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A goldsmith banker was a business role that emerged in seventeenth century London from the London where they gradually expanded their services to include storage of wealth, providing , transferring money and providing bills of exchange that would lead to the development of cheques. Some of the concepts were brought over from Amsterdam where goldsmiths would provide gold storage and issue chits that started to be used as a means of exchange. The goldsmith banker became a key development in the history of banking that would lead to modern banking.
Whereas before the Civil War the London goldsmith bankers had largely been creditors, following the restoration in 1660 they became the biggest debtors in England. As the system evolved, the goldsmith bankers developed a form of Fractional reserve banking, which whilst still restricted as individuals, enabled them as a group to create credit out of thin air.
In the 1660s George Downing, the Secretary to the Treasury, implemented a project outlined by Sir William Killigrew to side-step the power of the Goldsmith bankers. In A proposal, shewing how this nation may be vast gainers by all the sums of money, given to the Crown, . . . (1663) Killigrew had advocated that the government issue £2m in transferable bonds, with the interest being covered by a yearly tax of £300k. The bonds would be for denominations between £5 and £100, mostly in the smaller denominations. The state would provide a regulatory framework to avoid fraud and ensure they were accepted as legal tender. However, by 1672 most of the orders were in the hands of a handful of such bankers, and so ended up increasing their power.
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