Banking

Banking in the Renaissance began with a long recession during the second half of the 14th century, caused chiefly by the plague, defaulted loans, and

Handbook to Life in Renaissance Europe

Severe fluctuations in the market. Several important banking houses in Italy became bankrupt, including that of the renowned Acciaiuoli family. With the growth of banks in Barcelona and Genoa during the early 15th century, along with the establishment of the Medici bank in Florence, finances became more stable. Toward the close of the 15th century, the German city of Augsburg flourished as the banking capital of northern Europe. Banks in Augsburg owned by the Fuggers, Weslers, and Hochstetters became known throughout the Mediterranean. Wealthy individuals functioned as bankers to kings and other rulers. Agostino Chigi (1465-1520), for example, served as papal banker.

Renaissance Europe had four types of moneylending institutions: pawnbrokers, merchant banks, local deposit banks, and public banks. The rate of interest at some pawnbrokers’ shops was quite high, as much as 40 or even 60 percent. The majority of pawnbrokers during the early Renaissance were Christians, not Jews, in spite of the Catholic Church’s prohibition against usury (lending money and charging interest). Many more pawnbrokers were Jewish by the late 15th century, and they were criticized for practicing usury. Montespietatis (literally mountains of piety) operated in Italy by the Catholic Church functioned as special nonprofit banks. They lent relatively small amounts to private citizens in exchange for pawned property. Founded in 1461 by the Franciscan order, these banks were established so that people might avoid the “sin” of usury, especially the usury of Jewish sources of money. In 1515 the Fifth Lateran Council (see chapter 2) approved this system and branches were opened in France, Spain, Germany, and the Netherlands.

Merchant banks functioned as international organizations, issuing credit and invigorating the market. Activities of these banks, which were administered chiefly by the extended families of wealthy merchants, included insurance (especially for ships), financial speculation, and foreign exchange. Bills of exchange facilitated the operation of merchant banking. These bills involved money lent to the issuer of a bill of exchange, with the amount payable in the future in another currency at another bank. Although interest per se was not charged, a profit often was realized though differences in exchange rates. Thus the lender received more money than was originally lent to the borrower. By the 16th century, lenders were endorsing their bills of exchange, transforming them into negotiable commodities, much like checks. In the Republic of Venice, however, the bearer of a bill of exchange could not transfer it to a third party and had to be physically present at the bank to complete the transaction. Besides earning a slight profit for the lender, bills of exchange permitted merchants and their associates to travel internationally with no need to transport heavy chests full of coins. The risk of theft by highway robbers was also greatly reduced. (See chapter 9 For more information about merchants and travel.)

Local private banks, as well as the larger public banks that eventually replaced them, functioned somewhat as today’s banks do. Current accounts, or short-term accounts, did not earn any interest. Long-term accounts, similar to modern savings accounts, did bear interest over a period. Local deposit banks evidently began in Genoa during the Middle Ages, and Venice dominated the market by the 15th century. These banks were failing by the close of the century, partly because they were foolishly speculating with the deposits, significantly reducing the necessary reserve of funds. Public banks were monitored by public officials employed by the government, which operated these lending institutions. Different rules applied in different regions; some public banks were not allowed to make loans to private individuals. Money could, however, be deposited into savings accounts. During the 16th century, several public banks benefited from the tremendous influx of silver and gold from South America. The discovery of silver in central Europe simulated the growth of public banks in Germany as money was minted from the silver extracted in the mining operations.

MONEY

While bills of exchange were used in Renaissance banking, currency in the form of paper money did not yet exist. Medal coins manufactured under government control, the majority made from alloys of copper and silver, served as money. Because these coins were struck by hand with a hammer and die, the shapes often were irregular and the weight

Commerce

8.1 Man Weighing Gold. By Adriaen Isenbrandt, c. 1515—20. (The Metropolitan Museum of Art, The Friedsam Collection, bequest of Michael Friedsam, 1931 [32.100.36])

Could vary slightly. In Augsburg circa 1550, mass-produced coins cut from sheets of metal created new standards of precision for Renaissance money. Coins were produced in the mints, from metal supplied by merchants, bankers, and others involved in finance. Those supplying the metal received payment in coins; some of the money was paid in taxes to the government and some kept by the mint for operating expenses. Each type of metal was made into coins of varying weights, with the heaviest, of course, being the most valuable. Some of the largest coins were quite heavy; Spanish pieces of eight, for example, weighed 30 grams each. In 1400 several cities and countries had a gold coin of equal value, approximately 3.5 grams each in 24-karat quality: the Hungarian ducat, the Aragonese ducado, the French salut, the Venetian ducat, the Genoese genovino, and the Florentine florin. Such equivalences, however, were never a constant in Renaissance finance. Debasement of coinage presented a recurring problem, partially caused by the excessive expense of military campaigns, for which governments minted more and more money. Nevertheless, in spite of inflation, the larger gold coins were usually worth several hundred dollars each in today’s money.