This thesis emphasises the role of commercial banks as financial intermediaries. It is primarily concerned with the development of the commercial banking system of Lebanon in the period 1856-1974, and assesses the role of the commercial banking system in Lebanon, as capital provider to economic development. This role is examined here in terms of the mobilisation of bank deposits and allocation of short-term private credits. A historical approach has been used in this research, with findings indicating that the historiography of Lebanon’s economy has been dominated almost exclusively by the story of the banking industry. The general picture that emerges from the analysis of banking activities from a historical perspective suggests that there are lessons to be learnt from each of the episodes, and that present conditions can be understood with reference to past experience; how a banking system such as the Lebanese one operated under laissez-faire regime and how banks? Performance influenced the overall economic circumstances. A main interest is in the theoretical implications of commercial banking activities in a free banking system. Thus, it provides a useful theoretical and historical context in which to consider the importance of commercial banking in free trade and services. The findings indicate that even in a financially favourable environment as that of the Lebanese experience, the availability of capital does not necessarily lead to a significant growth of industrialisation. Finally, the results provide an insight into the contribution of commercial banking and capital to the integration of the early trade centre into the world economy.