Tag Archives: Medieval Banking

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.

Sources:
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.

Available now:

TheHeirsTale-WEB

Amazon

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

Medieval Ransoms Part 2

The French attempt to recapture Calais

I wrote in last week’s post that the male protagonist in a novel that I’m plotting at the moment has valued his ransom at £175. Being English, Geoffrey and his brother have calculated their worth in pounds sterling, but they’re in France and ransoms there would be paid in French gold coins. Geoffrey’s captor would make his calculation in livres tournois, the currency used in France. The coins were made of gold, silver or a silver-copper alloy, depending on the value of the coin.

The silver coins were the most important for most people, as they were used to pay taxes, wages and rents. The silver-copper alloy coins were used for everyday expenses, such as shopping. Ransoms, though, were usually paid in gold.

One livre tournois was worth much less than one pound sterling. There were six livres tournois to one pound sterling, so Geoffrey’s ransom as he has calculated it would be 1,050 livres tournois.

Then as now, however, the exchange rate wasn’t the only element of the transaction.

Once Geoffrey’s ransom is agreed with his captor, he has a problem. Although he has enough wealth to pay the ransom he has calculated, he doesn’t have enough gold. There might be some gold coins in the booty he’s taken, but most of the coins will be silver. The rest of his booty might be valuable (or not so valuable) objects that he has taken in raids and he might be able to persuade his captor to take some of these in lieu of coins. If he’s unlucky, his captor will expect him to hand over 1,050 gold coins.

Geoffrey’s next problem is that there aren’t that many gold coins in circulation. Most people have never even seen a gold coin, let alone owned one, so he has to find someone who has gold coins … lots of them. There’s a chance that some of his friends or relatives will sell him gold coins, especially if they’ve managed to get ransoms from the French prisoners they captured during the battle, but they’re unlikely to have all that he needs. Florentine bankers are a good source of gold coins, but they will charge him a fee to change the coins and it won’t be a small one. He will need to sell some of his possessions and get in touch with a representative of a Florentine bank.

Once Geoffrey has sold anything that he needs to sell to ensure that he has the necessary coins, something that might take some time, he now has to get them to Florence and the bank in Florence has to get the gold coins to him. In theory. In practice it was far too dangerous to transport large sums of money that far. Fortunately, banking in the fourteenth century was far more sophisticated than that and bills of exchange were often used instead of physical money.

I’ve written about Geoffrey having coins and precious objects, but, of course, he doesn’t have them with him. They are, he hopes, safely in Bordeaux with his brother. Whilst some captors would allow their prisoners to leave their captivity in order to raise their ransoms, there’s a risk that some of them will simply go home as soon as they’re released. Geoffrey, though, doesn’t need to leave the castle where he’s being held. All he needs to do, is to send a messenger to his brother, who shouldn’t be too far away.

Geoffrey assumes that his brother has also survived the battle and has returned with the English army to Bordeaux, so we will too. The brother is the one who will contact their family and friends to try and exchange silver coins for gold coins. He will also sell anything he needs to get more silver coins. Eventually he will deposit the coins with a representative of the bank he or Geoffrey has chosen in Bordeaux and the banker will send a bill of exchange to a representative near to where Geoffrey is being held. This representative will then pay the gold coins to Geoffrey’s captor, assuming that they have sufficient gold coins in that part of France. As it was for so many, it’s beginning to look as if Geoffrey’s captivity will be a lengthy one.

Sources:
Prisoners of War in the Hundred Years War by Rémy Ambühl

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.

Available now:

TheHeirsTale-WEB

Amazon

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Filed under Fourteenth Century, Hundred Years War, Medieval Commerce, Medieval Life