head offices in Lombard Street and historically it has been the London home for money lenders. No. 54 was the long-standing headquarters of Barclays before the financial institution moved in 2005. No. 71 was the headquarters of Lloyds Bank and No. 60 was the headquarters of the Trustee Savings Bank (TSB).

What is money? In a mediaeval village most people would have lived by subsistence agriculture and able to function with a barter system. Bartering has problems; both parties have to attribute an equal value to the goods exchanged or involve other people in a complicated chain of deals. The cautionary tale of ‘Jack and the Beanstalk’ reminds us of the pitfalls of assigning equal values in an exchange of goods. Bartering is tiring, inefficient and confusing. Trading is made easier using something that functions as a currency and has an agreed value. Usually this is a precious metal but beaver pelts, cowrie shells and dried corn have all served as currency. Historically in London the basis of the currency was gold.

The Christian Church forbade the lending of money for interest. After the Norman Conquest, Jews from France were invited to London by the Norman and Angevin courts to fill the need for money lenders. The Jews became the King’s ‘sponges’ and his exchequers, collecting his revenue and lending their own money, often at very high rates of interest. Legally Jews in England were effectively part of the King’s property. This entitled them to royal protection and anyone harming a Jew was damaging the King’s property. The Jews prospered and became a very successful community throughout England .Although excluded from guilds and many trades some Jews became goldsmiths, doctors, pawnbrokers and even artists. The royal relationship with the Jews had initially run on a franchise model but over time the crown realised that they could raise more money through a series of punitive taxes on the Jewish community. Popular resentment, increased taxes and decreased royal protection finally culminated in the expulsion of the Jews in 1290 by Edward 1st. Jews would not return to England until they were invited back by Oliver Cromwell.

After the Jews were banished, the vacuum left was filled by Italian merchants from the great trading ports of Northern Italy. Lombard Street takes its name from Lombardy in Italy. Their vocabulary has left us with the words cash, debtor, creditor and ledger; these merchants conducted their business on open air benches or ‘bancos’ and it is from that word that our ‘bank’ is said to be derived.

The Italian merchants arrived at a time when England was changing from a feudal community, with virtually all its wealth in land, to a commercial society in which surplus money needed to be stored and used for profit. This happened in the sixteenth century after a long and stable government under the Tudors, which saw an age of discovery and the beginnings of colonisation; a time of expansion of trade at home and abroad. Moreover, as the Reformation spread throughout Europe, King Henry VIII, at the end of his reign in 1546, repealed the usury laws. Before this the Church disallowed the lending of money with interest; now money could be lent “upon interest according to the King’s Majesty’s Statute at 10 per cent”. This Act was carried further by his daughter, Queen Elizabeth I, and so the foundation of the modern banking system was laid.

Englishmen of business followed the example of the Italian merchants. In particular, Sir Thomas Gresham, who as a pioneer of lending and borrowing money in the country, became the greatest of the London merchants and is now looked upon as the “Father of English Banking”. He served Henry VIII; Edward VI; Mary I and Elizabeth I and founded the Royal Exchange in 1565 in Cornhill. This was modelled on the ‘bourse’ in Antwerp and provided a meeting place for merchants to conduct their business.

In the early days the goldsmith had exchanged foreign currency, keeping some in hand to supply travellers abroad and melting down the rest in the course of their basic trade. They had also become recognisable and reliable keepers of money and valuables for people without their own safe custody facilities.

This function was to become more important when, in 1640, Charles I destroyed the reputation of the Royal Mint as the best place for safe custody by seizing the gold. Even though Charles I later repaid the money the damage had been done and public confidence lay with the goldsmiths, who paid interest and issued receipts.

Goldsmith bankers, as they were known, had developed into an efficient system of private banking in London and were to develop into the famous banking firms, of which some still exist today. Coutts & Company, now affiliated to the National Westminster Bank, dates from 1692. The firm of Duncombe and Kent at the Grasshopper in Lombard Street, is now part of Barclays (formerly Martins).This had been the home of the Gresham family and Thomas Gresham moved here with his wife after the death of his father, Sir Richard Gresham.  Barclays itself was incorporated in 1896 by the amalgamation of twenty private banks, among which was Gosling & Sharpe, descended from the famous goldsmith shop of “Ye Three Squirrels” in Lombard Street, which flourished under Major Henry Pinckney in Cromwell’s time.
The receipts given by goldsmiths for deposits have been compared to modern day cheques. However, it would seem that their similarities, as with Bills of Exchange, were their negotiable nature. Drawn notes only became known as cheques a century later.

Lombard Street has a number of colourful signs hanging from the buildings, depicting (mostly historic) organisations and buildings once located there. Having previously been banned, the present-day signs were erected for the coronation of Edward V11 in 1902 although only a small number remain. London’s business premises adopted street signs to advertise their whereabouts from the earliest times. Given that the vast majority of the population were unable to read or write, the use of visual images to distinguish one shop from another was a useful device. It seems likely that many of these began as inn signs but were then adopted by subsequent tenants of the same premises. Around the same time, The Grasshopper made its first appearance outside number 68, being the representation of the family crest of the occupier Sir Thomas Gresham. By the 18th century a large number of swinging signs overhanging the street had become a public nuisance. In 1718 in Bride Street one sign collapsed bringing the front wall of the building with it and killing four people as well. After this the law changed so that signs had to be fixed to the front of buildings.

An Edwardian banker, Frederick Hilton Price, an enthusiastic amateur historian researched the history of the signs for a paper presented to the Institute of Bankers in 1887 and later published as a book in 1902 ‘The Signs of Old Lombard Street’

In 1902 this interest in the old signs gave Hilton Price and his associates the idea of resurrecting as many of them as possible to commemorate the coronation of King Edward VII. These ancient street signs came to give Barclays and Lloyd’s, two of London’s best known banks, their trademark logos.

In the end, 23 such signs were erected. They made a rather splendid sight:

 

 

 

 

 

 

 

The Black Horse sign was first recorded at 53 Lombard Street in about 1677 when it was adopted by the goldsmith Humphrey Stokes, a friend of Samuel Pepys. Around 1728 the then owner, John Bland, took the sign with him when he moved up the street to number 62. The business became known as Bland & Barnett until 1884 when it was taken over by Lloyd’s Bank, who adopted the sign as the company’s logo. When Lloyd’s themselves moved premises to number 73 they again retained the sign, which remained in place until 2003 when Lloyd’s too moved its head office away from Lombard Street. The branch of Lloyds in Threadneedle Street has installed two modern swinging signs outside its premises.

The symbols on the street signs are now the bank’s logos and appear on their cheque books.

Principal sources

www.banking-history.co.uk

www.investopedia.com/insights

https://edu.bankofengland.co.uk/knowledgebank/what-is-money

https://historylondon.org/lombard-street-signs

Dilys

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