Bank of Amsterdam Invents Checks

The Netherlands’ Bank of Amsterdam helped make possible the modern trading economy by streamlining the deposit and transfer of monetary assets by creating transactions by bank note, or check. Also, as a public rather than private bank, it gained integrity and depositor trust.

Summary of Event

By the seventeenth century, the Dutch were the leading traders in the world. Their ascent to this position of dominance had its roots in the Middle Ages, when the revival of international trade first led to the creation of currencies and then to bills of exchange, bills that allowed for payments from one kind of currency to another. Finally, international trade led to the creation of banking institutions in the Low Countries, particularly the northern provinces. [kw]Bank of Amsterdam Invents Checks (1609)
[kw]Invents Checks, Bank of Amsterdam (1609)
[kw]Checks, Bank of Amsterdam Invents (1609)
[kw]Amsterdam Invents Checks, Bank of (1609)
Economics;1609: Bank of Amsterdam Invents Checks[0510]
Trade and commerce;1609: Bank of Amsterdam Invents Checks[0510]
Organizations and institutions;1609: Bank of Amsterdam Invents Checks[0510]
Netherlands;1609: Bank of Amsterdam Invents Checks[0510]
Checks, invention of
Bank of Amsterdam

Dutch trade dominance came about as a result of several factors. The first of these was their preeminence in Europe’s grain trade in the late sixteenth and early seventeenth century. The Dutch, who had developed the fluyt, a far more capacious cargo ship that made possible the shipment of raw materials in bulk, came to dominate the trade in grain from the Baltic region. As Europe’s population rose, local agricultural crops were often insufficient to feed entire populations. So, Dutch warehouses in the port of Amsterdam became the back-up source of food for all of western Europe.

As European trade expanded from the Continent to the world, trade that was made possible by voyages to the Americas and to South and East Asia in the sixteenth century, there came a need for institutions to facilitate the transfer of trading profits from one trader, or one trading business, to another. The leaders of the city of Amsterdam recognized this need, and in 1609, they created the Bank of Amsterdam Bank of Amsterdam . Many of the leading commercial figures of Antwerp, including those who would help found the bank, had fled northward after 1585, especially to Amsterdam, after Spain had attempted to reconquer provinces in the southern Low Countries. (The Low Countries had been trying to shake off Spanish control.) Those who fled and resettled in Amsterdam contributed their expertise and their financial resources to the city’s commercial leadership.

Prior to the establishment of the Bank of Amsterdam, the usual method of making “international” payments had been through the bill of exchange. The bill of exchange was a financial instrument that signified the amount of debt owed by one individual merchant to another, as a result of the transfer of some goods. Although rudimentary bills of exchange had been developed in antiquity, the modern bill of exchange was essentially created in Italy in the fourteenth century; it specified the debt owed by one individual to another, generally in a “foreign” currency. Indeed, technically, bills of exchange could only operate in the case of such a currency transfer. Over time, however, bills of exchange could be assigned to a third party, each bill guaranteeing the payment to the party who eventually claimed the cash.

This system of “assigning” bills of exchange had developed into the preferred instrument of foreign commerce, especially in the Antwerp of the sixteenth century. When the commercial center of Europe shifted to Amsterdam after 1585, of concern was institutionalizing this somewhat informal method of transferring obligations from one party to another. The city fathers of Amsterdam created the Bank of Amsterdam—an official institution of the city—to formalize the transfer of funds.

The bank’s primary purpose was to establish accounts for the principal traders active in Dutch international trade. Traders could—indeed, they were required to—deposit their various currency holdings into the accounts they held at the bank, a feature that eliminated the risk of cash transactions. Once a trader had an account at the bank, he could settle his obligations to others not through cash payments but by ordering the transfer—by check—of some of his credit at the bank to the accounts of other traders, who also held accounts at the bank. Moreover, unlike the bill of exchange, financial commitments avoided transfers between different currencies. Initially, all transactions of more than 600 guilders (the Dutch currency) had to be processed by the bank; the limit on cash transactions was later reduced to 300 guilders.

The Bank of Amsterdam and Depositor Trust

The Bank of Amsterdam gained depositor trust by emphasizing its public status and its function as an institution that transfers funds between accounts through checks. Contemporary English commentator Onslow Burrish noted the importance of this trust in 1728.

