Private banking is actually one of the oldest forms of banking, with its origins dating back to the 13th Century when Florence was one of the biggest economic powers in the world.
It was during these times when the banking industry began and started to flourish – as traders, salesmen and businessmen all looked to move money and credit around. At the time these banking institutions were all held by private families and worked to manage and move money around for their clients. In fact, most of the original banking industry was comprised of banks operating on behalf of individual wealthy clients.
The most important forerunner of the modern private banking world was actually the powerful Florentine Medici family, who set up their bank in 1348 and spent the next 50 years expanding into most of the major European cities. This expansion was presided over by Vieri di Cambio de’Medici, who upon retiring handed over control of his banks to his two sons and a nephew. The two sons quickly took the banks they were given control of into ruin, but the nephew – Giovanni die Bicci de’ Medici – grew his bank into a very successful banking house. He later founded the Banco Medici, which grew into one of Europe’s biggest banking institutions and made the Medici family one of the wealthiest in the continent before its demise in the late 1400s.
Banks, like the one run by the Medici family, concentrated on fulfilling private customers’ borrowing and investment needs, a far cry from the modern day private banking catalogue of asset management and financial products. It was not until the rise of retail banking, when banking services became accessible to the new middle classes, when banks began to differentiate themselves as “private banks”.