Banks are shops that sell and buy money. The first modern recognizable bank was formed in Genoa in Italy in 1406. No sooner was the bank formed when it had become the personal piggybank for a bunch of rich Italian merchants so banking fraud was invented about the same time.
At one time serious men were in charge of banks. They would not lend to anyone they thought wasn't worthy of their money so there was stability in the banking industry. As profits became the main thing, money was thrown at dodgy, risky people who took the money, spent it and then filed for bankruptcy. The bank executive had became a spiv in search of a massive bonus and was willing to risk his shirt to achieve it no matter the damage to his employer.
There are many different sorts of banks:
- Private Bank: Set up to manage wealthy buggers' money, scruff are not allowed to join and the wealthy get a bill for the bank finding new ways to hide their money from the taxman.
- Offshore Banks: Located in areas of low taxation and regulation. Many offshore banks are essentially private banks out of the reach of anyone's taxman. An ideal place for terrorists and drug lords to launder their money.
- Ethical banks: Banks that make socially-responsible investments. i.e. no investing in dodgy land deals in Asia. Frequented by readers of the Guardian and other lefty liberals.
- Islamic Banks: Banks that transact according to Islamic principles as set down in the Koran - i.e. no fun with hedge funds or futures markets or even simple interest. Muslim accountants aren't allowed to have fun either!
- Building Societies: On current evidence this sort of bank runs up massively dodgy mortgages, runs out of money, falls over, expects the UK government to bail them out then whines that it's not fair when the UK taxpayer takes them over. See Northern Rock.
- Central Bank: The main bank that the government owns. In the UK's case this is the Bank of England. The Central Bank's job is to partially regulate the financial markets and to print money. When money printing gets out of control (see Zimbabwe) you end up with 100,000% inflation rates!
See also: the Banking Industry