Medici Bank - Organization and Type

Organization and Type

Banks in Renaissance Florence were generally divided into three or four kinds:

1. banchi di pegno: pawn shops, which catered to the lower classes, were excluded from the banking or more literally, the "money-changing" guild (Arte del Cambio), and were allowed to charge up to 20% annually on loans they made which were secured by the borrower property. The pawnbrokers (a mix of Christians and Jews; exclusively Jewish after 1437) were socially ostracized since they openly violated the Catholic Church's ban on usury; as a consequence, they were actually illegal in Florence, but survived since the official penalty was a collective fine of 2000 florins each year, which when paid disallowed the imposition of any further punishments on them for the sin of usury; this law is generally characterized as really being a license in disguise.
2. banchi a minuto ("small" or retail "bank"): the most obscure of the three, they were sort of combinations of lenders and pawnbrokers. They dealt in, among other things, bullion, installment sales of jewels and loans secured by jewels, and currency exchange. None of the surviving records mention anything but time deposits (for the purposes of raising capital), so they generally did not offer demand accounts and maintain the interest by lending out a portion of the deposits. Such banks did lend without security, though; one example of a banchi a minuto (run by Bindaccio de' Cerchi) invested heavily in purchasing future interest payments from the Monte (Monte delle doti, a "seven percent dowry fund" founded in the 1340s by the state of Florence), loans to the Monte Comune, maritime insurance, and speculation in horse races. The Medici bank was not a banchi a minuto, although between 1476 and 1491, Francesco di Giuliano de' Medici (1450–1528) was involved in two that dealt heavily in jewelry (one of whose partnership contracts explicitly state that as a goal, though the more successful one dealt in all sorts of luxuries like Spanish tuna). Such banks were members of the Arte del Cambio as they were not "manifest usurers".
3. banchi in mercato or banchi aperti: transfer and deposit banks, who did their business out in the open of a public square, recording all their transactions in a single journal visible on their table (tavola, hence their collective name as tavoli), which they were required by law to only transfer between accounts when the customers were observing. Similarly, transfers between banchi aperti were done outside, and verbally. Theirs was an extremely risky business; by 1520, bank failures had reduced the number of Florentine banchi aperti to only two. Regardless, they were members of the Arte del Cambio.
4. banchi grossi ("great banks"): the largest financial institutions in Florence, though not the most numerous (only 33 in 1469 according to Benedetto Dei). They were the major movers and shakers in the European economy. They had vast accumulations of capital, multi-generational projects, and were a mainstay of the Florentine economy, because not only did they deal in time deposits, demand deposits, and discretionary deposits (deposits a discrezione), they expended most of their efforts in funneling their capital into commerce and bills of exchange. Such bills could be a hidden and legal method to create loans bearing interest. The Medici Bank was such a bank. One Medici branch manager (Tommaso Portinari) said: "The foundation of the business rests on trade in which most of the capital is employed." Similarly, the articles of association frequently said something along the lines of the purpose for the partnership being "to deal in exchange and in merchandise with the help of God and good fortune." Under Cosimo, the Bank had interests in wool, silk, alum and merchant vessels—entirely separate from the many financial instruments and relations it managed. Despite their membership in the Arte del Cambio (assuming they bothered to run a local bank in Florence itself, these merchant banks' focus were determinedly international in scope, where profits could be found, local markets being very competitive.
   Sometimes these banks were referred to as gran tavoli ("big table") or variants thereof, due to their origins as banchi in mercato; the difference between them and banchi grossi was more one of degree than kind.