In addition to giving a rise in the arts and sciences, the Renaissance is responsible for giving rise to the banking system. Not surprisingly, this originated in Florence, Italy as did most other Renaissance accomplishments. The great Medici family, who ruled Florence for several centuries, was responsible for this rise in banking. At one time it is estimated that the Medici family was the richest in Europe. Of course, estimating their wealth is almost impossible as they owned numerous priceless works of art.
The Medici bank was started by Giovanni di Bicci de’ Medici. He was not born into a wealthy family. His uncle, however, was a successful banker. He originally started working at his uncle’s bank in the Rome branch, and founded his own bank in 1397 in Florence, while also keeping a branch in Rome. One reason for the great success of his bank was that he moved his main branch to Florence, which had much greater investment opportunities than Rome, and was able to invest the Church’s deposited money for a greater return. Also because of the Church depositing and not withdrawing money, little of his own capital was required for these investments.
The bank flourished under his son, Cosimo de’ Medici, called Cosimo the Elder. By the time he took over when his father died, there were branches in Venice, Naples, which was later replaced by one in Geneva, and Gaeta. They later had branches in London, Bruges, Avignon, Milan, and Lyon.
It was after Cosimo’s death that the bank started to decline and branches started to fail. This was mainly due to the branches lending money to bad credit risks, such as the London branch lending to Edward IV. Further decline happened when his grandson, Lorenzo, referred to as “The Magnificent” for his great interest in the Arts, was not really interested in banking. The bank was dissolved two years after Lorenzo’s death.
Even in its decline, the Medici bank was the largest in Europe. Because of this, many people throughout Europe would only conduct business in gold florins, the coin of Florence, as it was considered the most stable and widely spread. It was the first gold coin in Europe to be struck in significant quantities since the seventh century. It was also a standard size at 54 grains of gold. The fact that there were Florentine banks all over Europe made it the coin of choice for large scale transactions, as opposed to silver bars.
A contribution that can be linked to the Medici and their banking is the general ledger system of debits and credits developed in the double entry accounting system.