Matthew Reikowsky
Professor Kirk
Humanities
February 17 2011
The Medici Bank During the time of the Renaissance there were many advances and going on in Florence and at the center of one of the industrial movements was banking. This movement was spurred on and enhanced by one of the most powerful families during that time. The Medici family. The Medici family was responsible for supplying the world with four popes, two queens of France, and they controlled Florence, with a few interruptions, for almost 400 years. One of the more famous things the Medici family is responsible for is the forming and rise of the Medici Bank. Founded by Giovanni di Bicca de’ Medici in 1397. Giovanni had managed a bank in Rome before moving to Florence. The Medici Bank lasted up until 1494, when it collapsed due to depression, internal strife and French aggression. Fortunately the Medici Bank kept excellent records and could later be used by other banking organizations and a building stone for their banks. While the Medici family were not the great innovators of the Renaissance like many people are famous for in this time, they did however use techniques that were being newly developed in Italy to the advantage, for instance double entry accounting. Which even as technology has advanced, the double entry accounting and bookkeeping is still being used widely on an electronic scale by just about all banks. Currently under GAP regulations in order to be certified by GAP a financial institution is required to use double entry accounting vs. the cash accounting system that was used before this point.
Also they used bills of exchange which in today’s system are still used, but are more commonly referred to as receipts. Like the modern banks of today the Medici bank conducted business just the same, by holding deposits, giving loans, exchanged currency, and had many other workings outside of Italy. The Medici bank also had different branches, at its highest it held up to nine different branches as well as correspondence banks and up until 1455 they were all a partnership under one central holding company. While not the largest bank in history up to its time, it was however the largest bank to deal with foreign markets. Thus gaining its biggest client, the Vatican. Because the Medici Bank could conduct business across many different countries, it enabled them to bring the tithes and taxes due to Rome for the other branches of the church into Europe. The Medici Bank became very successful under the ownership of Cosimo de’ Medici. Cosimo was said to have ruled with an iron rod and under his management the Medici bank managed the papal finances. Most of its income came from its Roman branch which was responsible for following the pope around. Because of this responsibility, it gave them political influence inside the Vatican. There is even a case of the Medici Bank getting the status of a cleric getting advanced to bishopric delayed until the mans father, a cardinal, had paid the debts of both him and his son. (economist). The Medici Bank did not just provide finical support to the public and political figures it also had its hands in trade as well, soon after starting the Medici Bank began to manufacture wool and eventually silk. Later it claimed a near monopoly on the alum industry. During this time period the Church had deemed that interest could not be charged, and so the Medici Bank having its hands in trade had formed a few ways to navigate around that law. For example lending to sheep farmers for a lower rate of exchange on wool. Also the bank may collect money in a foreign currency then pay out to others in the local currency thus creating a hidden interest charge on its money. Cosimo died in 1464 and after his death the Medici Bank started a huge decline. Like all businesses the Medici Bank was hugely dependant upon its leadership, after Cosimo’s death his son Piero dei Medici took over management, while able minded and willing to take the bank forward, he only lived five years after taking over. The new management was more focused on other items in life and spent more time dabbling in arts, and using their status to achieve political goals. By the end of the century the Medici Bank fortune had declined and it was nothing more than a mere shadow of its former self, beign outpaced by newly arrived banks and businesses, for instance the Bank of St. George in Genoa. The rise of the Medici Bank is extremely impressive. I work for a bank currently and rely heavily on technology of today. I use a computer to record customer transactions, telephones to communicate with other branches of the bank, and a courier service who uses automobiles to run mail and documents back and forth, and even with all the technology that the bank I work at uses it still finds itself competing for customers and trying its best to minimize mistakes. Now to think about the Medici Bank who did not have any of the modern technology, complex financial equations were done on the parchment or paper. There were no computers to keep a databank of transaction history, they were instead recorded in books, and messages and documents were only as fast as the horse the courier rode on. For a bank to become that advanced and that influential given such small means is extremely impressive to me. I for one could not imagine myself at work and not having a calculator to help me get through most of my transaction or having to record them by hand instead of punching a few keys on a keyboard to log the transaction history. While the rise of the Medici Bank was historic I think a there is a lot to learn from studying this. First, the banking system is nothing new of modern times, it has been around for awhile and the Medici family helped further it forward with it advancing into foreign trade and banking. Second, it is very interesting that an organization as strong as the Medici Bank can crumble in a very short time when ruled under improper management. Unfortunately for the Medici family the invention of the Corporation was quite a ways off, if it had once the bank started its decline it would have been easy to just vote in a new Board of Directors. Lastly, giving any one business as much influence as the Medici bank had is only asking for problems. If there is an organization who can control the advances of members of the Vatican, advances who according to the Vatican are deemed by God Himself, then in the wrong hands that power could be easily used for personal gain, and less focus on the business of banking and providing a service to the community and fulfilling its social responsibility that it originally held to such a high standard.

Work Cited
CBS Interactive Business Network, Business Publications 2008. http://findarticles.com/p/articles/mi_hb4779/is_12/ai_n28975197/pg_5/?tag=content;col1
. February 17 2011.
The Economist, Those Medici, 1999. http://www.economist.com/node/347333?story_id=347333
February 17 2011.