Medici Bank

by

Heinrich Lang

• LAST REVIEWED: 26 July 2022
• LAST MODIFIED: 26 July 2022
• DOI: 10.1093/obo/9780195399301-0490

Introduction

The history of the Medici Bank and the family’s history are essentially entangled. The rise of the Medici family was mainly due to the rise of their bank, which produced fundamental wealth. The economic riches were the basis of the social ascendency and the growing exercise of political influence in the Florentine Republic’s context. Like most Florentine patricians and members of the elite, the Medici ran some business at a high level. The enrolment in one of the major guilds gave access to political power in Florence. The most important Medici banking enterprise was the Bank of Rome, which was founded in 1397 by Giovanni di Bicci de’ Medici as the main shareholder and head of the company. From that moment onward, the Medici Bank made its way to substantial expansion. A significant step forward was becoming the Depositor of the Apostolic Chamber, the pope’s banking manager, in 1420—an office held for twenty-two years. Then, the banking business of Cosimo de’ Medici the Elder (Giovanni di Bicci’s son) held this important post for almost forty years (1443–1473). During the later fifteenth century, the Medici Bank had to face a much more complex situation with many other potent players. Since it got deeply involved in government finance, the banking business was in charge of high loans to various crowns and had to bear the risk of default. Until the liquidation of the Medici business partnerships in 1494, the bank still was the backbone of the political power of the Medici regime, which dominated the Florentine Republic down to the second Medici exile in that year. In fact, the Medici Bank consisted of a continuous and complex structure of companies whose individual contracts were renewed after a period of about three years. In economic history, the Medici Bank was described as a holding of quite modern appearance. Because of the interlocking directorship of capital investors and main shareholders, Richard A. Goldthwaite calls this Florentine type of organization a “business partnership agglomerate.” With regard to its key function for the ascendency of the Medici family to the core group of the governing regime in the fifteenth century—in the first half of the sixteenth century, two members of the Medici family were elected popes, and in 1537 Cosimo the Younger came to power as the first Duke of Tuscany—the bank became almost legendary. The Medici archives were shaped by various secretaries of the family and by the executors (sequestrators) of 1494; hence many of the traces of the business affairs were intentionally destroyed later, because they served other purposes or they could compromise the family’s dynastic ambitions. The Medici businesses covered commerce, banking, and government finance, like other Florentine firms did. The office of the administration of the Apostolic Chamber as the Pope’s depository was a highly desired objective of all potent banks in the late medieval period and the Renaissance. Especially, Cosimo the Elder tended to employ very aggressive strategies to eliminate rivals. His grandson, Lorenzo the Magnificent, succeeded in transferring the Medici Bank’s assets to Rome and Lyon, conveying them into other companies. When the bank was liquidated in 1494, the executors only found very little financial resources in Florence to be sequestrated. The de facto successors belonged to a group of former managers of the Medici Bank. So the Medici Bank’s interlocking ownership and capital were dispersed to the de’ Rossi, the Pandolfini and Buonvisi, the Lanfredini, the Bracci and Bartolini businesses.

General Overviews

The Medici Bank has been subject to many studies. However, there is only one comprehensive work on the whole history of the Medici Bank: the Belgian accountant Raymond de Roover made an attempt to consider all archival material of the Medici Bank preserved to cover the series of banking companies from the beginning in 1397 to the liquidation in 1494 (see de Roover 1948 and de Roover 1963). De Roover published a series of forerunning articles that present parts of his textbook. The great bulk of the sources he quotes are available online. Many writings on economic history of the fifteenth century or on the Medici family’s history refer to the bank and its performance, and hence to the works of de Roover. For profound interest, two reviews of de Roover 1948 are cited (Bautier 1948, Littleton 1949).

• Bautier, Robert-Henri. “The Medici Bank, Its Organization, Management, Operations, and Decline.” Bibliothèque de l’École des Chartes 107.2 (1948): 308–309.

  A very critical review article which explains that Raymond de Roover had not been using much material on the Medici Bank’s history, but only “some account books” (“a limité son information à quelques livres comptables”).

• Fazzini, Marco, Luigi Fici, Alessandro Montrone, and Simone Terzani. “A Modern Look at the Banco de’ Medici: Governance and Accountability Systems.” International Business and Economics Research Journal 15.6 (2016): 271–286.

