It's usually sovereign rings and chunky gold chains that get pushed under the counter window for a pawnbroker to inspect but at Nikolas Michael the items are far grander.

Not far from the gilded towers that house the London bases of discredited institutions such as the Royal Bank of Scotland and UBS, and tucked above a sandwich shop, is what is thought to be the first pawnbroker to open in the City of London for the best part of a century.

In a grim sign of the times the shop, which opened last month, used to house a recruitment consultant.

At Nikolas Michael it is Rolex watches and diamond necklaces that are the currency of the loans it provides as, with bonuses long gone, City workers seek out alternative ways to make ends meet.

"It is mostly expensive watches and diamonds coming in," says Mike Davies, who runs the store with his partner. At about £1,000, the typical loan dished out by Davies is 10 times that of a suburban pawn shop. He says the "savvy" City clientele, who may have just stepped away from a trading desk, are far more aware of the value of their items than a typical pawnbroking client borrowing £100 to get through to pay day.

For many, pawnbroking evokes a mental picture of a Dickensian figure in fingerless gloves pawing over a woman's Sunday linen. But in recent years the so-called "alternative credit" industry has gained a wider audience as quoted groups such as H&T open high street stores. Indeed, last month H&T reported record profits as a growing number of Britons sought to raise cash by hocking valuables or borrowing against their pay cheques.

John Nichols, president of the National Pawnbrokers Association, says pawnbroking can be traced back to 15th-century Italy when the Medici family was the dominant financial power; when the family split, one half became bankers, the other pawnbrokers.

Whether overt or not, Nichols says secured lending has always been a feature of City life, with valuable items such as paintings stowed in bank vaults as collateral for loans.