A distinct borough for traders which has stood for hundreds of years

With its cobbled streets, a cluster of ancient churches in the shadow of St Paul's Cathedral, and pockets of mystique around the dragon statue marking the border with its rival Westminster at Temple Bar, the City of London is the closest thing the capital has to an "old town".

But ever since Alfred the Great made his son-in-law the Earl of Mercia governor of London in AD886, the City has existed as a distinct borough with a distinct financial theme, gradually accommodating merchant traders from across Europe in what would become known as the Square Mile.

As recently as the 1960s, Sir Christopher Wren's 17th-century version of the cathedral, first dedicated to St Paul in AD604, towered over the City, which then contained just 400 pin-striped stockbrokers working for the firms Wedd Durlacher and Ackroyd & Smithers.

Today, viewed from from Primrose Hill in North-west London, the cathedral's famous domed roof is dwarfed by towering skyscrapers. It is a skyline which symbolises the comprehensive dominance, until recently at least, of financial trading in the area.

Though Parliament and the Civil Service are based in the neighbouring City of Westminster, the City of London – first settled by the Romans and governed since 1111 by the City of London Corporation – was the first local authority in England. It was badly damaged by fire in 1212, again by the Great Fire of London of 1666, and heavily bombed during the Blitz, but has survived to emerge as one of the world's great money-making centres. At its heart for hundreds of years have been a number of banks and financial institutions, including the Bank of England, Lloyds of London and the Stock Exchange in Threadneedle Street.

It was not until the 1970s that the major banks from America and Japan arrived and – following the abolition of exchange controls under the free-marketeering Thatcher administrations of the 1980s – the number of banks mushroomed to more than 300.

The stock-market deregulation of the "Big Bang" in 1986 saw the City explode with a bout of frenetic trading which continues today. The Thatcherite meritocracy had dealt a blow to the clubbable old boys' network of days past, and freed the City to become a competitive hub which could compete with the most active around the world.

Meanwhile, development began in the old Docklands area of east London, which was to welcome the Financial Services Authority as well as Barclays Bank, the Bank of America, Citigroup and HSBC, making it a rival to the City as London's financial epicentre.

When Canary Wharf was erected a few miles to its east, the "City" – meaning financial London – benefited because the vast new office space persuaded a number of banks to delay relocating abroad. But the geographic monopoly enjoyed by the romantic Square Mile in London's old town had already come to an end.