Medieval Bills of Exchange

Last week there was a question in the comments from Ellen Hawley who wanted to know how the innkeepers who stored and organised the transport of goods on behalf of merchants were paid by those merchants. I touched on this subject a bit when we were looking at how ransoms for prisoners of war were paid, but there is more to be said on the subject.

Banking in the fourteenth century was fairly sophisticated, even if two Florentine banks had gone bust lending money to Edward I and Edward III. Italian banks and Italian merchants were the most advanced in their business dealings, but we have to go back to the Templars in twelfth-century France to understand where the idea of how to make payments over large distances and in different currencies without physically moving lots of money arose.

Moving large amounts of coins was rarely a good idea in the Middle Ages. It was incredibly difficult to protect a train of slow-moving pack animals or carts from robbers and bandits. Even small amounts of money were vulnerable, as Chaucer discovered when he was robbed on three separate occasions when he was carrying money to pay men working for Richard II. This is not to say that real money and jewels weren’t transported around Europe and the East because they were. In 1328 a large amount of money was sent from the papal court in Avignon to Lombardy to pay the army there. There was a guard of 150 cavalry, but they were attacked and half the money was stolen and some of the cavalry were captured by the bandits and had to be ransomed.

Since it was so risky, another way had to be found to make payments across large distances. Somewhat surprisingly, we have to go back to the Templars and the Crusades. Although the Templars were active in protecting pilgrims and fighting in the Crusades in the holy Land, in England, France and Italy one of their primary functions was providing secure storage for important documents and precious objects. Although monasteries in general were fairly secure, the Templars were soldiers as well as monks. If I had to give my precious objects to someone, I think I’d prefer them to be in the care of men who were able to fight to protect them, rather than simply rely on the strength of monastery walls and doors.

The Crusades, however, meant that wealthy men needed to be able to access some of their money while they were in the East.  Not only did they have to feed the soldiers in their retinue, but they also had to replace lost or damaged equipment and horses. They also had to live in a certain style.

Fortunately, the Templars could help them. The Templars had preceptories all over Europe and in the East. A preceptory was a headquarters. Temple in London is where the English one was located and Le Temple is where the French equivalent was built in Paris. These were built like fortresses and were very secure. Wealthy men could deposit money in one of them and receive a letter of credit allowing him to receive the same amount in the local currency (less administration charges and interest) at any preceptory in Europe or in the Holy Land. This meant, of course, that the Templars made a profit on the transactions.

The records kept by the Templars were very thorough and everyone trusted them, with good reason. They even had a treasure ship off the coast of the Holy Land from which kings and nobles could make emergency withdrawals whilst on campaign. They were also able to make loans.

Since men from across Europe were involved in the Crusades, it’s not a surprise that the Templars became involved in the activities of Italian merchants and bankers who were interested in trade across Europe and in the East.

By the beginning of the fourteenth century, however, the Templar’s great wealth proved too tempting and Philippe IV of France destroyed the order in that country. The Florentine bankers had learned what they needed to do to fill the gap and came up with bills of exchange.

Bills of exchange allowed a person in one country to pay someone in a different country and in a different currency. They were also a form of loan on which interest was charged. Since charging interest was illegal, it was usually hidden in the administration fees, commission and exchange rates. Money didn’t have to be transferred just between branches of the same bank, but could also be transferred between different banks. The banks were not banks as we know them today. As far as I can discover, the only banks were Italian, but they operated all over Europe.

Bills of exchange weren’t always practicable. Sometimes the rate of exchange in one place made it too costly to buy a bill of exchange and silver, gold or precious stones had to be transported from one place to the other, because, despite the cost and risks involved, it was the cheaper option.

Bills of exchange weren’t just used by merchants, but also by people on business for the papal court. Men in the service of the kings also used them. Bills of exchange could only be used between locations that had more or less equal amounts of money in the branches of the bank. If the difference between them was too great, coins would have to be transported from one place to the other.

It wasn’t a perfect system, but it allowed innkeepers in France to be paid in their local currency by a merchant in England.

The Templars: History and Myth
by Michael Haag
Cathedral, Forge and Waterwheel by Joseph Gies and Frances Gies
Power and Profit by Peter Spufford

April Munday is the author of the Soldiers of Fortune and Regency Spies series of novels, as well as standalone novels set in the fourteenth century.

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Filed under Fourteenth Century, Medieval Commerce, Medieval Monks, Thirteenth Century, Twelfth Century

16 responses to “Medieval Bills of Exchange

  1. Fasinating stuff and great research…I have read a bit about the Templars but never knew they had floating ATM off the Holy Land!

    Liked by 4 people

  2. The treasure ship is a new one to me too, as is the banking part of the Templars. Made myself laugh though as my brain had a woopsie and I read “money was sent from the Paypal court in Avignon” and for a split second I thought that made sense! Great post April.

    Liked by 3 people

  3. Hmm…charging administration fees and interest? Some things never change, haha! 🙃

    Liked by 2 people

  4. Pingback: Medieval Bills of Exchange — A Writer’s Perspective – Strider's Table

  5. Sounds so complicated, and there had to be a great deal of risk taking and trust. Such a precarious business!

    And this doesn’t even scratch the surface of how dangerous it was to lend money. The treatment of Jewish moneylenders is one of the most shameful aspects of European history. Seems if a monarch had debts he didn’t want to pay, he could banish (or kill) the Jews and lay claim to all their chattels.

    I don’t think it was legal for a Jew to be an English citizen for a good many centuries. If they settled, they had to rely on the protection of the monarch, live in a cordoned off area (similar to a ghetto) and I think, forbidden to have land rights. Precarious indeed!

    Thank you for explaining the loan process! Still don’t quite get how it could pay off, security being as it was. Glad I live in 2022!

    Liked by 1 person

    • It was a system that worked for a long time, despite the dangers it involved.

      Philippe IV of France was the first king to banish Jews, but Edward I wasn’t slow to follow suit. It wasn’t until the middle of the seventeenth century that they were legally allowed to settle again. I don’t know that there was ever anything like the Ghetto in medieval England, but that might be something to look into for a post.


      • I do know they were expected to live in specific areas. Not walled off, but not allowed to live among the rest of the population. Also had to be buried in a specific cemetery. This was especially hard for northern Jewish communities, as the cemetery was, I think, in or near London.

        Sadly, I’m trying to remember this forty years after college. Yes, it does need research.

        Thank you for sharing even the sad parts of history. 💙


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