Without doubt, the only reason why persons are contented to deposit their money upon such terms is a firm belief that it remains sacred, untouched and unapplied to any use [as in lending] whatsoever. The magistrates of Amsterdam, all those concerned in the government of the Bank and in general the whole body of the Seven Provinces, take pains to propagate this opinion and appear, at least, to be of the same mind themselves.

Source: Quoted in The Embarrassment of Riches: An Interpretation of Dutch Culture in the Golden Age, by Simon Schama (Berkeley: University of California Press, 1988), p. 345.

Each transaction entailed a fee that was determined by the size of the transaction. The bank grew very profitable from these fees; it also benefited when new accounts were opened. Those individuals with multiple accounts (for example, separate accounts relating to trading ventures with different individuals) had to open separate accounts from which the bank also received a fee.

In addition, the bank accepted deposits of coins of various denominations and origin, thus helping to reduce the losses traders experienced from the constant devaluation of coins by clipping and other measures. The bank also accepted gold and silver bullion, which circulated in large quantities in sixteenth and seventeenth century Europe, thanks to the amounts of gold and silver won by the Spanish and other adventurers in the New World. Coins and bullion brought to the bank were credited to the depositor at 5 percent below their nominal amount, which also contributed to the bank’s profits. In 1683, the bank created special receipts for the deposits of currency and bullion, receipts called recipis. The recipis, in turn, could be traded.

Initially, the Bank of Amsterdam did not make loans; this function was provided by another bank, established in 1614, although it did advance funds to the lending bank (also a municipal institution) up until 1640. The bank did, however, make loans to the municipal authorities of the City of Amsterdam and to the Dutch East India Company, which was founded in 1602. In 1612, the City of Amsterdam added a municipally sponsored insurance system, called the Chamber of Assurance, to the financial facilities available to traders, thus helping to mitigate the risks of international trade.

About 1700, the Bank of Amsterdam developed a system to provide payments throughout the world. This capability of settling financial obligations anywhere made Amsterdam the financial capital of the world in the seventeenth century.


By creating an institution that could handle all of Europe’s international trading transactions, the Bank of Amsterdam gave a significant boost to the expansion of international trade in the seventeenth century. By making it possible to transfer financial assets from one individual to another through the use of paper notification—an early form of the bank check—the bank in effect created a new international currency.

The ease with which such transactions could be carried out eliminated a good deal of the risk that had previously plagued international trade, and by so doing facilitated the economic expansion of Europe.

The success of the Bank of Amsterdam inspired other cities in the Netherlands to create their own banks, but those banks never achieved the international success of Amsterdam’. The Bank of Amsterdam, however, continued to play an important part in the economy of the Netherlands and the world, until the Napoleonic conquests made it impossible for the bank to carry out its international role. The Bank of Amsterdam was liquidated in 1820. Nevertheless, the system of settling debts by direct payment from one account to another prevails in Europe, where it is called the giro system.

Further Reading

  • Barbour, Violet. Capitalism in Amsterdam in the Seventeenth Century. Ann Arbor: University of Michigan Press, 1963. This small volume gives an overview of the growth of the Dutch economy during the seventeenth century.
  • De Vries, Jan, and Ad van der Woude. The First Modern Economy: Success, Failure, and Perseverance of the Dutch Economy, 1500-1815. New York: Cambridge University Press, 1997. This broad survey by two Dutch scholars provides detailed information about the Bank of Amsterdam’s origins and practices.
  • Einzig, Paul. The History of Foreign Exchange. London: Macmillan, 1962. This work examines the historical origins of bills of exchange.
  • Glamann, Kristof. “European Trade, 1500-1750.” In The Sixteenth and Seventeenth Centuries, vol. 2 in The Fontana Economic History of Europe, edited by Carlo M. Cipolla. New York: Barnes and Noble Books, 1977. An overview of the economic development of the period.
  • ’t Hart, Marjolein, Joost Jonker, and Jan Luiten van Zanden, eds. A Financial History of the Netherlands. New York: Cambridge University Press, 1997. A detailed description by three Dutch scholars of the development of the Dutch financial market.

Related Articles in <i>Great Lives from History: The Seventeenth Century</i><br />

Maurice of Nassau; William Paterson; Maarten and Cornelis Tromp; Gerrard Winstanley. Checks, invention of
Bank of Amsterdam