Commercial Banking: Changing Interactions Between Banks, Markets, Industry and State

This chapter provides an overview of the development of commercial banking—defined as taking deposits payable on demand and originating loans to private and corporate customers—from the mid-nineteenth century to the present. Two characteristics are underlined: state regulation, primarily dictated by concerns about banks’ position as deposit takers; and banks’ role in the financing of industry and more generally in economic growth including their assigned responsibility. The changing nature of these two features has shaped the development of commercial banks since the onset of industrialization. In all countries, with the exception of England, commercial banks developed into some kind of universal bank in the course of the nineteenth century. This converging movement ended in the interwar years, when in many countries commercial banks were separated from investment banks. Universal banking became dominant again in the late twentieth century, but in the form of banking conglomerates.