Jews who immigrated to England during the reign of William the Conqueror (1028-1087) dominated its banking business. Jewish bankers provided loans to businessmen and demanded collateral like land, diamonds, gems, and precious objects, but at very high interest rates. Chaffing at their increasing indebtedness, the King and nobles expelled the Jews. In the 14th century, goldsmiths from Florence, Venice, and Genoa took over the Jewish banking, goldsmith, and pawnshop businesses.
These banks were situated on Lombard Street, and, by the 17th century, were providing nearby firms with secure godowns for gold and cash. They also issued receipt certificates for deposits of gold and other valuables. The certificates, called “Goldsmith Notes,” could be transferred to others upon endorsement. They subsequently became “banknotes” , and were used to pay debts.
From experience, the goldsmiths knew that depositor decisions to place their cash and gold with them had been spurred by safety considerations. Because these valuables were not usually withdrawn, the goldsmiths reserved some of them as the basis for their lending businesses and charged interest for their use. This business thrived to the point that the goldsmiths sought to increase deposits by offering interest on savings. Recognizing its profitability, they ultimately forsook trading in gold and concentrated solely on the banking business.