Before the establishment of the Bank of England in 1694, banking in England had been virtually restricted to the goldsmiths in London. By the second half of the seventeenth century the goldsmiths were not only acting as bailees of money and valuables entrusted to them but were increasingly using these funds for making loans. Meanwhile, their promissory notes payable on demand, which were issued to depositors, had come to be used as a convenient means of making payments and could, if desired, be cashed in part only. It is from these goldsmiths' notes that the Bank of England note ultimately derives.
The Bank of England note - a short history