  The concept of this article refers to the governance and accountability systems of the Medici Bank as drawn from archival evidence and literature to illustrate management strategies and the interlocking capitals of its shareholders. It examines the headquarters in Florence and the company resident in Lyon since 1466, referring to the bank’s holding structure. The authors present a first step in a history of accountancy of the Medic Bank.

• Goldthwaite, Richard A. “The Medici Bank and the World of Florentine Capitalism.” Past & Present 114 (1987): 3–31.

  DOI: 10.1093/past/114.1.3

  This overview article briefly compares the Medici Bank with other Florentine banks and shows, as a result, that it did not differ much from other banks. On the one hand, the Florentine firms were of rather small size and the individual enterprise was very limited in exercising influence. On the other hand, the government finance of the Florentine Republic was complexly entangled with a web of Florentine banks, because the merchant bankers belonged to the core of the ruling class.

• Ghosh, D. N. “Genesis of High Finance: Case of Medici Bank.” Economic and Political Weekly 41.7 (2006): 542–543.

  This is a short piece on the origins of finance and state power (“government finance”) regarding the case of the Medici Bank.

• Littleton, Ananias C. “The Medici Bank.” The Accounting Review 24.2 (1949): 229–230.

  This is an interesting review article on de Roover 1946a and de Roover 1946b, because Littleton was one of the scholarly experts on accounting history. There is a particular perspective on de Roover’s explanations about Medici accountancy (which Littleton does agree with).

• de Roover, Raymond A. “The Medici Bank: Organization and Management.” Journal of Economic History 6 (1946a): 24–52.

  DOI: 10.1017/S0022050700062100

  Raymond de Roover, the preeminent scholar of the Medici Bank, discusses the organization of the bank and how it changed over time. He focuses on the different members of the Medici family and their way of running the bank.

• de Roover, Raymond A. “The Medici Bank: Financial and Commercial Operations.” Journal of Economic History 6 (1946b): 153–172.

  DOI: 10.1017/S0022050700056916

  This article is another one in the series of articles written in the context of the author’s seminal textbook on the Medici Bank. The structure of the Medici Bank was a business partnership agglomerate consisting of a good number of independently constituted firms that were interlocked by capital and staff. The capital for business operations was raised by bills of exchange drawn from one European place to another. This mainly was to finance further business operations like commerce and government finance.

• de Roover, Raymond A. The Medici Bank: Its Organization, Management, Operations and Decline. New York: New York University Press, 1948.

  This first attempt to write a comprehensive history of the Medici Bank is the revised sample of three articles published before. It lays the ground for the comprehensive history on the bank.

• de Roover, Raymond A. “I libri segreti dell Banco de’ Medici.” Archivio Storico Italiano 108 (1950): 236–240.

  There are three “libri segreti” (secret books) preserved in the Mediceo avanti il Principato (Florentine State’s Archives): the first one belongs to Giovanni di Bicci de’ Medici from 1397 to 1427, the second one is from 1420 to 1535 when Giovanni’s sons Cosimo and Lorenzo were in charge of the business partnership agglomerate, the third from 1435 to 1450 held by the general manager Giovanni d’Amerigo Benci.

• de Roover, Raymond A. The Rise and Decline of the Medici Bank, 1397–1494. Harvard Studies in Business History 21. Cambridge, MA: Harvard University Press, 1963.

  This is the only comprehensive study on the Medici Bank that covers not only the full length of its existence, but also the whole range of activities between banking and commerce. The staff is introduced, from the managers down to the clerks and apprentices. The book outlines the common narrative of the rise of the Medici Bank as the papal bank, which reached its climax during the years of Cosimo de’ Medici. The bank then declined under the guidance of Lorenzo the Magnificent, who seemingly was not interested in business affairs and left the bank to managers such as Tommaso Portinari, who adopted a failing strategy for the Bruges and London branches. These managers were responsible for the ultimate insolvency of the bank. This volume offers also an extensive sample of transcribed documents. Republished in the Italian translation in 1970. Several reprints.

• Sieveking, Heinrich. Die Handlungsbücher der Medici. Sitzungsberichte der Kaiserlichen Akademie der Wissenschaften in Wien. Philosophisch-Historische Klasse 151, 5. Vienna: Alfred Hölder, 1905.

  This is an introduction to the archival evidence available in the case of the Medici Bank.