Banking and Moneylending

The commercial revolution prompted the development of banking. In the late Middle Ages, banking was not a specialised occupation, but was carried out by various actors, often in conjunction with other activities. At the international level Italian merchant-bankers played a decisive role, and were active in money-lending (often to sovereigns and to the pope), in international exchange and transfer of money, and were also accepting deposits and made payments on behalf of their customers. The symbol of their activity is the bill of exchange, which came to assume various functions in addition to the original one: international transfer of money. At the local level moneychangers carried out manual exchange of money, necessary in a context where many different coins of different value were in circulation. Also at the local level pawnbrokers, who were often Jewish, fulfilled the demand for credit by the population, but often incurred the accusation of being usurers. Charging (any) interest on money was prohibited by the (Christian) Church’s doctrine, but in time a number of exceptions began to undermine this prohibition which was in practice scarcely respected, for credit was a necessity for both investors in an expanding economy and a population in need of resources in moments of scarcity (and therefore of high prices) of food, for example during famines. In order to help the lower strata of the population with the provision on interest-free loans for consumption purposes, the so-called monti di pietà were funded in Central Italy after the mid-fifteenth century. The fifteenth century, but especially the sixteenth also saw the emergence of the first public banks, which were aimed at managing cities’ treasuries, providing loans to local governments, but also at accepting the deposits of private individuals. Throughout the Middle Ages the Italian peninsula (especially the cities of the Northern and Central regions) was at the forefront of innovation, but by the early modern era the leadership role would shift to the Low Countries.